econ 202 chapter 6

A perfectly competitive firm faces a demand curve that is

horizontal

Refer to Table 12-1. What is the fixed cost of production?

$1,000

Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?

(P × Q) - TC

Refer to Figure 13-4.What is the area that represents the total variable cost of production?

0P1bQa

Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output?

1,350 units

Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. Refer to Table 12-4. If the market price is $45 the firm will produce

80 units

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost. What is the likely explanation for this?

Continuing to operate resulted in smaller losses than would have been incurred by shutting down.

A firm will make a profit when

P > ATC.

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Production is at minimum average total cost.

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

added more to total revenue than it added to total cost.

Which of the following is not an example of a monopolistically competitive market?

automobile producers

Refer to Figure 12-9. Identify the short-run shut down point for the firm.

b

In the long run, firms in both monopolistically competitive markets and perfectly competitive markets earn zero economic profits, but unlike perfectly competitive firms in the long run, monopolistically competitive firs

do not produce at minimum average total cost.

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

increase output

Refer to Figure 13-18. The diagram demonstrates that

it is not possible for a monopolistic competitor to produce the productively efficient output level, Qa, because of product differentiation.

Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. Refer to Table 13-2. What is likely to happen to the product's price in the long run?

it will fall

If a firm shuts down in the short run

its loss equals its fixed cost.

Refer to Figure 12-9. At price P1, the firm would

lose an amount more than fixed cost.

If total revenue exceeds fixed cost, a firm

may or may not produce in the short run, depending on whether total revenue covers variable cost.

Refer to Figure 12-6. To maximize his profit, Jason should produce the rate of output indicated by point

point d.

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

price exceeds average total cost.

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

raising price

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

sunk costs

In a perfectly competitive industry, in the long-run equilibrium

the typical firm earns zero profit.