Managerial Economics - Chapter 7

At the point where the cost curve C(Q) and the revenue line R(Q) are the farthest vertical distance apart, the marginal cost (MC) is ________ marginal revenue (MR). less than unrelated to equal to greater than

equal to

In general, agriculture is considered a ___________ market. monopolistically competitive monopoly perfectly competitive

perfectly competitive

An individual firm in perfect competition has a price elasticity that is ________. perfectly elastic perfectly inelastic between 0 and 1 in absolute value relatively inelastic

perfectly elastic

In perfect competition, profits are maximized at a level of output such that the vertical distance between the revenue line and the cost curve is smallest. the total amount of costs generated is the smallest the total amount of revenue generated is the largest. the vertical distance between the revenue line and the cost curve is greatest.

the vertical distance between the revenue line and the cost curve is greatest

In the long run, profits in a perfectly competitive industry are ________. positive zero negative or positive negative

zero

The demand curve for a perfectly competitive firm is a _____________ line at the market ___________ .

Horizontal ; Price

What does the free entry and exit assumption imply for a perfectly competitive market? Multiple select question. In the long run, only one firm will exist. In the long run, economic profits are positive. In the long run, economic profits are zero. Firms will enter when profits exist. Firms will leave if they sustain losses.

In the long run, economic profits are zero. Firms will enter when profits exist. Firms will leave if they sustain losses.

To maximize profits, a perfectly competitive firm should produce in the range of increasing marginal cost where P = MC and MR < MC MR > MC P ≥ AVC P ≤ AVC

P ≥ AVC

Since each producer in a perfectly competitive market has no influence on market price, the demand curve for the individual firm is a downward-sloping curve a vertical line equal to the market quantity a horizontal line equal to the market price. an upward-sloping curve

a horizontal line equal to the market price.

A perfectly competitive firm's short-run supply curve is its marginal cost above the minimum point of the _______ curve. average fixed cost (AFC) average total cost (AC) average variable cost (AVC)

average variable cost (AVC)

A monopolist faces a downward-sloping demand curve. As a result, the monopolist can only determine price. the monopolist can only determine quantity. it can choose a price or a quantity, but not both. it can choose a quantity AND a price.

it can choose a price or a quantity, but not both

π = P(Q) - C(Q) defines profits costs revenues output

profits

If P is less than AVC, the firm _____. Multiple select question. should remain open is making a profit should shut down should increase its output is sustaining a loss

should shut down is sustaining a loss

Marginal revenue is the change in total cost from a one-unit change in output. the difference between total revenue and average revenue. the change in total revenue from a one-unit change in output. the change in total revenue divided by the quantity.

the change in total revenue from a one-unit change in output