unit 2 test

when consumers are relatively sensitive to changes in price

demand is considered elastic

a perfectly competitive market involves firms that produce identical products. This guarantees:

consumers receive the lowest prices

all firms maximize profits by producing the quantity of output at which the marginal ________ is equal to the marginal _______

cost, cost

for a perfectly competitive firm, the market price is equal to

demand average revenue marginal revenue

indicate why the market for cucumber is likely a perfectly competitive market

to most consumers, all cucumbers are very similar entry into the market is free and open producers do not have control over prices

a company can break even and meet operating cost without a loss when it earns _______ economic profit

zero

zero ______ profit is when the firm's revenue equals its economic costs without a loss

economic

marginal cost is the :

extra or additional cost associated with the production of an additional unit of output

in the long run

firms earn a normal profit

a perfectly competitive firm will incur its total _____ cost of production when it shuts down temporarily in the short run

fixed

a perfectly competitive firm will incur its total _______ cost of production when it shuts down temporarily in the short run

fixed

in a perfectly competitive market, we assume the products are ____ in the minds of consumers

identical

when the total revenue is _____ than the total cost, the level of profit that occurs is a loss

less

the market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as

long-run equilibrium

because the ____ revenue faced by the firm is equal to price, average revenue is also constant and equal to price

marginal MR=AR=P

a perfectly competitive firm should produce output until the point where

marginal revenue equals marginal cost

in a perfectly competitive market, a single firm is a price taker, and therefore, can only charge the _____ price

market

automobiles are

not perfectly elastic

breakfast cereal is

not perfectly elastic

cable television

not perfectly elastic

hass avocados

perfectly elastic

sugar is

perfectly elastic

in the short run, as the _____ rises, so does the level of output supplied

price

the demand for a perfectly competitive firm's product is a horizontal line originating at the market ______

price

firms that take or accept the market price and have no ability to influence that price are ____ takers

price takers

total revenue equal

price times quantity

when it shuts down temporarily in the short run, a perfectly competitive firm:

still incurs its total fixed costs

in a perfectly competitive market, homogeneity means that firms must charge the same market price for the goods or the services they produce, because there are hundred of other perfectly good:

substitutes

in a perfectly competitive market, the price the firm should charge is the market price because the firms a price _____

taker

when the total revenue earned by a firm is less than the total cost of production

the firm faces a loss

normal profit is also known as ______ economic profit

zero

identify the characteristics of a perfectly competitive market

a large number of buyers and sellers a standardized product producers who are price takers easy entry and exit

the perfectly competitive model is the most efficient type of market and is characterized by both productive and ____ efficiency

allocative efficiency

average revenue is the

amount of revenue per unit of a product sold