Chapter 10
in purely competitive industries, firms can freely
enter and exit
at a profit-maximizing level of output of 25 units, a perfectly competitive firm's marginal revenue is $4, average variable cost is $.30, an average total cost is $1.22 and marginal cost is $3.75. this firm's economic profit equals:
$69.50
a purely competitive firm's demand schedule equals its:
-average-revenue schedule -marginal-revenue schedule
By which two ways can a purely competitive firm determine the level of output at which it will realize maximum profit or minimum losses?
-by comparing total revenue to total costs; -by comparing marginal revenue to marginal costs
in purely competitive markets, an individual firm does not exert control over _______
-the firm's demand -product price -the total supply of a product
which of the following are considered the four basic market structures?
1. monopolistic competition 2. pure competition 3. oligopoly 4. pure monopoly
marginal revenue is the ______ in total revenue that results from selling _____ more unit of output
change; one
a basic feature of the purely competitive market is the presence of _______
a large number of sellers
which of the following explains why a purely competitive firm is a price taker?
a purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market
which of the following market structures produces only a standardized product?
a purely competitive market
which of the following best describes pure competition?
an industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily
which of the following best summarizes why firms in purely competitive industries do not differentiate their products?
because there are so many of them selling a standardized product
in a perfectly competitive market, the demand curve for an individual firm is perfectly ______ at the market price
elastic
Product ___ distinguishes ___ competition from all other market structures
differentiation; monopolistic
in pure competition, a firm's average revenue will be ______ the product's price
equal to
in pure competition, a firm's product price is _______ marginal revenue
equal to
t/f: a pure monopoly involves a very large number of firms producing a single unique product
false
t/f: a purely competitive firm in the short run will maximize profit by producing up to the point where marginal revenue is equal to marginal cost if the market price is less than minimum average variable cost
false
An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.
few; price
a purely competitive firm's total revenue curve will
have a constant slope because each extra unit of sales increases total revenue by a constant amount
the profit-maximizing rule of MR=MC states that:
in the short run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost
the demand curve for a purely competitive firm is perfectly elastic because
it cannot obtain a higher price by restricting its output, not does it need to lower its price to increase its sales volume
a purely competitive firm can maximize its economic profit (or minimize its loss) only by adjusting its output because:
it is a price taker
which of the following best describes the situation of a price-taking firm? A price-taking firm is one of a ________ number of firms producing a product that is identical to that of every other firm in the industry and providing _____ of a total market supply.
large; only a fraction
in a purely competitive market, the _____ revenue curve coincides with the demand curve because the product price and hence marginal revenue, is ______
marginal; constant
in a purely competitive market, the _____ revenue curve coincides with the demand curve because the product price and hence marginal revenue, is ________
marginal; constant
In the short run, a purely competitive firm will maximize profit by producing up to the point where marginal revenue is equal to marginal cost if
market price exceeds average variable cost
a purely competitive firm's profit is _____ when total revenue exceeds total cost by the maximum amount
maximized
a purely competitive firm's horizontal demand curve indicates:
perfect price elasticity
at which point will the firm be indifferent as to shutting down or continuing to produce?
point b
in pure competition, to calculate economic profit, we first calculate the difference between product _______ or ________ revenue and average total cost and then multiply it by output
price; marginal
_______ is relatively rare in the real world, although this market model is highly ______ to several industries
pure competition; relevant
A firm will not increase its product price in a _____ competitive market
purely
a ________ competitive firm's average-revenue schedule is also known as its demand schedule
purely
in a purely competitive market, price per unit to the purchaser is synonymous with ______ per unit or ______ revenue to a seller.
revenue; average
the market demand curve for a purely competitive industry:
slopes downward
purely competitive firms produce _____ products
standardized
in a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to _______
substitute with products of firms B, C, or D
a purely competitive firm is a price ______
taker
firms within pure competition are considered to be price ______
takers
which of the following best describes the economic break-even point?
the point where total revenue covers all costs, including implicit and explicit costs
which of the following does not describe a purely competitive firm?
they produce a large fraction of supply
the price, multiplied by the firm's output or goods produced, equals ______
total revenue
to find economic profit it is _____ minus _____
total revenue; total cost
a purely competitive firm will ask all of the following questions except:
will production result in normal profit?
