chapter 15
A firm will shut down in the short run if at the profit-maximizing quantity, ______.
marginal revenue is less than average variable cost
in perfect competition what determines the price
market demand and market supply
is a market in which many firms compete by making similar but slightly different products
monopolistic competition
is a market for a good or service that has no close substitutes and in which there is one supplier that is protected from competition by a barrier preventing the entry of new firms
monopoly
what is one characteristic of a perfectly competitive market?
there are large numbers of buyers and sellers
profit =
total revenue - total cost
Perfect competition exists when
-Many firms sell an identical product to many buyers. -There are no restrictions on entry into (or exit from) the market. -Established firms have no advantage over new firms. -Sellers and buyers are well informed about prices.
when is profit maximized?
MR=MC
If MR < MC →
decrease output to increase profit
In perfect competition, all the following situations arise except ______.
each firm chooses the price at which to sell the good it produces
If MR = MC →
economic profit must be maximized
increased demand
firms enter
decreased demand
firms exit
if MR > MC →
increase output to increase profit
as output increases total revenue _________
increases
A permanent increase in demand ______ economic profit in the short run and some firms will ______ in the long run.
increases; enter the market
In the short run, the profit-maximizing firm will ______.
incur an economic loss if average total cost exceeds marginal revenue
If the average total cost curve is above the demand curve, then this firm is:
incurring an economic loss
At the shutdown point, the firm _______.
incurs a loss equal to total fixed cost
A firm's short-run supply curve is the same as ______ if it produces the good.
its marginal cost curve above minimum average variable cost
is a market in which a small number of firms compete
oligopoly
In perfect competition, the marginal revenue is always the same as:
price
A firm in perfect competition makes an economic profit if:
price is greater than average total cost
A buyer or seller that is unable to affect the market price is called a __________.
price taker
is a firm that cannot influence the price of the good or service that it produces
price taker
If price > average variable cost:
produce some output
what choices do temporary shutdowns cause?
produce some output or temporarily shut down
A firm that is producing the quantity at which marginal cost exceeds both average total cost and the market price will increase its economic profit by _______.
producing a smaller quantity
in perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________.
shift rightward, decrease
If price < average variable cost:
shut down