Chapter11
Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold. The above table shows costs for a perfectly competitive producer of computer memory chips. This firm will produce as long as the market price of a wafer is above
$1,300
A perfectly competitive firm
sells a product that has perfect substitutes
In the short run, a perfectly competitive firm ________ earn an economic profit and ________ incur an economic loss.
might; might
If new firms enter a perfectly competitive industry, the market supply
increases
A market is classified as monopolistically competitive when
many firms produce a slightly differentiated products.
The above figure illustrates a perfectly competitive firm. If the market price is $40 a unit, to maximize its profit (or minimize its loss) the firm should
produce 40 units.
For a perfectly competitive firm, the market price of a good is
+ A given which the firm cannot change. +Equal to the firm's marginal revenue.
If it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue
always to maximize its profit.
When a firm adopts new technology, generally its
cost curves shift downward.
Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market. The marginal cost is $3 per pound, the average variable cost is $2 per pound, and the beans sell for $4 per pound. Jerry
could increase his profit by producing more beans.
When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
decrease.
A perfectly competitive firm will maximize profit when the quantity produced is such that the
firm's marginal revenue is equal to its marginal cost.
In a perfectly competitive market, one farmer's barley is
a perfect substitute for another farmer's barley.
If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel, how many bushels would Farmer Brown sell?
none
The above figure shows a perfectly competitive firm. If the market price is $20 per unit, the firm
will stay open to produce and will make zero economic profit.