Eco module 8

The demand for a perfectly competitive firm's product is a(n)_________ line originating at the market price.

horizontal

In a constant-cost industry, the long-run supply curve is a(n)_________ line originating at the market price that generates__________ profits for the firms in the industry.

horizontal; normal

As the market price of a good_________ , all else held constant, a profit-maximizing firm that produces the good can afford to expand its production.

increases

Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:

$250

In a perfectly competitive market, assume the market price is $10 per unit, and the profit-maximizing quantity is 45 units. If the ATC at 45 units is $8, the profit/loss amount at the profit-maximizing quantity is

$90

In a perfectly competitive market, assume the market price is $5 per unit and the profit-maximizing quantity is 70 units. If the ATC at 70 units is $8, what is the profit/loss amount at the profit-maximizing quantity?

-$210

Profit___________ (maximization/minimization) implies that perfectly competitive firms should expand production up to the point where marginal revenue equals marginal cost.

Maximization

A firm should shutdown if:

P<AVC

If a firm is earning an economic profit

P>ATC

in perfect competition firms

cannot influence the market price with production decisions

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

allocative

Perfect____________ is a market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product.

competition

in a________-cost industry, the long-run supply curve is a horizontal line originating at the market_________ that generates normal profits for the firms in the industry

constant; price

In a perfectly competitive market, we assume the product is identical in the minds of

consumers

As the market price decreases, all else held constant, a profit-maximizing firm can________ (increase/decrease) its production.

decrease

In _________-cost industries, the cost of production____________ with expanded output and the long-run market supply curve slopes downward.

decreasing; drops

The___________,the average revenue, and the marginal revenue curves for a perfectly competitive firm are the same horizontal line at the market price.

demand

In a perfectly competitive market, a single firm is a price taker and therefore can only charge the________ price.

equilibrium

Total revenue minus the_________ and_________ costs of production is economic profit.

explicit; implicit

The 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

When a firm shuts down in the short run, it must still pay the _____ costs.

fixed

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

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

loss

Because the_________ revenue faced by the firm is equal to price, average revenue is also constant and equal to price.

marginal

The extra or additional cost associated with the production of an additional unit of output is the________ cost.

marginal

A perfectly competitive firm should produce output until the point where:

marginal revenue equals marginal cost.

A(n)___________ profit simply indicates that the firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or to compete in a different industry.

normal

A market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product is known as:

perfect competition

A constant-cost industry is an industry in which the firms' cost structures do not vary with changes in

production

In the short run, as the price rises,:

quantity supplied rises

The long-run supply curve represents:

relationship between the price and the quantity supplied

total________ equals price times quantity

revenue

All firms maximize profits by producing the quantity of output at which the marginal_________ is equal to the marginal_________

revenue; cost

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

still incurs its total fixed cost

In a constant-cost, perfectly competitive industry, what happens to price in the short-run if the market demand increases?

the price increases

what market closely resembles a perfectly competitive market ?

tomatos

The price of a good times the number of units sold gives us:

total revenue

A firm sustains a loss if:

total revenue<total cost

Profit equals ___ revenue minus ___ cost.

total; total

In increasing-cost industries, the cost of production rises with expanded output and the long-run market supply curve slopes

upward

The firm's short-run supply curve is a(n) _______-sloping curve that begins at _________ average variable cost.

upward; minimum

Productive efficiency is:

using the fewest resources possible to produce a good or service

At the shutdown point, the price is equal to the average__________ cost.

variable

The short-run supply curve starts at the minimum average_______ cost

variable

Which of the following markets would most closely resemble a perfectly competitive market?

wheat chlorine cucumber

Normal profit is also known as________ economic profit.

zero

The level of profit that occurs when the total revenue is___________ to the total cost is known as normal profit.

equal

The long-run relationship between the price and the quantity supplied is given by the long-run_________curve

supply

In decreasing-cost industries, the cost of production falls with expanded output and:

downward

Because the marginal revenue equals the market price for perfectly competitive firms, they should produce output until the market_________ equals the marginal___________

price; cost

In a perfectly competitive market, the price the firm should charge is the market price because the firm is a price

taker

In a perfectly competitive market, we assume the product is______________(homogeneous/heterogeneous) in the minds of consumers.

homogeneous

Average revenue is the:

amount of revenue per unit of a product sold.

Total revenue minus the implicit and explicit costs of production is_________ profit.

economic

Economic profit creates an incentive for other perfectly competitive firms to________ the market.

enter

in_____-cost industries the cost of production_________ with expanded output and the long-run market supply curve slopes upward

increasing; rises

The total revenue divided by the number of units of a product sold is the________ revenue.

average

The demand, the__________ revenue, and the __________revenue curves for a perfectly competitive firm are the same horizontal line at the market price.

average; marginal

Total profit equals___________ revenue minus ____________total cost multiplied by output.

average;average

In a constant-cost, perfectly competitive industry, what is the shape of the long-run supply curve?

horizontal

The demand for a perfectly competitive firm's product is a horizontal line originating at the:

market price

Which of the following is not a characteristic of perfect competition?

producers who are price makers

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 hundreds of other perfectly good:

substitutes

Because perfectly competitive firms are price___________ , the marginal revenue is equal to the market price.

takers

A constant-cost industry is an industry in which:

the firms' cost structures do not vary with changes in production.

Firms that take or accept the market price and have no ability to influence that price are known as_________ takers.

price