ECON 202 Final Pt. 2

If marginal cost exceeds marginal revenue, the firm

may still be earning a positive accounting profit.

A seller in a competitive market can

sell all he wants at the going price, so he has little reason to charge less.

Which of the following represents the firm's short-run condition for shutting down?

shut down if TR is smaller than VC

Entry into a market by new firms will increase the

supply of the good.

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

variable costs.

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

variable costs.

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50.

In the short run firms will continue to operate, but in the long run firms will leave the market.

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Jose's restaurant should shut down immediately.

Which of the following is not a characteristic of a perfectly competitive market?

Many firms have market power.

Which of the following could be used to calculate the profit for a firm?

Profit = (P - ATC) times Q

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

There are many sellers, Goods offered for sale are largely the same.

For a firm operating in a competitive industry, which of the following statements is not correct?

Total revenue is constant.

When new firms have an incentive to enter a competitive market, their entry will

drive down profits of existing firms in the market.

Which of the following represents the firm's long-run condition for exiting a market?

exit if P is smaller than ATC

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

continue to operate in the short run but shut down in the long run.

The entry of new firms into a competitive market will

increase market supply and decrease market price.

Which of the following is not a characteristic of a competitive market?

Entry is limited.

Which of the following statements best expresses a firm's profit-maximizing decision rule?

If marginal revenue is less than marginal cost, the firm should decrease its output, If marginal revenue equals marginal cost, the firm should continue producing its current level of output, If marginal revenue is greater than marginal cost, the firm should increase its output.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

In the long run, a firm will exit a competitive industry if

average total cost exceeds the price.

In the short run, a firm operating in a competitive industry will shut down if price is

less than average variable cost.

Profit-maximizing firms in a competitive market produce an output level where

marginal cost equals marginal revenue.

When buyers in a competitive market take the selling price as given, they are said to be

price takers.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

When price is greater than marginal cost for a firm in a competitive market,

there are opportunities to increase profit by increasing production.