Econ Ch 12

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Perfect competition implies that

A. all firms are price takers. B. there are many firms in the industry. C. all firms are producing the same identical product.

A perfectly competitive firm is definitely earning an economic profit when

P​ > ATC.

In the short​ run, a perfectly competitive firm will earn an economic profit as long as

P​ > ATC.

A perfectly competitive firm maximizes its economic profit if it produces so that

marginal revenue​ = marginal cost.

In the short​ run, a perfectly competitive​ firm's economic profits

might be​ positive, negative​ (an economic​ loss), or zero​ (a normal​ profit).

Suppose firms in a perfectly competitive industry are suffering an economic loss. Over​ time,

some firms leave the​ industry, so the price rises and the economic loss decreases.

Marginal revenue is equal to

the change in total revenue divided by the change in quantity sold.

A market is perfectly competitive if

there are many firms in​ it, each selling an identical product

At a​ firm's break−even ​point, definitely its

total revenue equals its total opportunity cost.

Total economic profit is

total revenue minus total opportunity cost.

A​ firm's shutdown point is the output and price at which the firm just covers its

total variable cost.

the owners will shut down a perfectly competitive firm if the price of its good falls below its minimum

average variable cost.

The​ firm's supply curve is its

marginal cost​ curve, at all points above the minimum average variable cost curve.

Which of the following is NOT an assumption of perfect​ competition?

Firms compete by making their product different from products produced by other firms.

A perfectly competitive​ firm's short−run supply curve is the same as its

MC curve above the minimum of the AVC curve.

Individual firms in perfectly competitive industries are price takers because

each individual firm is too small to affect the market price.

In the long​ run, a perfectly competitive firm can

earn a normal profit.

If the market for maple syrup is perfectly​ competitive, then in the long−run ​equilibrium, firms are

earning zero economic profit.

In perfect​ competition, the marginal revenue of an individual firm

equals the price of the product.

In the short​ run, the firm makes zero economic profit when the price is​ ________ minimum average total​ cost, makes an economic profit when the price is​ ________ minimum average total​ cost, and incurs an economic loss when the price is​ ________ minimum average total cost.

equal​ to; higher​ than; lower than

If a perfectly competitive firm finds that it is producing an amount of output such that MR ​> MC and P​ > AVC​, it will

increase its output.


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