Econ Chap. 12

Which of the following terms best describes how the results of the forces of competition drives the market price to the minimum average cost of the typical firm?

productive efficiency

Long-run equilibrium in perfect cometition results in

productive efficiency, allocative efficiency

In perfect competition, the long-run equilibrium happens when

profit per unit is zero

A perfectly competitive firm is losing money in the short run, and its TR is less than its total variable cost. In order to minimize its losses in the short run, this firm should

shut down

What is the term given to a cost that has already been paid and cannot be recover?

sunk cost

Marginal revenue (MR) is

the change in TR that results from selling one more unit of output

In perfect competition, MR =

AR=P

A perfectly competitive firm will shut down the short run if price is less than

AVC

The demand curve facing a perfectly competitive firm is

Perfectly elastic

The equilibrium level of output is where

MR = MC, slope of TR = slope of TC

In perfect competition

MR=AR=P

The equilibrium level of output in perfect competition is where

P=MC

Profit is measured as

TR-TC or profit per unit * quantity sold

If market demand shifts to the right, how will a competitive firm's level of output change?

The firm will decrease its output, which will increase its profit

Which of the following terms best describes a state of the economy in which production reflects consumer preferences?

allocative efficiency

The market demand curve for a good produced in a perfectly competitive market is , while the demand curve for one firm in a perfectly competitive market is .

downward sloping; a horizontal line

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 .

increase; decrease

A perfectly competitive market is a market with which of the following conditions?

many sellers and buyers, homogonous product, no barriers to entry

If the demand curve for a perfectly competitive firm is above its average total cost curve, then this firm's profit is

positive