Econ Chapter 8

the short-run supply curve of the competitive industry is found by summing the

MC curves about AVC of the individual firms in the industry

a firm in short-run equilibrium always earns positive profits if

SRAR>SRAC

the perfectly competitive firm's short-run shutdown rule is to shut down immediately if

TR<SRVC

when a firm enters the steel industry the short-run equilibrium price of steel

always falls

perfectly competitive firms-------earn zero economic profit in the long-run equilibrium ecause

always; firms enter whenever their economic profit is positive and exit whenever it's negative, so in long run equilibrium economic profit must always be zero

perfect competition is the term used to describe

an industry in which numerous firms produce identical products

firms will continue to enter a competitive industry until

any excess returns have been competed away

the quantity which a firm will supply in the short run

can be read from the firm's marginal cost curve above average variable cost

in a market with perfectly competitive firms, the market demand curve is usually----------------- and the demand curve facing each individual firm--------------

downward sloping; horizontal

the difference between zero profit and zero economic profit is that

economists include opportunity cost in zero economic profit, while accountants do not include opportunity cost in zero profit

firms entering a competitive industry will cause the price of the product to

fall

for a perfectly competitive firm, marginal revenue equals average revenue because the

firm's demand curve is horizontal

the result that perfectly competitive firms produce at the lowest per-unit cost is derived form the assumptions off

free entry and exit

the short-run supply curve of a perfectly competitive firm

goes through the lowest point on both its short-run average varibale cost and its short-run average total cost curves

what is the closest to the economist's definition of perfect competition

he fishing industry

the supply curve for a competitive industry is obtained by

horizontally summing the supply curves of firms in the industry

the competitive firm has no influence over price because

its output is so insignificant relative to the market as a whole

the long-run supply curve of an industry equals the industry's

long-run average cost curve

regardless of quantity in long-run equilibrium, the industry price cannot exceed the

long-run average cost of supplying that quanity

a firm in a perfectly competitive industry

may choose a different input mix in the long run than in the short run

in short-run equilibrium, a perfectly competitive firm

may earn a profit or a loss

the short-run supply curve of the competitive firm is the firm's

mc curve above the minimum point on the AVC curve

the entry of firms into a competitive industry causes the supply curve to

move farther toward the right

we expect the demand curve in the perfectly competitive industry to be

negatively sloped

an increase in demand will cause an increase in industry output in the long run because

new firms enter the industry

a firm will shut down in the short run if

p<avc

at a perfectly competitive firm's short-run equilibrium level of output

p=MR=MC

if the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty slaon industry

resources will flow into the industry

a perfectly competitve firm would be wiling to remain in the industry in the long run at zero economic profit because

revenue is equal to all costs, including the opportunity cost of capital and loabor

at a firm's profit -maximizing level of output, its price is $200 and its short-run average total cost is $225. the firm

should shut down if its short-run average variable cost exceeds $25

a perfectly competitive firm is a price

taker

a firm will shut down if

tc-tr>tfc

if a firm shuts down in the short run, its losses are equal to

tfc

zero economic profits for a perfectly competitive firm in the long run means

the firm is in equilibruim

in a perfectly competitive industry, influence over price is exerted by

the forces of supply and demand

when a firm leaves a perfectly competitive industry

the individual demand curves facing remaning firms shift up in the long run

What resembles a perfectly competitive market

the stock market

economists study perfect competition

to establish a benchmark by which to measure the performance of the economy

a firm can stay in business while taking a loss in the short run as long as it covers its

variable costs

if the price falls below minimum SRAVC, the quantity supplied by the firm will be

zero