Econ (Micro) Ch9

True or False: Charges that are paid for factors of production are called implicit costs.

False

True or False: If P > ATC the firm will shut down.

False

True or False: If an industry experiences constant costs, the long-run industry supply curve will be downward sloping.

False

True or False: If price falls below the minimum of ATC, the firm will shut down in the short run.

False

True or False: In perfect competition P > MR.

False

If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:

can be increased by increasing production

True or False: As output increases the slope of the total revenue curve does not change.

True

True or False: Total economic profit is (price minus average total cost) times quantity.

True

true or False: Economic profit in long-run equilibrium in perfect competition is zero.

True

For a firm in a perfectly competitive market:

marginal revenue equals price and average revenue.

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

number of firms in the industry will increase.

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

number of firms in the industry will not change.

Economic profit:

(per unit) is price minus average total cost

In the short run, a perfectly competitive firm produces output and incurs an economic loss if:

AVC < P < ATC

Charges that are paid for factors of production are called:

Explicit costs

The profit-maximizing level of output for a perfectly competitive firm occurs where:

MR=MC

The slope of the total cost curve is:

Marginal cost

In the short run, if P=ATC, a perfectly competitive firm produces _________ and earns _____________.

Output, zero economic profit

In the long run, provided that there are no external benefits or costs, perfect competition will result in an efficient allocation of resources because:

P = MC

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

P > ATC

Provided that there are no external benefits or costs, resources are efficiently allocated when:

P=MC

Individuals in a market who must take the market price as given are:

Price takers

An increase in demand in a perfectly competitive market will cause a(n):

Temporary increase in price in a constant-cost industry.

The most profitable level of output occurs where...?

The MR (aka market price) and MC curve intersect

A firm's total output times the price at which it sells that output is:

Total revenue

Economic profits in a perfectly competitive industry induce _______ , and losses induce _______ .

entry, exit

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _______ and economic losses will _______ in the long run.

fall, fall

Price takers are individuals in a market who:

have no ability to affect the price of a good in a market.

Marginal revenue is a firm's:

increase in total revenue when it sells an additional unit of output.

Firms in the model of perfect competition will:

increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost

If a perfectly competitive firm is producing a quantity that generates P<MC, then profit can be increased by...?

increasing production

The marginal revenue received by a firm in a perfectly competitive market:

is equal to its average revenue.

The price received by a firm in a perfectly competitive market:

is equal to the market price.

In a perfectly competitive industry, economic profit:

is found by using cost in the economic sense of opportunity cost.

If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:

is maximized

When economic profits in an industry are zero:

it means that firms are doing as well as they could do in other markets.

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

short-run supply curve.

If price is less than average variable cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

shut down production.

Economic profit is maximized when:

the slope of the total revenue curve is equal to the slope of the total cost curve.