John Church Ch. excersizes 6, 8

If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a:

price taker

In perfect competition, each firm:

produces a standardized product.

A perfectly competitive firm is definitely earning an economic profit when:

P > ATC.

Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:

continue to operate even though she is experiencing an economic loss.

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

entry; exit

Marginal revenue:

equals the market price in perfect competition.

A perfectly competitive firm will incur an economic loss but will continue producing output in the short run if price is:

greater than average variable cost but less than average total cost.

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.

Total net gain is maximized when marginal benefit ________ marginal cost.

is equal to

The short-run supply curve for a perfectly competitive firm is its:

marginal cost curve above its average variable cost curve.

The amount by which an additional unit of an activity increases total cost is:

marginal cost.

If it produces, a perfectly competitive firm will maximize profits at which:

marginal revenue equals marginal cost.

The demand curve for a perfectly competitive firm is:

perfectly elastic.

Suppose Bob has a part-time business washing cars. He has washed nine cars on a given day; the marginal benefit of washing the tenth car is $20 and the marginal cost is $12. Bob should:

wash the tenth car.

Accounting profit differs from economic profit because:

economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only.

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost to the customer of the third slice is:

$1.00

A perfectly competitive firm maximizes profit by producing the quantity at which:

MR = MC

All except one of the following are characteristics of perfect competition. Which is the exception?

There are many producers; one firm has a 25% market share, and all the remaining firms have a market share of less than 2% each.

The costs economists use in the concept of economic profit are:

accounting costs and opportunity costs (i.e., the value of the best opportunity forgone).

Profit computed using explicit costs as the only measure of costs is:

accounting profit

According to the optimal output rule, if marginal benefit:

is equal to marginal cost, net benefit is maximized.

A perfectly competitive firm operating in the short run producing 100 units of output has ATC = $6 and AFC = $2. The market price is $3 and is equal to MC. In order to maximize profits (or minimize losses), this firm should:

shut down.

In economics a "marginal" value refers to:

the value associated with one more unit of an activity.

Profit is the difference between ________ and ________.

total revenues; total costs