Ch 10 SB Pure Competition in the Short Run

In this table, at a price of $71, the profit-maximizing or loss-minimizing level of output is ______. (shutdown/loss minimizing table)

0 units

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

6 units Reason: The firm can minimize its losses by producing at the point in which average variable cost is lowest.

Which of the following explains why a purely competitive firm is a price taker?

A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market

In a purely competitive market, price per unit to the purchaser is synonymous with ______ per unit or _______ revenue to a seller. (Enter one word per blank.)

Blank 1: revenue or cost Blank 2: average or marginal

Based on the information in this chart, at which price will a firm shut down? (generalized description graph)

P1

Which of the following is a method of calculating economic profit in pure competition?

Price minus average total cost multiplied by quantity

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

Pure competition; relevant

Select all that apply Which of the following are considered to be the four basic market structures?

Pure monopoly Pure competition Oligopoly Monopolistic competition

______ competition is considered to be rare in the real world.

Pure or Perfect

Select all that apply Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?

The firm does not need to lower its price to increase its sales volume. The firm cannot obtain a higher price by restricting its output.

Which of the following best describes the economic break-even point?

The point where total revenue covers all costs, but there is no economic profit.

Multiplying product price by output reveals which of the following?

Total revenue

In a purely competitive market, price per unit to a buyer equals:

average revenue to a seller

In a perfectly competitive market, the demand curve for an individual firm is perfectly ______ at the market price.

elastic

The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.

equals

True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.

false Reason: According to the supply schedule of the competitive firm, quantity supplied and economic profit both increase as prices rise.

Economists group industries into _____ distinct market structures.

four or 4

The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.

increase

From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.

normal

In pure competition, to calculate economic profit, we first calculate the difference between _______ and average total cost and then multiply it by output. (Type only one word in blank.)

price

This graph illustrates that a firm can minimize its losses by producing where ______. (loss-minimizing case graph)

price exceeds minimum average variable cost but is less than average total cost

Total revenue equals ______ times ______.

price; quantity

The MR = MC rule is known as the:

profit-maximizing rule

A purely competitive firm is a price _____ (Enter one word).

taker

Changes in ________ (Enter one word) and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

technology

If price is below a firm's minimum average _______ cost, the firm will not operate. (Insert only one word in the blank.)

variable

If price is below a firm's minimum average ________ cost, the firm will not operate. (Insert only one word in the blank.)

variable

A firm should always stop producing if its average ______ cost is ______ price.

variable; greater than Reason: If the price is greater than the firm's average variable costs but less than its average total cost, the firm should continue producing because the loss it will incur is less than the fixed costs it will pay when shut down.