CH. 14 MINDTAP HW / APLIA

Marginal Revenue = additional revenue earned for each additional item sold

For a competitive firm, marginal revenue is always = to the market price

it is important to note that while the demand curve of a competitive firm is perfectly elastic, the market demand curve of a competitive market still obeys the law of demand and is downward sloping

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sunk cost

costs that must be paid regardless of production

Profit = Total Revenue - Total Cost

P = TR - TC

profit = TR - TC

P x Q - ATC x Q (P - ATC) x Q

Shutdown price

The price below which it is optimal for the firm to shut down

1. There are hundreds of high school students in need of algebra tutoring services in Detroit. Dozens of companies offer tutoring services, and the parents who seek out tutors view the quality of the tutoring at the different companies to be largely the same.

Yes, meets all assumptions

The marginal-revenue curve and the marginal-cost curve cross at a quantity ______. This firm _____ in a competitive industry, bc marginal revenue is _____ as quantity increases. Also, the industry ______ in a long-run equilibrium.

between 5 and 6, is, constant, is not

Average Revenue = Total Revenue / Quantity (Price x Quantity / Quantity)

AR = TR / Q

Marginal Cost is the change in cost when Nick increases production by one item

Calculating the difference between each total cost given

The model of competitive markers relies on these three core assumptions:

1. there must be many buyers and sellers - a few players can't dominate the market 2. firms must produce an identical product- buyers must regard all sellers' products as equivalent 3. firms and resources must be fully mobile, allowing free entry into and exit from the industry

in the long-run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total cost ATC?

P=MC and P=ATC

________ is the change in total cost from the production of each additional unit of output, and _______ is the sum of total fixed costs and total variable costs. _____ is equal to fixed cost divided by the quantity produced. ______ is equal to variable cost divided by the quantity produced. ______ is equal to total cost divided by the quantity produced.

Marginal cost, Total cost (MC = ∆TC/ ∆Q), Average Fixed cost (AFC = FC/Q), Average variable cost (AVC = VC/Q), Average total cost (ATC = TC/Q)

The government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.

No, no free entry

Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.

No, not an identical product

profit if producing = profit if shut down

TR - (FC + VC) = -FC TR = VC P x Q = AVC x Q P = AVC

total revenue = price x quantity

TR = P x Q

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will

keep producing in the short run but exit the market in the long run

many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil riss. If the price of oil spikes on the supply market, the supply curve shifts

left, in the short, profits of boat makers decrease and in the long run, the number of boat makers decreases

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses. The price of fertilizer must be _____ average cost, _____ average variable cost, and _____ marginal cost. If firms in the market are producing output but are currently making economic losses, _____ illustrates the present situation for the typical firm in the market, and _____ indicates the corresponding supply curve.

less than, greater than, equal to, P2, S2

a competitive firm maximizes profit by choosing the qauntity at which

marginal cost equals the price

a competitive firm's short-run supply curve is its _______ cost curve above its ______ cost curve

marginal, average variable

Pretzel stands in NYC are a perfectly competitive industry in long-run equilibrium. One day, the city starts imposing $100 per month tax on each stand. How does this policy affect the number of pretzels consumed in the short run and the long run?

no change in the short run, down in the long run

Bob's lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. In the short run, Bob should _______. In the long run, Bob should _______ the industry.

not shut down, exit

in a competitive market, many firms sell an an identical product to many buyers

someone can charge more for an item than other firms charge, but will lose customers bc other firms are offering a lower price

a perfectly competitive firm

takes its prices as given by market conditions

since a competitive firm faces a perfectly elastic demand curve at the market price, it can sell any quantity it chooses at this place

this is shown as a horizontal demand curve at the market price

In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.

No, not many sellers

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

True