ECON 200 LS Perfect Competition
The amount of revenue produced per unit of an output sold is the _______________ revenue.
average
Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of
$1.50 *Profit per unit is (Price - ATC). ATC = AFC + AVC. AFC = TFC/Q
Identify the characteristics of a perfectly competitive market.
-A standardized product. -Easy entry and exit. -Producers who are the price takers. -A large number of buyers and sellers.
Indicate why the market for cucumbers is likely a perfect competitive market.
-Entry into the market is free and open. -Producers do not have control over prices. -To most consumers, all cucumbers are very similar.
For a perfectly competitive firm, the market price is equal to
-marginal revenue -demand -average revenue.
The perfectly competitive model is the most efficient type of market and is characterized by both productive and _________________ efficiency.
allocative
When the total revenue earned by a firm is less than the total cost of production,
the firm faces a loss
A constant-cost industry is an industry in which
the firms' cost structures do not vary with changes in production.
The long-run supply curve represents
the long-run relationship between the price and the quantity supplied.
Economic profit equals
total revenue minus economic costs.
Identify the conditions that guarantee consumers will enjoy the lowest prices possible.
-Individual firms are price takers. -Every firm produces the exact same product.
Which of the following are reasons for the market of running shoes to be NOT a perfectly competitive market.
-Producers have some control over prices. -Running shoes are not standardized. -Entry into the market is partially blocked.
To calculate profit, we need to identify three pieces of information.
-Quantity of output. -Average total cost. -Price.
Perfect ________________ is a market structure characterized by the interaction of large numbers of buyers and sellers, in which the sellers produce a standardized, or homogenous, product.
competition
As the market price decreases, all else held constant, a profit-maximizing firm will ____________ its production.
decrease
In ________________-cost industries, the cost of production ________________ with expanded output, and the long-run market supply curve slopes downward.
decreasing; falls
The demand curve facing a single perfectly competitive firm is perfectly ______________.
elastic
The demand for a perfectly competitive firm's product is a horizontal line originating at the market ___________.
market price
The demand for a perfectly competitive firm's product is a horizontal line originating at the market ____________.
market price
The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as
long-run equilibrium.
The long-run relationship between the price and the quantity supplied is given by the
long-run supply curve.
Average revenue is the
amount of revenue per unit of a product sold.
Because the marginal revenue faced by the firm is equal to price, _______________ revenue is also equal to price.
average
In decreasing-cost industries, the cost of production falls with expanded output, and the long-run market supply curve slopes _________________.
downward
Economic profit creates an incentive for other perfectly competitive firms to ______________ the market.
enter
The level of profit that occurs when total revenue is ___________________ to total cost is known as normal profit.
equal
The decision to shut down temporarily is a short-run decision, while the decision to ______________ an industry can be made only in the long run.
exit
Total revenue minus the ____________ and ____________ costs of production is economic profit.
explicit; implicit
Total revenue minus the _____________ and ______________ costs of production is economic profit.
explicit; implicit
In perfect competition,
firms cannot influence the market price with production decisions.
In the short run, as the ___________ rises, so does the level of output supplied.
price
If an economy is going to produce the goods and services most wanted by society, competitive firms
produce more of the products we value most and fewer of the products we value least.
Allocative efficiency is
producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost.
Total ________ equals price times quantity
revenue
Profit equals average ______________ minus average total _________________ multiplied by output.
revenue; cost
Profit equals total ________________ minus the total _______________.
revenue; cost
In a perfectly competitive market, homogeneity means that firms must charge the same market price for the goods or the service they produce, because there are hundreds of other perfectly good
substitutes.
Profit equals _____________ revenue minus _______________ cost.
total; total
The firm's short-run supply curve is a(n) ______________-slopping curve that begins at ______________ average variable cost.
upward; minimum
If labor costs increase, a firm's marginal costs curve will shift ___________________.
upwards
Productive efficiency is
using the fewest resources possible to produce a good or a service.
If the market price is below the average variable cost, the business in not bringing in enough revenue to compensate for the ______________ costs.
variable
Normal profit is also known as ________________ economic profit.
zero
When a firm shuts down in the short run, it must still pay the _______________ costs.
fixed
In a constant-cost industry, the long-run supply curve is a ___________ line originating at the market price that generates _______________ profits for the firms in the industry.
flat; normal
The demand for a perfectly competitive firm's product is a ______________ line originating at the market price.
horizontal
In a perfectly competitive market, we assume the products are ____________ in the minds of consumers.
identical
As the market price _____________, all else held constant, a profit maximizing firm can afford to expand its production.
increases
When the total revenue earned by a firm is less than the total cost of production, the firm faces a __________________.
loss
Extra or additional revenue associated with the production of an additional unit of output is the
marginal revenue
In a perfectly competitive market, a single firm is a price taker, and therefore, can only charge the __________ price.
market
A perfectly competitive firm should produce output until the point where
marginal revenue equals marginal cost.