Econ ch. 8

In an increasing cost industry, the outward shifts in the demand curve of the industry are:

Wider than the shifts in the industry's supply curve

Marginal revenue is the change in:

total revenue brought about by selling one more unit of output.

If the expansion of output in an industry leads to unchanged resource prices, the industry is most likely to be a(n):

constant cost industry.

If a firm has no ability to select the price of its product, it:

has a horizontal (not downward sloping) demand curve.

In the perfectly competitive market, all firms in the market are assumed to be producing:

identical products.

If a firm shuts down in the short run, it will:

incur losses equal to its fixed costs.

Because a competitive firm is a price taker, it faces a demand curve that is:

perfectly elastic.

In the short run, a firm will stay in business as long as:

price exceeds or is equal to average variable cost.

If a firm decreases output when MR > MC, then:

profit will decrease.

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its marginal revenue per unit is:

$5.

A perfectly competitive firm in the short-run maximizes its profit by producing the output where:

ALL OF THESE marginal cost equals price. marginal cost equals marginal revenue. total revenue minus total cost is at a maximum.

As shown in Exhibit above, assume that a perfectly competitive industry is in long-run equilibrium at point A. If the demand curve shifts from D1 to D2, the adjustment sequence between points will be:

A to B, then to C.

Profits are maximized at the production level where MR = MC under

ALL OF THE ABOVE a. Perfect competition b. Monopolistic competition c. Oligopoly d. Monopoly

As the electronic components industry expands, the salaries paid to electrical en-gineers rise (increased resource cost, not decreases resource cost!) in response to higher demand (outward shift in the market demand curve of electronic compo-nents). We can conclude that the electronic components industry is:

An increasing-cost industry

As shown in above exhibit, the price that will yield zero economic profit is at point:

B.

Which of the following best illustrates a perfectly competitive market?

Soybean farmers.

Maximizing profit means finding the maximum difference between:

TR and TC.

The total cost curve is the sum of the:

Total fixed and total variable cost curves

If input prices for a perfectly competitive industry remain constant as the output of the industry expands in the long run, the industry supply curve will:

be perfectly horizontal.

If a perfectly competitive industry's long-run supply curve is downward sloping, we can conclude that input prices will:

decrease as industry output increases.

Above the shutdown point, a competitive firm's supply curve coincides with its:

marginal cost curve.

As shown in the above diagram, the firm's supply curve is the:

rising part of marginal cost beginning at E.

A perfectly competitive firm's short-run supply curve is the:

segment of the marginal cost curve above the minimum level of AVC.

Total profit can be calculated by:

subtracting total costs from total revenue.

In a constant cost industry:

the long-run supply curve will be perfectly elastic.

As shown in the above diagram, suppose the firm's price is OB (means the price is "B"). The firm's total economic profit at this price is equal to the area of:

zero.

As shown in Exhibit above, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D1 to D2. The result is a long-run supply curve drawn from point:

A to point C.

In the short run, a perfectly competitive firm may be making

ALL OF THE ABOVE a. Positive economic profits b. Zero economic profits c. Negative economic profits/economic losses

Which of the following is true of a perfectly competitive market?

ALL OF THESE If economic profits are earned then the price will fall over time. In long-run equilibrium P = MR = SRMC = SRATC = LRAC. A constant-cost industry exists when the long run supply curve is perfectly elastic.

In long-run equilibrium, the perfectly competitive firm's price is equal to which of the following?

ALL OF THESE Short-run average total cost. Short-run marginal cost. Long-run average cost.

In long-run equilibrium, the typical perfectly competitive firm has no incentive to:

ALL OF THESE change output. change plant size. enter or leave the industry.

A perfectly competitive firm in the short-run can earn:

ALL OF THESE positive economic profits. negative economic profits. zero economic profits.

The firm shown in Exhibit above will:

ALL OF THESE produce where marginal cost equals marginal revenue. be a price taker. not produce below a price of OA.

Perfect competition is defined as market structure in which:

ALL OF THESE there are many small sellers. the product is homogeneous. it is very easy for firms to enter or exit the market.

A firm operating in a perfectly competitive market is a price taker because:

ALL OF THESE. no firm has a significant market share. no firm's product is perceived as different. setting a price higher than the going price results in zero sales.

In the short run, a firm should shut down its business if price is less than:

AVC

As shown in the above diagram, if the price is OD, the firm's total revenue at its most profitable level of output is:

OZID.

If a firm is a price taker, its demand curve is

Horizontal (perfectly elastic)

As shown in above diagram, if the price is OD, a perfectly competitive firm maximizes profit at which point on its marginal cost curve?

I.

A firm is currently operating where the MC (of the last unit produced) = $64, and the MR of this unit = $130. What would you advise this firm to do?

Increase output.

Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This firm is:

perfectly competitive in long-run equilibrium.

As shown in the above diagram, the firm will not produce in the short-run if the price is below:

OA (or at point A).

As shown in the above diagram, the firm will shut down in the short-run at a price below:

OA.

As shown in the above diagram, if the price is OB, the firm's total cost of producing at its most profitable level of output is:

OYFB.

Individual companies/corporations in an industry/market advertise their products individually under:

Perfectly competitive market structure

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will:

be upward sloping.

If there is an increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include:

both a and b. the entry of new firms. temporarily higher profits.

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC), and the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would:

continue to produce a quantity such that marginal revenue equals marginal cost.

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

economic profits are $20,000.

A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short-run profit, the firm should:

maintain its current output.

If price is equal to OD for the firm shown in the above diagram, total profit is maximized when:

output is Z.