micro chapter 6 - self study

Which of the following capture the conditions under which firms will shutdown?

1. If price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost. 2.If the firm's revenue is less than the firm's variable cost at all levels of output.

Total cost divided by total output is

ATC

The marginal cost curve passes through the minimum of the:

ATC, AVC

At each point along a market supply curve, price measures each seller's

MC of production

the law of diminishing returns

The property that when some factors of production are fixed, increased production of a good eventually requires ever-larger increases in the variable factor is known as

variable cost

The sum of all payments made to the firm's variable factors of production is the firm's

price taker

a firm that has no influence over the price at which it sells its product.

_____ firms with a higher opportunity cost of producing a product will be willing to start supplying the product.

as price rise

When some of a firm's factors of production are fixed, the law of diminishing marginal returns states that increased production of the good eventually requires

ever-larger increases in the variable factor

In perfectly competitive markets, firms choose

how much to produce but not the price of their output.

The law of diminishing returns explains why marginal costs eventually

increase

If the marginal cost of producing an additional unit of a good is less than price of that good, then the firm should

increase the production

If a firm is profitable, then at its profit maximizing level of output, its total revenue

is greater than its total cost

If a firm's total revenue is greater than its total cost, then the firm

is profitable

In a perfectly competitive market, the supply curve for a firm

is the portion of the marginal cost curve that lies above the average variable cost curve.

Firms in perfectly competitive markets face demand curves that are

perfectly elastic

producer surplus

price exceeds the seller's reservation price

If a firm is profitable, then at its profit maximizing level of output:

price is greater than average total cost (P>ATC).

A firm cannot be profitable unless

price is greater than average total cost for some level of output

if price>MC,

sirm should produce more

A firm's fixed cost

sum of all payments made to the firm's fixed factors of production.

In a perfectly competitive market, the portion of the marginal cost curve that lies above the average variable cost curve is the firm's

supply curve

Whenever P < MC

the firm should reduce output.

sum of all payments the firm makes to inputs whose quantities can be altered in the short run.

variable cost of the firm

Variable cost divided by total output is called

AVC

Which of the following is correct as it applies to pollution mitigation and recycling programs?

Reaching zero pollution increases MC above MB in most cases.

In the short run, a profit-maximizing firm will not produce anything if

the firm's revenue is less than its variable cost at all levels of production.