Micro Economics Chapter 15

According to the graph, what is the value of total fixed cost for this perfectly competitive firm?

$2,400

At which of the prices given in the answers is the perfectly competitive firm incurring an economic loss?

$250

A buyer or seller that is unable to affect the market price is called a __________.

price taker

According to the graph, which level of output maximizes profit?

8 shirts per minute

According to the data in the table, what level of output maximizes profit?

8 units of output

According to the data in the table, when the price is $4, the firm would produce:

Four units of output and would incur an economic loss

What does the shaded area in the graph represent for a perfectly competitive firm that produces at output level Q?

Negative economic profit

According to the graphs, which of the following is likely to happen in this market in the long run?

No new firms will enter this market

In the short run, the firm should:

Operate if price > average variable cost.

According to the graph the shut-down point corresponds to:

Point d

In perfect competition, the marginal revenue is always the same as:

Price

Using the graph, at what level of output does this perfectly competitive firm maximize profit?

Q3

According to the graph, if a perfectly competitive firm is producing at point A, which of the following is true?

The firm makes zero economic profit.

As the market demand decreases, how will the firm's amount of output change?

The firm will decrease its output.

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

There are large numbers of buyers and sellers.

The perfectly competitive firm represented in the graph on the right is __________.

making an economic profit in the short run

A firm in perfect competition makes an economic profit if:

price is greater than average total cost

In perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________.

shift rightward, decrease

According to the graph, which demand curve is associated with the shutdown point for this perfectly competitive firm?

Demand curve 2

In this graph, the market is initially in long-run equilibrium at point A. If this is a constant-cost industry, after the decrease in demand, which point is likely to be a short-run equilibrium and which point is likely to be the next long-run equilibrium?

Point D is a short-run equilibrium and point C is the new long-run equilibrium.

If the average total cost curve is above the demand curve, then this firm is:

incurring an economic loss