Pure Competition in the Short Run

At a profit-maximizing level of output of 25 units, a perfectly competitive firm's marginal revenue is $4, average variable cost is $.30, average total cost is $1.22 and marginal cost is $3.75. The firm's economic profit equals:

$69.50

At a profit-maximizing level of output of 15 units, a perfectly competitive firm's marginal revenue is $6, average variable cost $1.70, average total cost is $7.22 and marginal cost is $5.95. this firm's economic profit equals:

-18.30

which of the following explains why a purely competitive firm is price taker?

A purely competitive firm offers only a negligible fraction of the total market supply and therefore must accept the price determined by the market.

Which of the following best describes PURE COMPETITION?

An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.

In a purely competitive market, price per unit to a buyer equals:

Average Revenue to a seller

Marginal revenue is the ________ in total revenue that results from selling _________ more unit of output.

Change/ one

purely competitive firms marginal revenue curve will _______ the firm's demand curve.

Coincide with

In a purely competitive industry, at profit-maximization or loss-minimization, Marginal _________ is equal to _________.

Cost: price revenue: price revenue : marginal cost.

Based on the information given in the table, which of the following statements are true of the profit-maximizing rule?

Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost. The tenth unit should not be produced as it adds more to marginal cost ($150) than to revenue ($131).

A purely competitive firm in the short run will maximize profit by producing up to the point where marginal revenue is equal to marginal cost if the market price is less than minimum average variable cost.

False A purely competitive firm will maximize profit by producing up the point where marginal revenue is equal to marginal cost if the market price exceeds the minimum average cost

Which of the following best explains why a firm would not stop producing if the loss is less than its fixed costs?

Fixed cost are paid regardless of whether something or noting is produced, and the firm receives enough revenue per-unit to cover AVC and some FC

The demand curve for a purely competitive firm is perfectly elastic because _________.

It cannot obtain a higher price by restricting its output, nor does it need to lower its price to increase its sales volume.

In pure competition, economic profit is calculated as _________ or_________.

Marginal revenue minus average total cost multiplied by the quantity or Price minus average total cost multiplied by quantity

A purely competitive firm's horizontal demand curve indicates:

Perfect price elasticity

In pure competition , _____ and marginal revenue are equal

Price.

In maximizing profits at 9 units of output the firm in this graph is adhering

Product till the point where additional units of output add positively to total profit.

In a purely competitive market, price per unit to the purchaser is synonymous with ___________ per unit or ___________ revenue to a seller.

Revenue / Average revenue

A firm price multiplied by the quantity of output or goods produced equals :

Total Revenue

Which of the following best explains why the price-marginal cost relationship improves as production increases

at the very early stages of production, marginal product is low, making marginal cost unusually high

when price is above _____________ total cost, the firm incurs an economic profit.

average

The shaded area on the graph represents

economic profit

In pure competition , a firm's average revenue will be ______ the product's price.

equal to

A purely competitive firm's total revenue curve will:

have a constant slope because each extra unit of sales increases total revenue by a constant amount.

If price is _______ than a firm's minimum average _________ cost, the firm will not operate.

less/ variable

The market demand curve for a purely competitive industry:

slopes downward

Which of the following are true about the profit-maximizing rule of MR=MC.

the rule can be re-stated as P=MC when applied to a purely competitive firm because product price and MR are equal the rule is an accurate guide to profit maximization for all firms regardless of their market structure When MR is equal to MC at a fractional level of output the last complete unit of output should be produced where MR > MC The rule applies only if producing is referable to shutting down