Chapter 8 Competitive Firm Microeconomics

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, total profits are maximized at an output of

39

A perfectly competitive firm will maximize profits by choosing an output level where

price equals marginal cost

For the perfectly competitive firm, the marginal revenue is always

constant

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $15,

economic profits will be zero

Profit per unit is equal to

P- ATC

If price is greater than marginal cost, a perfectly competitive firm should increase output because

Additional units of output will add to the firm's profits (or reduce losses).

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $10,

An economic loss will occur.

Refer to Figure 22.2 for a perfectly competitive firm. The profit-maximizing quantity of output is

D

Short-run profits are maximized at the rate of output where

Marginal revenue is equal to marginal cost.

Refer to Figure 22.3 at quantity level B

Marginal revenue is greater than marginal cost, so the firm should expand production.

A perfectly competitive firm should expand output when

P>MC.

If price is less than marginal cost, a perfectly competitive firm should decrease output because

The firm is producing units that cost more to produce than the firm receives in revenue, thus reducing profits (or increasing losses).

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $23,

The firm will have above-normal profits.

Marginal revenue is the change in

Total revenue when output is changed.

A firm's total revenue can be determined by

price times quantity

Which of the following industries is perfectly competitive?

wholesale fresh flowers

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

Can increase its profit by decreasing output.

For perfectly competitive firms, price

Is equal to marginal revenue.