ECO C. 10 Pure Competition in the Short Run

A firm will not increase its product price in a __________ competitive market.

A firm will not increase its product price in a __________ competitive market.

Market models are distinguished based upon differences in:

A. conditions of entry B. non-price competition c. the number of firms d. type of product

At the price of _______, output is ______ and the loss is ______ than the total _______ cost.

P3; Q3; less; Fixed

In pure competition, to calculate the difference between product _______ or _______ revenue and average total cost and then multiply it by output.

Price;Marginal

Match the market models based on the number of firms present in each model

Very large number- Pure competition relatively large number- monopolistic competition few-oligopoly one-monopoly

in purely competitive industries, firms can freely:

enter and exit

A firm should not produce a unit of output when the marginal cost is _____ than its marginal revenue

greater

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

A purely competitive firm's is _________ when total revenue exceeds total cost by the maximum amount.

maximized

In pure competition, _________ and marginal revenue are equal.

price

A purely competitive firm will ask all of the following questions except:

will production result in normal profit?

Match each market structure with the correct description of how price control is exerted.

1. purely competitive = none. 2. monopolistically competitive = some, but within narrow limits. 3. oligopoly = limited by mutual interdependence. 4. monopoly = considerable control.

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

1. the rule can be re-stated as P=MC when applied to a purely competitive firm because product price and MR are equal 2. the rule is an accurate guide to profit maximization for all firms regardless of their market structure 3. When MR is equal to MC at a fractional level of output the last complete unit of output should be produced where MR > MC 4. The rule applies only if producing is referable to shutting down

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

At a very early stages of production, marginal product is low, making marginal cost unusually high

All of the following statements describe a purely competitive market, except

a single seller selling only in national market

Changes in _______ and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

technology

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

-cost; price -revenue; price -revenue; marginal cost

Match each market structure with the correct type of product that it produces.

1. oligopoly = standardized or differentiated 2. monopoly = unique, no close substitute. 3. monopolistically competitive = differentiated product 4. purely competitive = standardized product

A wage increase would increase marginal costs and shift the supply curve:

upward; to the left

In this graph, the first unit of output sold increases total revenue from zero to $131, so marginal revenue for that unit is $131. The second unit sold increases total revenue from $131 to $262 and marginal revenue is again $131. The third unit sold increases total revenue to _______ and marginal revenue is now _______________.

$393 and $131 put them all on the table (fig. 8.1 p. 166)

In pure competition, economic profit is calculated as __________ or ______________

-Price minus average total cost multiplies by quantity -marginal revenue minus average total cost multiplied by quantity

Which of the following are conditions necessary to have a pure competition?

-very large number of firms or sellers -standardized product -free entry and exit

By which two ways can a purely competitive firm determine the level of output at which it will realize maximum profit or minimum losses?

1. Comparing marginal revenue to marginal costs 2. Comparing total revenue to total cost

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

1. Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost. 2. The tenth unit should not be produced as it adds more to marginal cost ($150) than to revenue ($131).

Match each market structure with the description that best describes the conditions for exit and entry into that industry.

1. Purely competitive - very easy, no obstacles 2. Monopoly - blocked 3. Monopolistically competitive - relatively easy 4. Oligopoly - significant obstacles

Match the market models on the number of firms present in each model.

1. oligopoly = few 2. monopoly= one 3. pure competition = very large number. 4. monopolistic competition = relatively large number

In pure competition, economic profit is calculated as _______ or ______.

1. price minus average total cost multiplied by quantity 2. marginal revenue minus average total cost multiplied by quantity

In the table, total economic profits at the profit-maximizing level of output are calculated as total revenue of _______ minus approximate total costs of ________.

1179;880

When price is _____ to a firm's lowest average ____ cost, the firm will be able to cover its ______ variable cost and its loss will equal its total ______ cost.

Equal; Variable; Total; Fixed

At which price will a firm shut down?

P1 (because this is the lower mark)

From an economic standpoint, the break-even point is the level of output at which a firm makes ________ profit.

Zero or Normal

a purely competitive firm's demand schedule equals its:

average- revenue schedule marginal-revenue schedule

Which of the following best explains why the firm should produce any unit of output whose marginal revenue exceeds its marginal cost?

because the firm would gain more in revenue from selling that unit than it would be add to its costs by producing it

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

cannot change market price, it can only adjust to it

A purely competitive firm's marginal revenue curve will ______ the firm's demand curve.

coincide with

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

coincide with

Since a purely competitive firm's average revenue curve equals price, it will also ________ the demand curve.

coincide with

Pure _________ involves a very large number of firms.

competition

Each purely competitive firm's demand curve is perfectly ____ at the equilibrium price.

elastic

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

equal to

An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.

few; price

Economists group industries into ____ distinct market structures

four

Whenever the price is _______ than average variable costs but is _______ than average total costs, the firm can pay part, but not all its _______ costs by producing.

greater, less, fixed

The profit-maximizing rule of MR=MC states that:

in the short run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost

Which of the following best describes a pure monopoly?

one firm selling a single unique product, where entry of additional firms is blocked and product differentiation is not an issue

in the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its _____________.

output

a purely competitive firm's horizontal demand curve indicates:

perfect price elasticity

In pure competition the demand curve faced by an individual firm graphs as a ________ curve and the market demand in pure competition is graphed as a __________ curve.

perfectly elastic; down-sloping

A firms total revenue is calculated as ______ times quantity produced.

price

Which of the following best describes monopolistic competition?

producing differentiated products and in which entry or exit from the industry is quiet easy.

__________ competition is considered to be rare in the real world

pure

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

revenue; marginal

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

revenue; marginal

Purely competitive firms produce _________ products.

standardized

a purely competitive firm is a price _________.

taker

In purely competitive market, an individual firm does not exert control over _________.

the firm's demand product price the total supply of a product

Which of the following best determines a firm's decisions regarding price and production?

the market structure in which it operates

A purely competitive firm's total revenue (TR) is a straight line that slopes ________ and to the __________.

upward; right