Eco module 8
The demand for a perfectly competitive firm's product is a(n)_________ line originating at the market price.
horizontal
In a constant-cost industry, the long-run supply curve is a(n)_________ line originating at the market price that generates__________ profits for the firms in the industry.
horizontal; normal
As the market price of a good_________ , all else held constant, a profit-maximizing firm that produces the good can afford to expand its production.
increases
Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:
$250
In a perfectly competitive market, assume the market price is $10 per unit, and the profit-maximizing quantity is 45 units. If the ATC at 45 units is $8, the profit/loss amount at the profit-maximizing quantity is
$90
In a perfectly competitive market, assume the market price is $5 per unit and the profit-maximizing quantity is 70 units. If the ATC at 70 units is $8, what is the profit/loss amount at the profit-maximizing quantity?
-$210
Profit___________ (maximization/minimization) implies that perfectly competitive firms should expand production up to the point where marginal revenue equals marginal cost.
Maximization
A firm should shutdown if:
P<AVC
If a firm is earning an economic profit
P>ATC
in perfect competition firms
cannot influence the market price with production decisions
The perfectly competitive model is the most efficient type of market and is characterized by both productive and_________ efficiency.
allocative
Perfect____________ is a market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product.
competition
in a________-cost industry, the long-run supply curve is a horizontal line originating at the market_________ that generates normal profits for the firms in the industry
constant; price
In a perfectly competitive market, we assume the product is identical in the minds of
consumers
As the market price decreases, all else held constant, a profit-maximizing firm can________ (increase/decrease) its production.
decrease
In _________-cost industries, the cost of production____________ with expanded output and the long-run market supply curve slopes downward.
decreasing; drops
The___________,the average revenue, and the marginal revenue curves for a perfectly competitive firm are the same horizontal line at the market price.
demand
In a perfectly competitive market, a single firm is a price taker and therefore can only charge the________ price.
equilibrium
Total revenue minus the_________ and_________ costs of production is economic profit.
explicit; implicit
The marginal cost is the:
extra or additional cost associated with the production of an additional unit of output.
In the long run
firms earn a normal profit
A perfectly competitive firm will incur its total_________cost of production when it shuts down temporarily in the short run.
fixed
When a firm shuts down in the short run, it must still pay the _____ costs.
fixed
The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as:
long run equilibrium
When the total revenue earned by a firm is less than the total cost of production the firm faces a
loss
Because the_________ revenue faced by the firm is equal to price, average revenue is also constant and equal to price.
marginal
The extra or additional cost associated with the production of an additional unit of output is the________ cost.
marginal
A perfectly competitive firm should produce output until the point where:
marginal revenue equals marginal cost.
A(n)___________ profit simply indicates that the firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or to compete in a different industry.
normal
A market structure characterized by the interaction of large numbers of buyers and sellers in which the sellers produce a standardized or homogeneous product is known as:
perfect competition
A constant-cost industry is an industry in which the firms' cost structures do not vary with changes in
production
In the short run, as the price rises,:
quantity supplied rises
The long-run supply curve represents:
relationship between the price and the quantity supplied
total________ equals price times quantity
revenue
All firms maximize profits by producing the quantity of output at which the marginal_________ is equal to the marginal_________
revenue; cost
When it shuts down temporarily in the short run, a perfectly competitive firm
still incurs its total fixed cost
In a constant-cost, perfectly competitive industry, what happens to price in the short-run if the market demand increases?
the price increases
what market closely resembles a perfectly competitive market ?
tomatos
The price of a good times the number of units sold gives us:
total revenue
A firm sustains a loss if:
total revenue<total cost
Profit equals ___ revenue minus ___ cost.
total; total
In increasing-cost industries, the cost of production rises with expanded output and the long-run market supply curve slopes
upward
The firm's short-run supply curve is a(n) _______-sloping curve that begins at _________ average variable cost.
upward; minimum
Productive efficiency is:
using the fewest resources possible to produce a good or service
At the shutdown point, the price is equal to the average__________ cost.
variable
The short-run supply curve starts at the minimum average_______ cost
variable
Which of the following markets would most closely resemble a perfectly competitive market?
wheat chlorine cucumber
Normal profit is also known as________ economic profit.
zero
The level of profit that occurs when the total revenue is___________ to the total cost is known as normal profit.
equal
The long-run relationship between the price and the quantity supplied is given by the long-run_________curve
supply
In decreasing-cost industries, the cost of production falls with expanded output and:
downward
Because the marginal revenue equals the market price for perfectly competitive firms, they should produce output until the market_________ equals the marginal___________
price; cost
In a perfectly competitive market, the price the firm should charge is the market price because the firm is a price
taker
In a perfectly competitive market, we assume the product is______________(homogeneous/heterogeneous) in the minds of consumers.
homogeneous
Average revenue is the:
amount of revenue per unit of a product sold.
Total revenue minus the implicit and explicit costs of production is_________ profit.
economic
Economic profit creates an incentive for other perfectly competitive firms to________ the market.
enter
in_____-cost industries the cost of production_________ with expanded output and the long-run market supply curve slopes upward
increasing; rises
The total revenue divided by the number of units of a product sold is the________ revenue.
average
The demand, the__________ revenue, and the __________revenue curves for a perfectly competitive firm are the same horizontal line at the market price.
average; marginal
Total profit equals___________ revenue minus ____________total cost multiplied by output.
average;average
In a constant-cost, perfectly competitive industry, what is the shape of the long-run supply curve?
horizontal
The demand for a perfectly competitive firm's product is a horizontal line originating at the:
market price
Which of the following is not a characteristic of perfect competition?
producers who are price makers
In a perfectly competitive market, homogeneity means that firms must charge the same market price for the goods or the services they produce because there are hundreds of other perfectly good:
substitutes
Because perfectly competitive firms are price___________ , the marginal revenue is equal to the market price.
takers
A constant-cost industry is an industry in which:
the firms' cost structures do not vary with changes in production.
Firms that take or accept the market price and have no ability to influence that price are known as_________ takers.
price