ECON 206 Perfect Competition
A perfectly competitive firm will incur its total _______ cost of production when it shuts down temporarily in the short run.
fixed
Assuming the market for office paper is perfectly competitive, the profit level for the firm in the long run would be $
$0
Suppose Carl's Candies sells 100 boxes of candy for $4 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 profit per unit of:
$1.50.
Suppose Carl's Candies sells 100 boxes of candy for $4 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:
$150.
Use the table to answer the following question. Assuming the market is perfectly competitive, what is the marginal revenue between 4 and 6 pounds of kale?
$2
Use the graph of a perfectly competitive market above to answer the question. If the market for office paper is perfectly competitive, the price for a typical perfectly competitive firm is $
$20
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.
Assuming the market for office paper is perfectly competitive, what would the long-run market price and output level be in the office paper market?
$30; 60 cases
If the market above is perfectly competitive and the MR = $2, the profit/loss amount at the profit-maximizing quantity is
-$120
How many tomatoes will the farmer produce in the market above to maximize profits?
100 pounds
If the market price for tomatoes is $5 per pound and the tomato market is perfectly competitive, what is the profit-maximizing quantity?
100 pounds
Use the table to answer the question. If the MR = $5.00, what is the profit-maximizing quantity and profit amount?
90 pounds, Profit = $81
The price of a good times the number of units sold gives us:
total revenue.
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
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
A company can break even and meet operating costs without a loss when it earns ______ economic profit.
zero
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
Refer to the two graphs above the answer the following question. Assume the market for office paper is perfectly competitive. What is the profit maximizing quantity and profit for the office paper firm?
40 cases, Profit = −$600
Which of the following markets would most closely resemble a perfectly competitive market?
Cucumbers Chlorine Wheat
In a constant-cost, perfectly competitive industry, what is the shape of the long-run supply curve?
Horizontal
Use the table to answer the following question. Which of the following is true about the market for kale if we assume the market is perfectly competitive?
MR = AR = Firm Demand
Total revenue equals:
Price times quantity
Which of the following markets would most closely resemble a perfectly competitive market?
Tomatoes
Because the marginal revenue faced by the firm is equal to price, _______ revenue is also equal to price.
average
A(n) _______-cost industry is an industry in which the firms' cost structures do not vary with changes in production.
constant
In a perfectly competitive market, we assume the product is identical in the minds of
consumers
The marginal cost is the:
extra or additional cost associated with the production of an additional unit of output.
In a perfectly competitive market, we assume the product is ___________ (homogeneous/heterogeneous) in the minds of consumers.
homogeneous
The demand curve for a perfectly competitive firm's product is a ________ (vertical/horizontal) line originating at the market price.
horizontal
The demand for a perfectly competitive firm's product is a(n) ________ line originating at the market price.
horizontal
In a perfectly competitive market, we assume the products are __ in the minds of consumers.
identical
The long-run relationship between the price and the quantity supplied is given by the:
long-run supply curve.
When the total revenue is _______ than the total cost, the level of profit that occurs is a loss.
less
At the shutdown point, the price is _____ the average variable cost.
less than
When the total revenue earned by a firm is less than the total cost of production the firm faces a(n)
loss
Extra or additional revenue associated with the production of an additional unit of output is the
marginal
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.
Because perfectly competitive firms are price takers, the marginal revenue is equal to the market
price
In a perfectly competitive market, homogeneity means that firms must charge the market _______ for the goods or the services they produce because there are hundreds of other perfectly good substitutes.
price
The demand for a perfectly competitive firm's product is a horizontal line originating at the market
price
All firms maximize _________ by producing the quantity of output at which the marginal revenue is equal to the marginal cost.
profits
In the short run, as the price rises,:
quantity supplied rises
Total _______ equals price times quantity.
revenue
The long-run relationship between the price and the quantity supplied is given by the long-run ______ curve.
supply
In a perfectly competitive market, the price the firm should charge is the market price because the firm is a price
taker
A constant-cost industry is an industry in which:
the firms' cost structures do not vary with changes in production.
The amount of revenue produced per unit of an output sold is the ___________ revenue.
average
Total profit equals ( _______ revenue minus _______ total cost) multiplied by output.
average
As the market price decreases, all else held constant, a profit-maximizing firm can ________ (increase/decrease) its production.
decrease
In a constant-cost, perfectly competitive industry, what happens to price in the short-run if the market demand increases?
The price increases.
Marginal revenue is the:
additional revenue associated with the sale of an additional unit of output.
In a(n) ______-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
The level of profit that occurs when total revenue is _______ to total cost is known as normal profit.
equal
Profit _________ (maximization/minimization) implies that perfectly competitive firms should expand production up to the point where marginal revenue equals marginal cost.
maximization
Profit equals (average _______ minus average total _________) multiplied by output.
revenue, cost
Profit equals total _________ minus total ________
revenue, cost
Profit equals total __ minus total __.
revenue; cost
In the _______ (short/long) run, when at least one input is fixed, as the price rises so does the level of output supplied.
short
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
______ profit is also known as zero economic profit.
Normal
_______ competition 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.
Perfect
Identify the characteristics of a perfectly competitive market. (Select all that apply.)
Producers who are price takers A large number of buyers and sellers A standardized product Easy entry and exit for firms
_______ efficiency is producing output at the lowest possible average total cost of production.
Productive
_______ efficiency is using the fewest resources possible to produce a good or a service.
Productive
________ efficiency is producing output at the lowest possible average total cost of production.
Productive
_______ equals the total revenue minus the total cost.
Profit
The perfectly competitive model is the most efficient type of market and is characterized by both productive and ___________ efficiency.
allocative
In the long run, perfectly competitive firms achieve _____ and _______ efficiency.
allocative, productive
Average revenue is the:
amount of revenue per unit of a product sold
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 revenue minus the implicit and explicit costs of production is _____ profit.
economic
Total revenue minus the implicit and explicit costs of production is _______ profit.
economic
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 _____ -run equilibrium
long
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
Extra or additional revenue associated with the production of an additional unit of output is the:
marginal revenue.
In the short run, the supply curve for a firm is the _______ cost curve above or equal to the average ________ cost curve.
marginal, variable
In a perfectly competitive market, a single firm is a price taker and therefore can only charge the ______ price.
market
Price takers are firms that take or accept the ________ price and have no ability to influence that price.
market
The demand for a perfectly competitive firm's product is a horizontal line originating at the:
market price.
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
The market condition in which firms do not face incentives to enter or exit the market and firms earn a(n) ________ profit is known as long-run equilibrium.
normal
The _________ competition model is the most efficient type of market and is characterized by both productive and allocative efficiency.
perfect
Firms that take or accept the market price and have no ability to influence that price are known as:
price takers.
Because the marginal revenue equals the market price for perfectly competitive firms, they should produce output until the market _______ equals the marginal _______.
price, cost
A constant-cost industry is an industry in which the firms' cost structures do not vary with changes in _______.
production
All firms maximize profits by producing the quantity of output at which the marginal _______ is equal to the marginal _________.
revenue, cost
All firms maximize profits by producing the quantity of output at which the marginal _______ is equal to the marginal __________.
revenue, cost
Zero ________ profit is when the firm's revenue equals its economic costs without a loss.
economic
The long-run supply curve represents:
the long-run relationship between the price and the quantity supplied.
In the presence of _______ profits, firms enter a perfectly competitive market until the market reaches the point at which the firms are generating a _______ profit; then entry stops and the market settles into its ________ -run equilibrium
economic, normal, long
When a firm shuts down in the short run, it must still pay the _____ costs.
fixed
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.
flat, normal
Economic profit creates an incentive for other perfectly competitive firms to _______ the market.
enter
