Econ Chapt 6 Perfectly competitive

If Mitch's Surf Shop has $30,000 in revenue each month and if the total cost of operating the shop is $26,000 each month, then the monthly profit for his shop is what?

$30,000-$26,000=4,000

The picture on the right shows the cost curves for the West End Bakery. In this picture the bakery's profits equal ____ dollars per day

$50

efer to the figure below. Total producer surplus in this market is: Picture

125

Consider the table on the rgiht which shows the total cost of producing wedding cakes at the Bakery. If the market price for a wedding cake is 350 and the bakery is a price-taker, how many wedding cakes should they make each day?

4 since the marginal benefit of selling an additional cake is 350, crumby bakery should expand output until it reaches 4 cakes/day. if it produces a 5th weading cake the resulting marginal cost (400) waould exceed the marginal benefit

Given the figure on the right, if strawberries sell for $3 per pound, producer surplus is 45,000 dollars per day.

45,000 (3x30,000)/2

The cost curves of the west end bakery, if the price of bread is 3 per loaf then the profit maximizing level of output for the bakery is...

50 p=mc

Supply curves are upward sloping in part because as price rise firms with a higher opportunity cost of producing the product will be willing to start supplying the product The marginal benefit to consumers of consuming the product increases as price increases Individual suppliers already in the market will be willing to turn to more costly production techniques to supply more of the product.

Firms with a higher opportunity cost..... Individual suppliers....

An input whose quantity cannot be altered in short run is a______ factor of production

Fixed

Which of the following capture the conditions under which firms will shut down? If the firm's revenue is less than the firm's total cost at all levels of output If the firm's revenue is less than the firm's variable cost at all levels of output If the price is less than average variable cost even when the firm produces at the level of output that minimizes average variable cost

If the firm's revenue is less than the firm's variable cost... if price is less than average...

The period of time of sufficient length that all firm's factors of production are variable is known as the

Long run

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Picture Should John spend a third hour cleaning windows?

No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.

If the marginal cost of producing the 500th unit of a good is greater than the price of that good the firm should ?

Not produce the 500th unit

For a firm that produces bread, which of the following is likely to be a factor of production? Ovens Bakers Flour Money

Ovens, bakers, and flour

If output can be varied continuously, then firms in a perfectly competitive market maximize their profits by choosing the level of output such that..

Price = marginal cost

Fixed cost + variable cost =

Total cost

A price taker is:

a firm that has no influence over the price at which it sells its product

price taker

a firm that has no influence over the price at which it sells its product

Long run

a period of time of sufficient length that all the firm's factors of production are varriable

short run

a period of time sufficiently short that at least some of the firm's factors of production are fixed

total cost/total output

average total cost

The marginal cost curve passes through the minimum of the average total cost curve variable cost curve total cost curve average fixed cost curve average variable cost curve

average total cost curve average variable cost curve

a firm's profit-maximizing level of output will not change when the firm's.... cost changes.

fixed

The sum of all payments made to the firm's fixed factors of production is the firm's

fixed cost

Suppose an artist has a year long lease on the studio where she works. When deciding how many paintings to make in a given month, the rent the artist pays for her studio is considered a

fixed cost since the lease can not be altered on a monthly basis, the rent the artist pays is a fixed cost

In perfectly competative markets, firms choose:

how much to produce but not the price fo their output

as otuput changes from one level to another, the change in total cost/ corresponding change in output is the firm's

marginal cost

Firms in perfectly competitive markets face demand curves that are

perfectly elastic

In the short run, a profit maximizing firm will not produce anything if..

the firm's revenue is less than its variable cost at all levels of production

Total cost

the sum of all payments made to the firm's fixed and variable factors of production

In the short run, a profit-maximizing firm will not shut down if its total revenue is:

greater than or equal to its variable cost.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

if the firm increases its price above the market price, it will earn zero revenue.

When the owners of a local brewery increases their output from 4 to 6 kegs of beer per day, their total cost increases from 310 to 360 perday. This implies the marginal cost of producing the additional keg of beer is.

25 360-310/6-4

Which of the following are characteristics of perfectly competative markets? each firm in the market faces a perfectly inelastic demand curve Buyers are well informed about the prices different firms charge The market has many sellers, each of which sells only a small fraction of the total quantity sold in the market

Buyers are well informed.... The market has many sellers....

A factor of production is?

an input used in the production of a good or service

Factor of Production

an input used in the production of a good or service

A VARIABLE FACTOR OF PRODUCITON IS

an input whose quantity can be altered in the short run

A variable factor of production is?

an input whose quantity can be changed in the short run

Fixed factor of Production

an input whose quantity cannot be altered int the short run

Marginal cost eventually increases because of

diminishing returns

an..... has at least some control over price

imperfectly competititive firm.

Which of the following is NOT true of a perfectly competititve firm?

it seeks to maximize revenue.

The property that when some factors of production are fixed, increased production of a good eventually requires ever-larger increases in the variable factor known as

law of diminishing returns

Suppose a professional artist decides to paint one additional painting, the resulting increase in her total cost is the... of producing an additional painting

marginal cost is the change in total cost/ by the change in total output.

A perfectly competititve market is a market in which

no individual seller has a significant influence over the market price of a product

Producer surplus is the amount by which

price exceeds the seller's reservation price

a firm cannot be profitable unless

price is greater than average total cost for some level of output

At each point along a market supply curve,.... measures each seller's marginal cost of production.

price.

If a firm's total revenue is greater than its total cost, then the firm

profitable

Fixed cost

the sum of all payments made to the firm's fixed factors of production

variable cost

the sum of all payments made to the firm's variable factors of production

Profit

the total revenue a firm receives from the sale of its product minus all costs-explicit and implicit-incurred in producing it

Profit equals?

total revenue minus total cost

A firm's__ cost is the sum of all payments the firm makes to inputs who's quantities can be altered in the short run

variable cost

Suppose an artist can easily change the number of hours she spends working each month. In deciding how many paointings to paint each month, the opportunity cost of the artist's time is considered a.

variable cost.

average variable cost

variable cost/ total output