exam 3 hoda question

. the long run is a time period that

When all of the firms inputs are variable

total revenue minus explicit costs is called

Accounting profit

average total cost is generally U shaped because

Average fixed costs are declining pulling ATC downward and average variable costs are rising pulling ATC upward

diseconomies of scale occur in the long run when:

Average total costs rise as output increases

the exit of firms from a perfectly competitive market will

Decrease market supply and increase market price

which of the following is true in the long run equilibrium under perfect competition?

Economic profit is zero because marginal revenue equals the minimum of ATC

as output in the short-run, average fixed costs:

Fall

perfectly competitive firms have

Horizontal demand curves and they can sell as much output as they want at the market price

in a perfectly competitive market, one farmers wheat:

Is an identical or the same as another's farmers wheat.

the long run supply curve for a firm in a perfectly competitive market

Is the portion of its marginal cost curve that lies above its average total cost

if average total costs are declining, marginal cost must be

Less than average total cost

perfectly competitive firms maximize profits when marginal costs equals

Marginal revenue and price

a firm will make the most profits if it produces that quantity of output for which

Marginal revenue equals marginal cost

suppose that a perfectly competitive market in the short run with firms earning positive economic profit. What change is most likely to occur in this market in the long run?

New firms will enter the market, shifting the market supply curve to the right

diminishing marginal product of labor holds that

Ouput per additional worker declines as more workers are hired

a perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

Price is greter than the minimum average variable cost

zumies inc produces skateboards. When zumies produces 10 skateboards a week, the marginal cost of the 10th board is $84 and the marginal revenue of that skateboard is $70. What yould you advise zumies to do?

Produce fewer skateboards

marginal cost tells us

The amount total cost changes when output changes by one unit

an example of an implicit cost of production would be:

The cost of space in your home used for a home office or business

if a perfectly competitive firm raised the price of its product:

The output it sells will decrease to zero

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

continue to operate in the short run but shut down in the long run.

Which of the following represents the firm's long-run condition for exiting a market?

exit if P < ATC

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

A long-run supply curve is flatter than a short-run supply curve because

firms can enter and exit a market more easily in the long run than in the short run.

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we don't know by how much.

i only

1. Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

labor to be variable and capital to be fixed.

Mrs. Smith operates a business in a competitive market. The current market price is $7.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

shut down in both the short run and long run.`

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

the marginal cost curve determines the quantity of output the firm is willing to supply at any price.

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

total cost