HW 6

The shutdown point occurs where price is below the minimum of

AVC.

For the perfectly competitive firm, the marginal revenue is always

Constant.

Profit per unit is equal to

P - ATC.

Refer to Figure 22.3 for a perfectly competitive firm. This firm should shut down at any price below

$10.

The accounting profit is equal to

$925. Accounting profit is equal to revenue ($4,000) minus explicit costs ($200 + $75 + $250 + $750 + $600 + $1,200), which is $925.

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, profit per unit is maximized at an output of

31 units.

Refer to Figure 22.3 for a perfectly competitive firm. At a market price of $23, total profits are maximized at an output of

39.

If price is greater than marginal cost, a perfectly competitive firm should increase output because

Additional units of output will add to the firm's profits (or reduce losses).

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

Can increase its profit by decreasing output.

Normal profit

Covers the full opportunity cost of the resources used by the firm.

Accounting costs and economic costs differ because

Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $15,

Economic profits will be zero.

The demand curve confronting a competitive firm

Equals the marginal revenue curve.

In defining economic costs, economists emphasize

Explicit and implicit costs while accountants recognize only explicit costs.

If a firm can change market prices by altering its output, then it

Has market power.

When a producer can control the market price for the good it sells, the producer

Has market power.

The demand curve confronting a competitive firm is

Horizontal, while market demand is downward-sloping.

For perfectly competitive firms, price

Is equal to marginal revenue.

The perfectly competitive market structure includes all of the following except

Large advertising budgets.

A competitive firm should always continue to operate in the short run as long as

MR > AVC.

Short-run profits are maximized at the rate of output where

Marginal revenue is equal to marginal cost.

A catfish farmer will shut down production when

Price falls below AVC.

A firm experiencing economic losses will still continue to produce output in the short run as long as

Price is above average variable cost.

When price exceeds average variable cost but not average total cost, the firm should, in the short run,

Produce at the rate of output where MR = MC.

Economists assume the principal motivation of producers is

Profit.

Normal profit implies that

The factors employed are earning as much as they could in the best alternative employment.

Refer to Figure 22.3 for a perfectly competitive firm. Which of the following statements is true for this firm between the prices of $10 and $15?

The firm is experiencing economic losses but should continue to produce.

If price is less than marginal cost, a perfectly competitive firm should decrease output because

The firm is producing units that cost more to produce than the firm receives in revenue, thus reducing profits (or increasing losses).

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $23,

The firm will have above-normal profits.

Perfect competition is a situation in which

There are many firms and no buyer or seller has market power.

Marginal revenue is the change in

Total revenue when output is changed.

Economic profit is the difference between

Total revenues and total economic costs.