UNIT 9

Which of the following best describes a competitive industry?

Its firms sell similar products and have little control over their prices; there are many buyers and sellers and each is relatively small compared with the overall market

To maximize profits, a firm in a highly competitive industry should set its price:

at the market price.

Use the figure. At a price of $20, the firm earns profit of:

$75

Refer to the table: What is the marginal cost of producing the seventh barrel of oil?

36

Refer to the table. What is the marginal revenue of producing the fifth barrel of oil?

50

Refer to the table: How many barrels of oil should the company produce to maximize profit?

8

Why can't marginal cost decrease forever?

At some point, firms encounter physical limits of production

In their calculation of profit, accountants typically do not take into account:

Opportunity costs

Stating that TR = TC is equivalent to stating that:

P = AC

A firm should exit an industry if:

P- AC < 0

An industry is said to be perfectly competitive when:

each firm has virtually no influence over the price of its product.

Which of the following is an example of an implicit cost of production?

opportunity cost

Economic profit differs from accounting profits because of its inclusion of:

implicit costs

if a single supplier produces a good with many good substitutes, then:

it will have little control over the market price

Programs such as Steam distribute more and more video games. Purchasers buy the game and download it immediately to their computer. If the entire system is automated, estimate the marginal cost of producing and selling video games this way (ignore electricity costs).

zero