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In the long run market supply will be horizontal if

firms have identical cost structures.

In a competitive market, an individual firm

has little to no effect on the market price.

An increase in market demand for a product in a competitive market will raise profits for firms currently in the market.

True

A new movie is being released that you are excited to see. The personal value you receive from seeing the movie is $20. You purchase an advanced ticket for $10. If you lose the ticket, what is the most you should be willing to pay for a new ticket if losing the ticket does not change the value received from watching the movie?

$20

You purchase a ticket to a baseball game that you value at $40. You pay $35 for the ticket. Unfortunately you lose the ticket. What is the maximum you would be willing to pay for a new ticket if the value of seeing the baseball game remains the same?

$40

Profits for a firm can be calculated using which of the following formulas? a. (ATC - AVC)*Q b. AFC *Q c. (P - MC) *Q d. (P - ATC)*Q

(P - ATC)*Q

If marginal revenue is currently greater than marginal cost at the current the level of output, then

increasing output by one unit will increase profits for the firm.

Which of the following characteristics does not describe a competitive market? - A market where firms sell a nearly identical product. - A market where firms sell a differentiated product. - A market with many buyers and sellers. - A market where firms can freely enter or exit the market.

A market where firms sell a differentiated product.

Which of the following would be an example of a firm in a competitive market? - the Los Angeles Lakers - Pfizer, Inc. - An Iowa corn farmer - Google, Inc.

An Iowa corn farmer

A competitive market where firms currently earn positive economic profit will see firms exit the industry from increased competition.

False

A firm in a competitive market can change the market price by changing its own production level.

False

A firm should continue to operate if price is below average variable cost.

False

Firms with identical cost structures in a competitive market will have an upward sloping market long-run supply curve.

False

For all firm types price equals marginal revenue, and for competitive firms price equals average revenue.

False

If P < ATC then economic profits are positive.

False

If a firm in a competitive market increases the quantity of output sold, total revenue should

Increase

Which of the following describes why the market long-run supply curve would be upward sloping? - consumers have more market power than producers - entry of new firms does not change the cost structure of existing firms in the market - firms have different cost structures. - all inputs and resources are available in unlimited quantities

firms have different cost structures.

The condition that firms use to exit a competitive market in the long run is

P < ATC

Which of the following characteristics describes a competitive market? Firms are price setters. Producers sell highly differentiated products. Producers sell nearly identical products. Natural forces allow for only one firm to operate in the market.

Producers sell nearly identical products.

Which of the following is true if price is below average variable cost for a firm in a competitive market? a. The firm should continue to operate as long as price exceeds marginal cost. b. The firm should shut down and limit losses to fixed costs. c. The firm should continue to operate as long as price equals marginal cost. d. The firm should shut down and incur both variable and fixed costs.

The firm should shut down and limit losses to fixed costs.

ABC Co. brings in $3,400 in revenue from selling 425 units of its product and $3,404 in revenue from selling 426 units of its product. Which of the following conclusions can be drawn from this information?

The marginal revenue of the 426th unit is $4 and ABC Co. does not operate in a competitive market.

Which of the following is an example of a sunk cost? - The variable costs associated with increasing production. - The average costs associated with increasing production. - The unrecoverable fixed costs associated with production decisions. - The opportunity cost associated with making a decision.

The unrecoverable fixed costs associated with production decisions.

Which of the following is considered a characteristic of a competitive market? a. There are many buyers and sellers in the market. b. Government regulation limits the number of firms in the market. c. Firms are price setters. d Producers sell highly differentiated products.

There are many buyers and sellers in the market.

A firm that is currently producing at a level of output where marginal revenue is greater than marginal cost can increase profits by producing one more unit of output.

True

Fixed costs that cannot be recovered are known as sunk costs

True

If P > ATC then economic profits are positive.

True

If a firm in a competitive market doubles the quantity of units sold, total revenue will exactly double.

True

It is possible to have positive accounting profit and zero economic profit for a firm.

True

Which of the following explains why the market long-run supply curve would be upward sloping? - consumers have more market power than producers - entry of new firms does not change the cost structure of existing firms in the market - firms have identical cost structures. - all inputs and resources are only available in limited quantities

all inputs and resources are only available in limited quantities

A firm in the short run

cannot avoid paying fixed costs if the firm shuts down.

A market with many buyers and sellers trading a nearly identical product describes a(n)

competitive market.

If there is a reduction in market demand in a competitive market, then in the short run profits will

decrease

If a firm in a competitive market decreases the quantity of output sold, total revenue should

decrease.

If there is a reduction in market demand in a competitive market, then in the short run prices will

decrease.

If marginal revenue is currently less than marginal cost at the current level of output, then

decreasing output by one unit will increase profits for the firm.

Firms will have an incentive to exit a competitive market when

economic profits are negative.

Firms will have an incentive to enter a competitive market when

economic profits are positive.

Which of the following correctly describes a firm's entry condition in the long run? - enter if P = MC - enter if P > ATC - enter if MR > MC - enter if P < AVC

enter if P > ATC

A firm can exit an industry in the short run.

false

Farmer Brown sells sweet corn in a competitive market. When Farmer Brown sells 10 dozen ears of sweet corn, his total revenue is $30. When Farmer Brown sells 20 dozen ears of sweet corn, his total revenue is $60. Farmer Brown's average revenue is ____________ per dozen and his marginal revenue from selling the 20th dozen _________________.

is $3; is also $3

A firm that shuts down in the short run

is required to pay fixed costs but not variable costs.

When a firm exits a competitive market in the long run

it avoids paying both fixed and variable costs.

Which of the following is true if a firm increases its level of output by one unit and profits increase? - marginal revenue is less than marginal cost - marginal revenue is greater than marginal cost - price is greater than average total cost - marginal revenue is equal to marginal cost

marginal revenue is greater than marginal cost

Which of the following is true if a firm increases its level of output by one unit and profits decrease? - marginal revenue is less than marginal cost - marginal revenue is greater than marginal cost - price is greater than average total cost - marginal revenue is equal to marginal cost

marginal revenue is less than marginal cost

When price is less than average total cost, profits for the firm are

negative.

Firms in a competitive market are considered price takers because

no individual buyer or seller can affect the market price.

When price is greater than average total cost, profits for the firm are

positive.

Which of the following is not correct with respect to firms in a competitive market in the long-run? - price is equal to average total cost - economic profits are zero - price is equal to marginal cost - price is above average total cost

price is above average total cost

A firm in a competitive market will shut down in the short run if

price is below average variable cost.

Which of the following is correct with respect to firms in a competitive market in the long-run? - price is below average total costs - price is equal to average total costs - economic profits are positive - price is equal average fixed costs

price is equal to average total costs

The entry decision for a firm in a competitive market in the long run depends on if

price is greater than average total cost.

The exit decision for a firm in a competitive market in the long run depends on if

price is less than average total costs.

Which of the following correctly describes when a firm in a competitive market should shut down in the short run? - price is greater than marginal cost - price is less than average total cost - price is less than average variable cost - price is equal to marginal cost

price is less than average variable cost

If marginal revenue is equal to marginal cost at the current level of output, then

profits are maximized.

An increase in market demand in a competitive market will have which effect in the short run?

profits for the firm will increase

Fixed costs that are not relevant to production decisions are known as

sunk cost

Which of the following costs should be ignored by a firm when making production decisions in the short run? - opportunity costs - implicit costs - sunk costs - explicit costs

sunk costs

One explanation for why the market long-run supply curve slopes upward is because

the inputs in production are only available in limited quantities.

An increase in market demand in a competitive market will have which effect in the short run?

the market price will increase

Which of the following is a likely effect from firms entering into a competitive market? - the market price for the product should increase - the demand for the product should increase. - the profits for existing firms will decline. - the market supply curve will shift left

the profits for existing firms will decline.

In the long-run, firms in a competitive market will have

zero economic profit.

When price equals average total cost, profits for the firm are

zero.