chapter 15

A firm will shut down in the short run if at the​ profit-maximizing quantity,​ ______.

marginal revenue is less than average variable cost

in perfect competition what determines the price

market demand and market supply

is a market in which many firms compete by making similar but slightly different products

monopolistic competition

is a market for a good or service that has no close substitutes and in which there is one supplier that is protected from competition by a barrier preventing the entry of new firms

monopoly

what is one characteristic of a perfectly competitive market?

there are large numbers of buyers and sellers

profit =

total revenue - total cost

Perfect competition exists when

-Many firms sell an identical product to many buyers. -There are no restrictions on entry into (or exit from) the market. -Established firms have no advantage over new firms. -Sellers and buyers are well informed about prices.

when is profit maximized?

MR=MC

If MR < MC →

decrease output to increase profit

In perfect​ competition, all the following situations arise except ​______.

each firm chooses the price at which to sell the good it produces

If MR = MC →

economic profit must be maximized

increased demand

firms enter

decreased demand

firms exit

if MR > MC →

increase output to increase profit

as output increases total revenue _________

increases

A permanent increase in demand​ ______ economic profit in the short run and some firms will​ ______ in the long run.

increases; enter the market

In the short​ run, the​ profit-maximizing firm will​ ______.

incur an economic loss if average total cost exceeds marginal revenue

If the average total cost curve is above the demand curve, then this firm is:

incurring an economic loss

At the shutdown​ point, the firm​ _______.

incurs a loss equal to total fixed cost

A​ firm's short-run supply curve is the same as​ ______ if it produces the good.

its marginal cost curve above minimum average variable cost

is a market in which a small number of firms compete

oligopoly

In perfect competition, the marginal revenue is always the same as:

price

A firm in perfect competition makes an economic profit if:

price is greater than average total cost

A buyer or seller that is unable to affect the market price is called a __________.

price taker

is a firm that cannot influence the price of the good or service that it produces

price taker

If price > average variable cost:

produce some output

what choices do temporary shutdowns cause?

produce some output or temporarily shut down

A firm that is producing the quantity at which marginal cost exceeds both average total cost and the market price will increase its economic profit by​ _______.

producing a smaller quantity

in perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________.

shift rightward, decrease

If price < average variable cost:

shut down