ECO 2023 Chapter 13

If the market price is $40, the average revenue of selling five units is remember AR=P

$40

total profit formula

(P-ATC)xQ

The actions of a firm intended to maintain the differentiation of a product over time

brand management

a critical aspect of marketing is creating a ___________ ___________ for your product. can help to maintain product differentiation, and delay the ability of other firms to compete away your profits.

brand name

if P=ATC, the firm is

breaking even

What is always true at the quantity where a firm's average total cost equals average revenue? the firm

breaks even

Market supply is found by a. vertically summing the relevant part of each individual producer's marginal cost curve. b. horizontally summing each individual producer's average total cost curve. c. horizontally summing the relevant part of each individual producer's marginal cost curve. d. vertically summing each individual producer's average total cost curve.

c

if P<ATC, the firm is making a

loss

2 features of monopolistically competitive firms do not sell identical products like perfectly competitive firms

many firms, easy entry

3 features of perfectly competitive markets

many firms, identical products, easy entry

Profit maximization requires producing until the marginal revenue from the last unit is just equal to the ___________ ______

marginal cost

a perfectly competitive firm in long-run equilibrium produces where price equals _____________ ___________

marginal cost

in a perfectly competitive firm, Price =

marginal revenue

All the activities necessary for a firm to sell a product to a consumer.

marketing

Monopolistic competition results in ____________ productive nor allocative efficiency.

neither

Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.

ok

because in a perfectly competitive firm, P= MR the profiting maximum for perfectly competitive firms is when Price = MC and also MR = MC

ok

providing customers with good products at a low price is probably the best way to ensure success

ok

when revenue increases because of a lower price, causing an increase in amount sold "one good thing" from a price drop

output effect

only _______________ competition can result in productive and allocative efficiency

perfect

when price is reduced and it causes loss in revenue due to total purchases decreasing total revenue, even if more products are sold one "bad thing" of a price change

price effect

A firm's ability to differentiate its product and to produce it at a lower average cost than competing firms creates __________ for its customers.

value

if a firm is about to shut down, as long as _________ price is higher than _____________ (same) cost, it should stay working

variable

____________ efficiency is achieved in the short run and the long run. ______________ efficiency is achieved only in the long run.

Allocative, Productive

If a typical firm in a perfectly competitive industry is incurring losses, then a. some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. b. some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. c. some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. d. all firms will continue to lose money.

a

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications? a. ease of entry b. few firms in the market c. identical products d. blocked entry

a

Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive? a. As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production. b. Sales of cage-free eggs have increased at a rate of 20 percent per year. c. The U.S. Department of Agriculture has established standards for the labeling of cage-free eggs. d. The profits earned by farmers who sell cage-free eggs have continued to grow, despite the increasing number of farmers entering this market.

a

If a firm shuts down in the short run it will a. declare bankruptcy. b. suffer a loss equal to its fixed costs. c. suffer a loss equal to its variable costs. d. break even.

b

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen? a. The firm's revenue will increase. b. The firm will not sell any output. c. The firm will sell more output than its competitors. d. The firm's profits will increase.

b

A firm's total profit can be calculated as all of the following except a. total revenue minus total cost. b. (price minus average total cost) times quantity sold. c. average profit per unit times quantity sold. d. marginal profit times quantity sold.

d

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if a. his Shoppe's total revenue exceeds his implicit costs. b. his Shoppe's total revenue exceeds his fixed cost. c. his Shoppe's total revenue exceeds his capital costs. d. his Shoppe's total revenue exceeds his variable cost.

d

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should a. keep output constant and enjoy the above normal profit. b. lower the price. c. reduce its output. d. increase its output.

d

Perfect competition is characterized by all of the following except a. homogeneous products. b. sellers are price takers. c. a horizontal demand curve for individual sellers. d. heavy advertising by individual sellers.

d

Firms use advertising to _________________ their products: effectively making the demand curve more inelastic

differentiate

Think of the long-run as the ____________ ____ ____________ demand will continue to fall to the zero (economic) profit level, unless the firm is able to do something about it.

direction of trend

When a firm has total revenue greater than total cost, it makes an _____________ __________

economic profit.

By being the first to sell a particular good, a firm may gain a _______ _____________ advantage, finding its name closely associated with the good in the public's mind. Surprisingly, recent research has shown that the first firm to enter a market often does not have a long-lived advantage over later entrants

first mover

costs a firm has to pay no matter how much it produces

fixed costs

if a firm has to shut down it still pays its

fixed costs

perfectly competitive firms have a ____________ sloping curve

horizontal

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is an

increasing cost industry

differentiating products makes the curve more _____________

inelastic

consumers might benefit from monopolistic competition through _____________ _____________ can purchase products specific to their tastes and needs

product differentiation

if P>ATC, the firm is making a

profit