ECO100: Competitive Markets
Company X has sold 1,221,981 song downloads of a popular music group for $0.99 a song. What will marginal revenue be for the next song?
$0.99
What is the break-even quantity for a piece of software that cost $500,000 to develop and will sell for $5 per download?
$100 000
Company Z invested $200,000 in software development and now sells the product for $10 a CD. Assuming the cost to create and package the CDs is $2 each, what is the break-even point in dollars for this product?
$250 000; $200 000/($10-$2) = 25 000 units; $200 000 + ($2 x 25 000 units) = $200 000 + $50 000
If the average total cost curve is above the demand curve, then this firm is:
having economic losses
A buyer or seller that is unable to affect the market price is called a:
price taker
Company Z invested $200,000 in software development and now sells the product for $10 a CD. Assuming the cost to create and package the CDs is $2 each, what is the break-even point in units for this product?
25 000 units; $200 000/($10-$2)
According to the data in the table, how many shirts would the firm produce when the price is $4?
Fixed Cost ($17) - Variable Cost ($13) = $4 at 4 units (loss b/c revenue is $16)
Which of the following is a characteristic of a perfectly competitive market?
Large number of buyers and sellers; undifferentiated products; no transaction costs; no barriers to entry and exit; perfect information about the price of a good
Which of the following best describes the additional revenue associated with selling an additional unit of output?
Marginal revenue
In perfect competition, the marginal revenue is the same as:
Price
What is zero economic profit?
Price is equal to ATC
What is MC?
The price at the Q
When do you shut down?
Where AVC = MC
Where is profit maximized?
Where MR=MC
A firm in perfect competition earns profit if:
price is greater than average total cost
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 right; decrease
What is average revenue?
total revenue/the quantity sold
In the short run, the firm should:
operate if price > average variable cost.