Econ 202 Assignment 10

What are two ways that a purely competitive firm can determine the level of output at which it will realize maximum profit or minimum losses?

-By comparing marginal revenue to marginal costs -By comparing total revenue to total costs

Which of the following features occur in a purely competitive market?

-Many independently acting sellers -Sales in both national and international markets.

Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?

-The firm cannot obtain a higher price by restricting its output. -The firm does not need to lower its price to increase its sales volume.

Which of the following are conditions necessary to have pure competition?

-free entry and exit -standardized product -very large number of firms or sellers

A purely competitive firm's demand schedule is equal to which of the following?

-marginal revenue -average revenue

In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ______ is equal to ______.

-revenue; marginal cost -cost; price -revenue; price

In this table, at a price of $71, the profit-maximizing or loss-minimizing level of output is ______.

0 units

In pure competition, if the first unit of output sold increases total revenue from $0 to $131, marginal revenue for that unit is $131. If the second unit sold increases total revenue from $131 to $262, marginal revenue is again $131. The third unit sold increases total revenue to $______ and marginal revenue is now $______.

393; 131

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

6 units

Which of the following explains why a purely competitive firm is a price taker?

A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market

Which of the following is a characteristic of a monopolistically competitive market?

A relatively large number of sellers producing differentiated products

Which of the following best explains why the price-marginal cost relationship improves as production increases?

At the very early stages of production, marginal product is low, making marginal cost unusually high.

In a perfectly competitive market, the demand curve for an individual firm is perfectly _________at the market price.

Elastic

What is the firm's most likely response if price is exactly equal to minimum average variable cost?

Indifference to producing or shutting down

Which of the following best describes oligopoly?

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:

MR=P=MC

Which of the following best describes a pure monopoly?

One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price.

Which of the following is a method of calculating economic profit in pure competition?

Price minus average total cost multiplied by quantity

Total revenue equals ______ times ______.

Price x Quantity

Which of the following improves as production increases?

Price-marginal cost relationship

Which of the following explains why a firm would not produce a unit of output where MC exceeds MR?

Producing it would add more to costs than to revenue, and profit would decline or loss would increase

A(n) ___________ , competitive firm's average-revenue schedule is also known as its demand schedule.

Pure

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

Pure competition; relevant

Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location?

Technology Prices of variable inputs

Based on the chart, what happens at a price P3 and an output of Q3?

The firm incurs a loss but covers part of its fixed cost.

Which of the following best describes the economic break-even point?

The point where total revenue covers all costs, but there is no economic profit.

Which of the following best describes marginal revenue?

The revenue that an additional unit of output contributes to total revenue.

True or false: Firms within pure competition will produce standardized products.

True

A basic feature of the purely competitive market is the presence of ______.

a large number of sellers

Which of the following market structures produces only a standardized product?

a purely competitive market

Which of the following best describes the situation of a price-taking firm? A price-taking firm is one of a ______ number of firms producing a product that is identical to that of every other firm in the industry and providing ______ of total market supply.

large; only a fraction. A price taker provides a small amount or fraction of the total supply.

A firm would not produce a unit of output where ______.

marginal cost exceeds marginal revenue

The change in total revenue that results from selling one more unit of output is called_______ revenue.

marginal revenue

__________ revenue is the additional revenue that an additional unit of _________would add to total revenue. (Enter one word in each blank.)

marginal, output

In which market model do firms rely on product differentiation to distinguish themselves from the competition?

monopolistic competition

From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.

normal

In the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its

output

Based on the information in this chart, at which price will a firm shut down?

p1

Given an output of Q4, at which price will the firm break even or earn a normal profit?

p4

At which point will a firm be indifferent whether to shut down or continue to produce?

point b

A firm's total revenue is calculated as_________ times quantity produced. (Enter one word in the blank)

price

In pure competition, to calculate economic profit, we first calculate the difference between and average total cost and then multiply it by output.

price

A(n) _________competitive firm's average-revenue schedule is also known as its demand schedule.

purely

In a purely competitive market, price per unit to the purchaser is synonymous with__________ per unit or _______ revenue to a seller. (Enter one word per blank.)

revenue, marginal

A purely competitive firm is a price

taker

Changes in____________(Enter one word) and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

technology

The two ways to determine the level of output at which a firm will realize maximum profit or minimum loss are to compare total revenue to ______ and to compare marginal revenue to ______.

total cost; marginal cost

The price, multiplied by the firm's output or goods produced, equals ______.

total revenue

If price is below a firm's minimum average___________ cost, the firm will not operate.

variable

A firm should always stop producing if its average ______ cost is ______ price.

variable; greater than

In a purely competitive market, price per unit to a buyer equals:

average revenue to a seller

A firm operating in a purely competitive market is a price taker because it ______.

cannot change the market price, it can only adjust to it

The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.

equals

True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.

false

The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.

increase

A purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting only its output because it ______.

is a price taker

This graph illustrates that a firm can minimize its losses by producing where ______.

price exceeds minimum average variable cost but is less than average total cost

In pure competition, to calculate economic profit, we first calculate the difference between_________ and average total cost and then multiply it by output. (Type only one word in blank.)

price