Econ Ch 12
Perfect competition implies that
A. all firms are price takers. B. there are many firms in the industry. C. all firms are producing the same identical product.
A perfectly competitive firm is definitely earning an economic profit when
P > ATC.
In the short run, a perfectly competitive firm will earn an economic profit as long as
P > ATC.
A perfectly competitive firm maximizes its economic profit if it produces so that
marginal revenue = marginal cost.
In the short run, a perfectly competitive firm's economic profits
might be positive, negative (an economic loss), or zero (a normal profit).
Suppose firms in a perfectly competitive industry are suffering an economic loss. Over time,
some firms leave the industry, so the price rises and the economic loss decreases.
Marginal revenue is equal to
the change in total revenue divided by the change in quantity sold.
A market is perfectly competitive if
there are many firms in it, each selling an identical product
At a firm's break−even point, definitely its
total revenue equals its total opportunity cost.
Total economic profit is
total revenue minus total opportunity cost.
A firm's shutdown point is the output and price at which the firm just covers its
total variable cost.
the owners will shut down a perfectly competitive firm if the price of its good falls below its minimum
average variable cost.
The firm's supply curve is its
marginal cost curve, at all points above the minimum average variable cost curve.
Which of the following is NOT an assumption of perfect competition?
Firms compete by making their product different from products produced by other firms.
A perfectly competitive firm's short−run supply curve is the same as its
MC curve above the minimum of the AVC curve.
Individual firms in perfectly competitive industries are price takers because
each individual firm is too small to affect the market price.
In the long run, a perfectly competitive firm can
earn a normal profit.
If the market for maple syrup is perfectly competitive, then in the long−run equilibrium, firms are
earning zero economic profit.
In perfect competition, the marginal revenue of an individual firm
equals the price of the product.
In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________ minimum average total cost.
equal to; higher than; lower than
If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will
increase its output.