Econ CH 8

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its

allocative efficiency

If the price that a firm charges is higher than its cost of production for that quantity produced, then the firm will earn profits.

average

If the price that a firm charges is lower than its of production, the firm will suffer losses.

average cost

When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will

determine the company's total revenue, total costs, and its profits.

Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?

imposition of hurdle rates of interest

break even point

level of output where the marginal cost curve intersects the average cost curve at the minimum point of AC; if the price is at this point, the firm is earning zero economic profits

shutdown point

level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately

In the ______, the perfectly competitive firm will react to profits by ________.

long run; increasing its production

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?

price of competing products

In the __________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _______.

short run; losses are smallest

exit

the long-run process of firms reducing production and shutting down in response to industry losses

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?

what quantity to produce

long-run equilibrium

where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC

___________ refers to the additional revenue gained from selling one more unit.

Marginal revenue

In a perfectly competitive market setting, which of the following would be a true statement?

Wage rates trend toward marginal revenue product levels.

price taker

a firm in a perfectly competitive market that must take the prevailing market price as given

If the price that a firm charges are higher than its cost of production for that quantity produced, then the firm will earn profits.

average

In economics, labor demand is synonymous with

derived demand.

perfect competition

each firm faces many competitors that sell identical products

In economics, the term "shutdown point" refers to the point where the

marginal cost curve crosses the average variable cost curve.

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then

marginal cost is below average variable cost.

What happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is

preparing to exit operations.

The term _______ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

For a perfectly competitive firm, the marginal cost curve is identical to the firm's _______.

supply curve

market structure

the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold

entry

the long-run process of firms entering an industry in response to industry profits

A perfectly competitive industry is a

hypothetical extreme

Based on the information illustrated in this graph, which of the following is an accurate statement?

profits will be reduced by production in the zone where MC exceeds MR

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output,

expanding output levels at any given price will be profitable.

Economic profit can be derived from calculating total revenues minus all of the firm's costs,

including its opportunity costs

marginal revenue

the additional revenue gained from selling one more unit