ECON Chapter 12 DSM

Long run equilibrium in perfect competition results in:

both productive and allocative efficiency

According to the graph, which demand curve is associated with the shutdown point for this perfectly competitive firm?

demand curve 2 (touches MC and AVC)

A buyer or seller that is unable to affect the market price is called a __________

price taker

According to the data in the table, when the price is $4 the firm would produce:

four units of output, although it would suffer a loss from doing so (total revenue/ output)

If the average total cost curve is above the demand curve, then the firm is:

having economic losses

In the short run, the firm should:

operate if price > average variable cost

According to the graph the shut-down point corresponds to:

point d (the lowest point that intersects marginal cost and average variable cost)

In perfect competition, the marginal revenue is the same as:

price

A firm in perfect competition earns profit if:

price is greater than average total cost

In a 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 rightward; decrease

What is the term given to a cost that has already been paid and cannot be recovered?

sunk costs

As the market demand shifts to the left, how will the firm's level of output change?

the firm will decrease its output and suffer losses

Which graph best depicts an industry in which the firm's average costs decrease as the industry expands production?

the graph on the left (when the price is higher than the quantity)

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

there are a large amount of buyers and sellers

According to the data in the table, what level of output maximizes profit?

when marginal revenue and marginal cost are the same