Econ Exam 3

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

True

Which of the following is the best example of a variable cost?

monthly wage payments for hired labor

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

no, the average variable cost exceeds the price

For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are both equal to price.

true

What is the average fixed cost if the fixed cost is 50 and the quantity is 2?

25

How to calculate marginal cost?

Change in total cost divided by change in quantity

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

a one-unit increase in output will increase the firm's profit.

Profit-maximizing firms enter a competitive market when existing firms in that market have

average total costs less than market price.

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits

diminishing marginal product

Which of the following is not a characteristic of a competitive market?

entry is limited

If the firm is maximizing profit, how many units the firm is going to produce?

it will produce the quantity at which marginal cost equals marginal revenue

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

marginal cost

If firms are competitive and profit maximizing, the price of a good equals the

marginal cost of production.

At the profit-maximizing level of output

marginal revenue equals marginal cost.

The firm's short-run supply curve is its marginal cost curve above

the average variable cost curve

In a competitive market, the price and quantity relationship

the price remains the same, regardless of quantity sold-because they are price takers

Marginal revenue equals marginal cost when the firm produces

the same marginal cost as the price

In a long-run equilibrium, the marginal firm has

total revenue equal to total cost,economic profit equal to zero, price equal to average total cost.

A profit-maximizing firm in a competitive market will earn zero economic profit in the long run.

true

Firm operating in a perfectly competitive industry will shut down in the short run if the market price is less than that firm's average variable cost

true