Econ Final

The long run is best defined as a time period...

During which all inputs can be varied

A firm\'s _________________ are costs that are incurred even if there is no output. In the short run, these costs _______________ as production increases.

Fixed costs; do not change

Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and earns economic profits. Which statement is FALSE?

Price is equal to average total cost. This is false because when price = ATC they are at a breakeven point and profits are at zero

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

There is not enough information given to answer this question.

Which of the following best explains why this price will cause the firm to shut down instead of continuing to operate at a loss?

Total revenue<Total variable costs

The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, cornflakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of:

a standardized product

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

$30

Price in a perfectly competitive industry:

is always equal to marginal revenue for the firm.

The short-run supply curve for a perfectly competitive firm is its:

marginal cost curve above its average variable cost curve.

At the current level of output, Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:

must be rising

What is assumed in a perfect competition?

price taking behavior

In the short run, if P = ATC, a perfectly competitive firm:

produces output and earns zero economic profit.

One thing that distinguishes the short run and long run is...

the existence of at least one fixed input

Perfect competition is characterized by:

the inability of any one firm to influence price.

In economics, the short run is defined as:

the period in which some inputs are considered to be fixed in quantity.

A firm\'s ______________ are costs that increase as quantity produced increases. These costs often show ________________ illustrated by the increasingly steeper slope of the total cost curve.

variable costs; diminishing marginal returns

If two firms are identical in all respects except that one has more of the fixed input capital than another, the total product curve for the firm with more capital

will lie above the total product curve for the firm with less capital.

In perfectly competitive long-run equilibrium:

all firms produce at the minimum point of their average total cost curves.

If marginal cost is equal to average total cost:

average total cost is at its minimum.