ECON Test #3 MODULE 2

Since the marginal revenue faced by the firm is equal to price, _______ revenue is also equal to price.

average

In a perfectly competitive market, we assume that the products are identical in the minds of...

consumers

For a perfectly competitive firm, the market price is equal to...

-average revenue -marginal revenue -demand

To calculate profit, these 3 pieces of information must be identified

-quantity of output -price -average total cost

_________ is the revenue needed for a company to break even and meet operating costs without a loss

Zero Economic Profit/Normal Profit

Perfect Competition

a market structure characterized by the interaction of large numbers of buyers & sellers, in which the sellers produce a standardized, or homogeneous, product.

The perfectly competitive model is the most efficient type of market and is characterized by both productive & ________ efficiency

allocative

When consumers are relatively sensitive to changes in price, demand is considered....

elastic

Economic profit creates an incentive for other perfectly competitive firms to ______ the market

enter

Entry into a perfectly competitive market is...

free & open

As the market price _______, all else held constant, a profit-maximizing firm can afford to expand its production

increases

In the short run, as the price rises, so does the...

level of output supplied

The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit is known as the the...

long-run equilibrium

A perfectly competitive market involves firms that produce identical products, which means that consumers receive the _______ prices

lowest

All firms maximize profits by producing the quantity of output at which the _________ ________ equals the ______ _______

marginal cost; marginal revenue

In the short run, the supply curve for a firm is the ________ cost curve above or equal to the _________ cost curve.

marginal; average variable

In a perfectly competitive market, a single firm is a price taker, meaning that they only charge the...

market price

The demand for a perfectly competitive firm's product is a horizontal line originating at the...

market price

A ______ profit simply indicates that the firm is doing just as well as it would have if it had chosen to use its resources to produce a different product to compete in a different industry

normal

In the long run, firms have a ______ profit

normal

A firm should shutdown if...

price is less than average variable costs

Allocative Efficiency

producing the goods & services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost

Average Revenue

the amount of revenue per unit of a product sold

Economic Profit is...

the amount remaining after both explicit and implicit costs are subtracted from total revenue

Changes in the variable costs of resources will affect...

the marginal costs faced by firms

Profit

total revenue - total cost

If labor cost increases, a firm's marginal cost will shift...

upward

The firm's short-run supply curve is a ______ sloping curve that begins at _______ average variable cost

upward;minimum

Productive Efficiency

using the fewest resources possible to produce a good or service

Zero economic profit

when the firm's revenue equals its operating costs without a loss; NOT A BAD THING

Loss

when total revenue is less than the total cost`