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`
