ECON CH 7

In perfect competition:

A firm's total revenue is found by multiplying the market price by the firm's quantity of output.

Perfectly competitive firms will:

Increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.

The assumptions of perfect competition imply that:

Individuals in the market accept the market price as given.

The marginal revenue received by a firm in a perfectly competitive market:

Is equal to its average revenue

For a perfectly competitive firm, marginal revenue:

Is equal to price.

If a perfectly competitive firm is producing a quantity at which marginal cost is equals marginal revenue, profit:

Is maximized.

A perfectly competitive firm maximizes profit by producing the quantity at which:

MR=MC

The slope of the total cost curve is:

Marginal cost.

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

P = ATC

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

P > ATC

The demand curve for a perfectly competitive firm is:

Perfectly elastic.

If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Produce at a profit.

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

Produces output and incurs an economic loss.

Marginal revenue is a firm's:

Ratio of the change in total revenue to the change in output.

If the price is less than the average variable cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Shut down production.

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

$30

If all firms in an industry are price takers:

An individual firm cannot alter the market price even if it doubles its output.

A firm's shut-down point is the minimum value of:

Average variable cost.

If a perfectly competitive firm is producing a quantity at which marginal cost is greater than marginal revenue, profit:

Can be increased by decreasing production.

If a perfectly competitive firm is producing a quantity at which marginal cost is less than marginal revenue, profit:

Can be increased by increasing production.

____ almost always take the market price as given or are considered ____, but this is often not true of ____.

Consumers and producers; price takers; firms that produce a differentiated product.

The difference between total revenue and total cost is:

Economic profit or loss.

Marginal revenue:

Equals the market price in perfect competition.

The shut-down price is:

The minimum of the average variable cost curve.

The shut-down point in the short run is:

The minimum point average variable cost.