Econ Test 2

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, then

average total cost is at its minimum

Ashley bakery expects its marginal cost curve will eventually slope upward, because in baking there are:

diminishing marginal returns

A perfectly competitive industry is currently in a state of long run equilibrium. Which of the following must be true?

P= MR= MC= ATC

The slope of a long run average total cost curve exhibiting decreasing returns is:

Positive

constant returns

each additional unit of input is as productive as the previous unit of input

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

greater than the average total cost

Firms in the model of perfect competition will:

increase output up to the point that the marginal revenue is equal to the marginal cost

Over the range of diminishing marginal returns, marginal cost:

increases

For a perfectly competitive firm, marginal revenue:

is equal to price

Average variable cost is the ratio of:

variable cost / quantity of output

The slope of a long run average total cost curve exhibiting increasing returns is:

negative

increasing returns

occur when hiring new workers causes marginal product to increase

A perfectly competitive firm is a:

price taker

In a short run graph how do you calculate ATC?

AFC+ AVC

In a short run, only if the price falls __________ shutdown is the company out of business.

BELOW

The competitive model assumes all of the following except: A) a large number of buyers B) easy entry into easy exit from market C) standardized product D) patents and copyrights

D) patents and copyrights

Diminishing marginal returns:

Each additional unit of input used will increase output, but by smaller and smaller amounts.

If a firm experiences lower costs per unit as it increases production in the long run, this is an example of:

Increasing returns to scale

Decreasing and Increasing returns to scale account for the shape of the:

Long run average total cost curve

The curve that shows the additional cost of each additional unit of output is called the:

Marginal cost curve

labor specialization

The division of labor into specialized activities that allow individuals to be more productive.

In a long run, if a company becomes absolete what does it do to the LRATC?

The whole curve shifts up (minimum costs increase because of out of date technology)

In a long run, what does new technology do to the LRATC?

Whole curve shifts down (minimum costs decrease)

the production graph:

exhibits diminishing returns to capital holding labor constant or exhibits diminishing returns to labor holding capital constant

Over the range of increasing marginal returns, marginal cost:

falls

The marginal cost curve intersects the average variable cost curve at:

its lowest point (min point)

A perfectly competitive firm's short run supply curve is its:

marginal cost curve above the average variable cost curve

The increase in output obtained by hiring an additional worker

marginal product

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

short run supply curve

In the short run:

some inputs are fixed and some inputs are variable.

Perfect competition is characterized by:

the inability of any one firm to influence price.