Micro ch. 12 hw & study module
Resources are allocated efficiently when _______.
marginal social benefit equals marginal social cost, and the economy is producing the goods and services that people value most highly
In perfect competition
price always equals marginal revenue. ?? & a firm's marginal revenue curve also the demand curve for the firm's output?
In a perfectly competitive market, the market demand is _______ and the demand faced by the individual firm is _______.
shown by a downward-sloping curve; perfectly elastic and the firm takes the market price as given
The market price is
the price at which the quantity demanded equals the quantity supplied
When some firms exit a market in which firms incur economic losses, the market supply curve shifts ______ and the market price ______.
leftward; rises
Perfect competition is a market in which there are _____ firms, each selling _____ product; many buyers; _____ to the entry of new firms into the industry; no advantage to established firms; and buyers and sellers _____ about prices.
many; identical; no barriers; are well informed
When new firms enter a perfectly competitive market in which firms are making an economic profit, the market supply curve shifts _______ and the market price _______.
rightward; falls
The shutdown point is the point at which price equals minimum average _____ cost and the quantity produced is that at which average _____ cost is at its _____.
variable; variable; minimum Shutdown point is the point at which price equals minimum average variable cost and the quantity produced is that at which average variable cost is at its minimum.
The firm's supply curve is the same as
its marginal cost curve at prices above minimum average variable cost
In a market undergoing technological change, firms that adopt the new technology _______. Firms that stick with the old technology _______.
make an economic profit and there is entry by new-technology firms; either exit the market or switch to the new technology
The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. Describe each firm in long-run equilibrium. In long-run equilibrium, each firm is _______.
making zero economic profit; In long-run equilibrium, there is no incentive for firms to either enter or exit the market. Firms enter the market when existing firms are making an economic profit. Firms exit the market when existing firms are incurring an economic loss. In long-run equilibrium firms are making zero economic profit.
A firm's supply curve is its ______.
marginal cost curve above minimum average variable cost A firm is willing to produce if it can cover its total fixed cost, so the supply curve extends lower than minimum average total cost. But you are correct that the firm's supply curve does run along part of the length of the marginal cost curve because the firm chooses the level of output such that marginal cost equals marginal revenue.
Each firm's output _______.
Each firm produces the quantity at which marginal cost equals marginal revenue. In a perfectly competitive market, marginal revenue equals price. So when the market price falls, each firm moves down along its marginal cost curve and each firm's output decreases.
In a competitive market, the market demand curve measures ______. In a competitive market, the market supply curve measures ______.
__marginal social benefit if the people who consume a good or service are the only ones who benefit from it; marginal social cost if the firms that produce a good or service bear all the costs of producing it -If the people who consume a good or service are the only ones who benefit from it, then the market demand curve measures the benefit to the entire society and is the marginal social benefit curve. If the firms that produce a good or service bear all the costs of producing it, then the market supply curve measures the marginal cost to the entire society and the market supply curve is the marginal social cost curve.
Clara's marginal revenue curve _______. #8
is also her firm's demand curve because the price remains the same regardless of how many purses she sells
A firm in perfect competition is a price taker because _______.
it produces a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms