Micro ch 8

Refer to the data in Figure 22.1. The total fixed costs for this firm are approximately

$50 The total fixed cost is $50 because total cost is $50 at 0 units of output.

Refer to figure 22.3 for a perfectly competitive firm. The law of diminishing returns takes effect at an output of

13

Refer to the data in figure 22.1. The profit-maximizing output for this firm is

200 units

A firm that makes zero economic profits

Covers all its costs, including a provision for normal profit.

The demand curve confronting a competitive firm is

Equals the marginal revenue curve.

A perfectly competitive firm should expand output when

P>MC

perfectly competitive firm is a price taker because

The price of the product is determined by many buyers and sellers.

A firm maximizes profit when

Total costs exceed total revenue by the largest amount

marginal revenue is the change in

Total revenue when output is changed.

For a perfectly competitive firm, marginal revenue is always

constant

The demand curve for each perfectly competitive firm is

horizontal

Short-run profits are maximized at the rate of output where

marginal revenue is equal to marginal cost

normal profit

the accounting profit earned when all resources earn their opportunity cost

Competitive firms cannot individually affect market price because

Their individual production is insignificant relative to the production of the industry.