Microeconomics Chapter 13

Commodities:

are a special type of standardized good. Incorrect have no product differentiation. are identical regardless of who produced them. All are correct.

In the short run, the relevant costs for a firm to consider whether to shut down production are:

average variable costs.

When demand increases in a perfectly competitive market, the market price:

increases in the short run and falls in the long run.

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

other firms will enter the market.

The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

MC = MR.

Given the exit rule, where does a firm's long-run supply curve derive from? It is the section of the:

MC curve that lies above the ATC curve.

When the market price has fallen below a firm's ATC but is above its AVC, in the short run, the firm:

can minimize its losses by staying open.

When firms have market power, it means that they:

can noticeably affect the market price.

When a firm faces a perfectly competitive market and buys its inputs from perfectly competitive markets, the only choice the firm has to affect its profits is to:

change the quantity it produces.

If the market price falls below a firm's minimum average total cost, the firm should:

consider how to minimize its losses.

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

economic profits must be positive.

Because market price always tends back to the minimum average total cost for all identical firms in a perfectly competitive market in the long run, in theory:

price will be the same at any quantity.

In a perfectly competitive market, when the price is below the minimum average total cost for all firms:

the price will eventually rise once enough firms have left the market.

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Price Quantity TC $50 0 $10.00 $50 1 $20.00 $50 2 $27.50 $50 3 $77.50 $50 4 $147.50 $50 5 $250.00 According to the table shown, what is the firm's total revenue when 4 units are produced?

$200

This table shows price and quantity produced for a single firm in a perfectly competitive market. Price Quantity $10 23 $10 24 $10 25 $10 26 Given the information in the table shown, what is the average revenue when 24 units are produced?

$10

This table shows price and quantity produced for a single firm in a perfectly competitive market. Price Quantity $10 23 $10 24 $10 25 $10 26 Given the information in the table shown, what is the marginal revenue when 25 units are produced?

$10

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Price Quantity TC $50 0 $10.00 $50 1 $20.00 $50 2 $27.50 $50 3 $77.50 $50 4 $147.50 $50 5 $250.00 According to the table shown, fixed costs must be:

$10

A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run?

Produce where MC = MR to minimize losses if P > AVC.

In a perfectly competitive market, producers:

are able to sell as much as they want without affecting the market price.

In the short run, the fixed costs of a firm:

are irrelevant in deciding whether to shut down production.

For firms that sell one product in a perfectly competitive market, average revenue is:

equal to the market price.

When firms enter a market, the supply increases and price:

falls and profits decrease.

If the market price ever drops below a firm's average variable costs at its profit-maximizing level of output the:

firm should shut down immediately. loss-minimizing quantity of output is zero. firm is not earning enough revenue to cover the variable costs of production. All are correct.

In the long run in a perfectly competitive market:

firms earn zero economic profits. Incorrect firms operate at an efficient scale. supply is perfectly elastic when all firms have the same cost structure. All are correct.

A competitive market is one in which:

fully informed price-taking buyers and sellers easily trade a standardized good.

An essential characteristic of a perfectly competitive market is:

goods are standardized.

If a firm is earning a negative economic profit, it means that:

more profits could be earned with the same resources in another industry.

When economic profits are zero for a firm, it means that:

no firms will enter or exit the industry.

If the demand in a perfectly competitive market decreases, the price will:

temporarily decrease.

For firms that sell one product in a perfectly competitive market, marginal revenue is always:

the same as market price.

The market supply in a perfectly competitive market is:

the sum of the quantities that each individual producer is willing to supply.

When some firms leave a perfectly competitive market, the price:

increases, and profits of those left rise.

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Price Quantity TC $50 0 $10.00 $50 1 $20.00 $50 2 $27.50 $50 3 $77.50 $50 4 $147.50 $50 5 $250.00 According to the table shown, the firm's marginal revenue:

is constant.

The number of firms in a perfectly competitive market:

is fixed in the short run.

In the short run, we assume that the number of firms in a perfectly competitive market:

is fixed.

For a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are equal to marginal revenue, it:

is producing a profit-maximizing quantity.

If a firm is earning a positive economic profit, it means that it:

is using its resources in the most profitable way.

For a firm in a perfectly competitive market, a price decrease:

lowers the profit-maximizing quantity.

In a perfectly competitive market price takers exist because there are:

many buyers and sellers.

In the long run, firms in a perfectly competitive market produce:

where price equals marginal cost.

If a firm in a perfectly competitive market is producing at a level of output where marginal costs exceed marginal revenue, its profits:

will increase if it produces less.

For firms that sell one product in a perfectly competitive market, the market price:

will remain constant regardless of an individual firm's output decision.

This table shows price and quantity produced for a single firm in a perfectly competitive market. Price Quantity $10 23 $10 24 $10 25 $10 26 Given the information in the table shown, what is the total revenue when 23 units are produced?

$230

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Price Quantity TC $50 0 $10.00 $50 1 $20.00 $50 2 $27.50 $50 3 $77.50 $50 4 $147.50 $50 5 $250.00 According to the table shown, what is the market price?

$50

Which of the following holds true at the chosen level of output in the long run for firms in a perfectly competitive market?

MR = MC

Which is not an essential characteristic of a perfectly competitive market?

Firms have limited market power.

Given the shutdown rule, what does the firm's short-run supply curve look like? It is the section of the:

MC curve that lies above the AVC curve.

If the demand increases in a perfectly competitive market, firms will likely:

enter the market in hopes of capturing some profits.

In a perfectly competitive market, when the price is greater than the minimum average total cost for most firms, some will:

enter until the price drops to equal minimum ATC.

If a firm in a perfectly competitive market faces a market price of $8, and it decides to increase its production from 300 units to 550 units, the firm's total revenue will:

increase from $2,400 to $4,400.

For a firm in a perfectly competitive market, if it produces where marginal cost exceeds marginal revenue it:

should cut back production to increase profits.

If a firm in a perfectly competitive market faces a market price of $7, and it decides to increase its production from 4,000 to 12,000 units, the firm's marginal revenue will:

stay the same.

A firm in a perfectly competitive market can maximize its profits by producing:

the level of output where marginal cost equals marginal revenue.

An example of a standardized good is:

grain

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. Price Quantity TC $50 0 $10.00 $50 1 $20.00 $50 2 $27.50 $50 3 $77.50 $50 4 $147.50 $50 5 $250.00 According to the table shown, when 1 unit is produced:

marginal revenue exceeds marginal costs, and the firm should produce more

For firms that sell one product in a perfectly competitive market, marginal revenue is:

the additional revenue gained from selling one more unit. equal to average revenue. equal to market price. Incorrect All are correct.

If the market price falls below the bottom of the firm's ATC curve:

there is no level of output at which the firm can make a profit.

If the demand increases in a perfectly competitive market, what will likely occur?

Firms will temporarily make a profit due to a higher price. Firms will enter the market in hopes of capturing some profits. The short-run supply curve will shift to the right, causing price to eventually fall. All are correct.

If firms are producing at a profit-maximizing level of output where the price is equal to the average total cost:

economic profits must be zero.

When demand increases in a perfectly competitive market, in the short run __________________, and in the long run __________________.

prices increase; supply increases

In the long run, firms in a perfectly competitive market choose to produce a quantity:

that earns zero economic profits.