pure competition ECON

_______ revenue is the additional revenue that an additional unit of _______ would add to total revenue.

Marginal, output

Which of the following are considered to be the four basic market structures?

Oligopoly Pure competition Monopolistic competition Pure monopoly

In a perfectly competitive market, the demand curve for an individual firm is perfectly _______ at the market price.

elastic (horizontal line)

A purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting only its output because it ______.

is a price taker

Which of the following best describes the situation of a price-taking firm? A price-taking firm is one of a ______ number of firms producing a product that is identical to that of every other firm in the industry and providing ______ of total market supply.

large, only a fraction

A firm's total revenue is calculated as _______ times quantity produced.

price

In a purely competitive market, marginal revenue is a constant that is equal to which of the following?

price

The MR = MC rule is known as the:

profit maximizing rule

A ______ competitive firm's average-revenue schedule is also known as its demand schedule.

pure

_____competition is considered to be rare in the real world.

pure

A(n) _____ competitive firm's average-revenue schedule is also known as its demand schedule.

purely

Which of the following best explains why the price-marginal cost relationship improves as production increases?

At the very early stages of production, marginal product is low, making marginal cost unusually high.

If there are losses in the long run, what adjustments will take place?

Firms will exit the industry until losses are eliminated.

Total revenue equals ______ times ______.

Price x Quantity

In the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its___

output

Which of the following are conditions necessary to have pure competition?

standardized product free entry and exit very large number of firms or sellers

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

Pure competition; relevant

True or false: Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output.

false

There is no incentive for firms to enter or exit the industry in the long run when ______.

firms earn a normal profit MR = MC price equals minimum average total cost

In pure competition marginal revenue and ____ are equal

price

A competitive firm may realize an economic profit or loss in the ______ run but will earn only a normal profit in the _______ run.

short, long

A purely competitive firm is a price____

taker

Firms within pure competition are considered to be price ______

takers

A firm should always stop producing if its average ______ cost is ______ price.

variable; greater than

There is no incentive for firms to enter or exit the industry in the long run when _____

MR = MC firms earn a normal profit price equals minimum average total cost

In which market model do firms rely on product differentiation to distinguish themselves from the competition?

Monopolistic competition

What are two ways that a purely competitive firm can determine the level of output at which it will realize maximum profit or minimum losses?

By comparing marginal revenue to marginal costs By comparing total revenue to total costs

In a purely competitive market, price per unit to the purchaser is synonymous with ______ per unit or total_______ revenue to a seller

revenue, average

In pure competition, if the first unit of output sold increases total revenue from $0 to $131, marginal revenue for that unit is $131. If the second unit sold increases total revenue from $131 to $262, marginal revenue is again $131. The third unit sold increases total revenue to $______ and marginal revenue is now $______.

393; 131

Which of the following explains why a purely competitive firm is a price taker?

A purely competitive firm offers only a negligible fraction of total market supply and therefore must accept the price determined by the market

____efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

allocative

In a purely competitive market, price per unit to a buyer equals:

average revenue to a seller

A firm operating in a purely competitive market is a price taker because it ____

cannot change the market price, it can only adjust to it

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce _____

decrease, losses

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.

decrease, losses

If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.

decrease, rise

A firm should not produce a unit of output when the marginal cost is __________ (greater/lesser) than its marginal revenue.

greater

The entry and the exit of firms in an industry are considered to be _____ -run adjustments.

long

A purely competitive firm is a price___

taker

Economists group industries into_________, distinct market structures.

4

Pure ______ involves a very large number of firms

competition

Which of the following market structures produces only a standardized product?

A purely competitive market

Which of the following is a characteristic of a monopolistically competitive market?

A relatively large number of sellers producing differentiated products

Which of the following best describes pure competition?

An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.

Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?

In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost. In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost. Price or marginal revenue will settle where it is equal to minimum average total cost.

When the marginal cost of an additional unit of output exceeds the marginal revenue, what should the firm do?

Not produce that additional unit of output

Which of the following is a method of calculating economic profit in pure competition?

Price minus average total cost multiplied by quantity

Which of the following improves as production increases?

Price-marginal cost relationship

Which of the following explains why a firm would not produce a unit of output where MC exceeds MR?

Producing it would add more to costs than to revenue, and profit would decline or loss would increase

What are the effects of the "invisible hand" in a purely competitive economy?

Resource allocation that maximizes consumer satisfaction Maximum profits for individual producers

Which of the following are features of a purely competitive market?

Sales in both national and international markets Many independently acting sellers

Which of the following factors will alter costs and shift the marginal cost or short-run supply curve to a new location?

Technology Prices of variable inputs

Which of the following occur only in the long run?

The expansion or contraction of plant capacity The entry and exit of firms

Which factors illustrate that the demand curve for a purely competitive firm is perfectly elastic?

The firm cannot obtain a higher price by restricting its output. The firm does not need to lower its price to increase its sales volume.

A basic feature of the purely competitive market is the presence of ______.

a large number of sellers

Which of the following statements are true about allocative efficiency?

The goods and services produced are those that society most wants to consume. It is impossible to produce net gains for society by altering the mix of goods and services produced. The marginal cost and marginal benefit of producing each unit of output is equal.

Which of the following best describes the economic break-even point?

The point where total revenue covers all costs, but there is no economic profit.

Which of the following best describes marginal revenue?

The revenue that an additional unit of output contributes to total revenue.

____ profits in a competitive industry will attract new firms into the industry.

economic

Economists maintain that new firms are attracted into an industry due to:

economic profits

The profit-maximizing rule of MR=MC states that in the short run, the firm will maximize profit or minimize loss by producing the output for which marginal revenue ______ marginal cost.

equals

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?

externalities

Productive efficiency requires that goods be produced:

in the least costly way

The quantity of a product supplied by a firm in pure competition should _____ as long as price rises.

increase

The change in total revenue that results from selling one more unit of output is called _____ revenue.

marginal

he change in total revenue that results from selling one more unit of output is called ______ revenue.

marginal

A firm would not produce a unit of output where ______.

marginal cost exceeds marginal revenue

A purely competitive firm's demand schedule is equal to which of the following?

marginal revenue average revenue

The long run, every purely competitive firm tends to operate at its ______.

minimum ATC

From an economic standpoint, the break-even point is the level of output at which a firm makes a(n) ______ profit.

normal

In the long run, a purely competitive firm will only earn a ______ profit.

normal

In pure competition, marginal revenue and _______ are equal

price

In pure competition, to calculate economic profit, we first calculate the difference between _______ and average total cost and then multiply it by output.

price

This graph illustrates that a firm can minimize its losses by producing where ______

price exceeds minimum average variable cost but is less than average total cost

____(Allocative/Productive) efficiency means that goods are produced in the least costly way.

productive

Competitive market economies generate ______.

productive efficiency allocative efficiency

A competitive market generates ______ efficiency and _______ efficiency.

productive, allocative

All firms in a(n) ______ industry share the same basic efficiency characteristics.

purely competitive

Changes in _____ and changes in prices of variable inputs alter costs and shift the marginal cost or short run supply curve.

technology

As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?

there are no economic losses

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______.

total cost where product price is equal to marginal revenue

The two ways to determine the level of output at which a firm will realize maximum profit or minimum loss are to compare total revenue to ______ and to compare marginal revenue to ______.

total cost; marginal cost

Multiplying product price by output reveals which of the following?

total revenue

The price, multiplied by the firm's output or goods produced, equals ______.

total revenue

A firm will break even where ______ will just cover ______ because the revenue per unit and the average total cost per unit are equal.

total revenue, total cost

True or false: Firms within pure competition will produce standardized products.

true

If price is below a firm's minimum average _______ cost, the firm will not operate.

variable