CH 10: Pure Competition in the Short Run

question

Economists group industries into ____ distinct market structures

answer

question

Pure ___________ involves a very large number of firms

answer

competition

question

Which market structure has the fewest obstacles to entry or exit?

answer

Pure Competition

question

The market structure in which individual firms have the least amount of control over price is ______, whereas in ______ a single firm has significant control over price.

answer

pure competition, pure monopoly

question

Match each market structure with the correct type of product that it produces

answer

standardized product-purely competitive
differentiated product- monopolistically competitive
standardized or differentiated- oligooly
unique, no close substitute- monopoly

question

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

answer

Oligopoly
Pure monopoly
Monopolistic Competition
Pure competition

question

Which of the following best describes pure competition?

answer

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.

question

A purely competitive industry has a very ______ number of sellers, whereas the other three market structures reflect a progressively ______ or ______ number of sellers.

answer

large; smaller; decreasing

question

Match each market structure with the description that best describes the conditions for exit and entry into that industry.
Instructions

answer

very easy, no objectives- purely competitive
relatively easy- monopolistically competitive
significant obstacles- oligopoly
block- monopoly

question

True or false: A pure monopoly involves a very large number of firms producing a single unique product.

answer

False

question

Match each market structure with the correct description of how price control is exerted

answer

none- purely competitive
some, but within narrow limits -monopolistically competitive
limited by mutual independence- oligopoly
considerable control- monopoly

question

In which type of market structure does a single firm produce a unique product with no close substitutes?

answer

Pure monopoly

question

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

answer

Monopolistic competition

question

Which of the following best describes oligopoly?

answer

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

question

Match the market models based on the number of firms present in each model.

answer

very large number- pure competition
relatively large number- monopolistic competition
few- obligopoly
one- monopoly

question

Which of the following best describes a pure monopoly?

answer

One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price

question

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

answer

A relatively large number of sellers producing differentiated products

question

Select all the market structures that are considered forms of imperfect competition.

answer

Pure Monopoly
Monopolistic competition
Oligopoly

question

An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.

answer

few; price

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______________ competition is considered to be rare in the real world.

answer

Pure

question

Firms within pure competition are considered to be price ___________

answer

taker

question

Which of the following features occur in a purely competitive market?

answer

Many independently acting sellers
Sales in both national and international markets

question

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

answer

Pure competition, relevant

question

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

answer

A purely competitive market

question

Firms that operate in a purely competitive industry:

answer

do not differentiate their products

question

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

answer

- Very large numbers of firms or sellers
- Standardized Product
- Free entry and exit

question

In a purely competitive industry, buyers view the products of firms B, C, D and E as ______ for the product of firm A.

answer

perfect substitutes

question

A basic feature of the purely competitive markets is the presence of _______________

answer

a large number of sellers

question

In purely competitive markets, an individual firm lacks control over which factor

answer

Product Price

question

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.

answer

large; only a fraction

question

Firms within pure competition will produce standardized products

answer

True

question

Which of the following best summarizes why firms in purely competitive industries do not differentiate their products?

answer

Because there are so many of them selling a standardized product

question

In a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to ______.

answer

substitute with products of firms B, C, or D

question

A firm will increase its product price in a(n) _______________ competitive market because consumers can switch to a lower-prices identical product.

answer

purely

question

Which of the following are true of purely competitive firms?

answer

They produce a small fraction of total supply
They do not exert control over product price
They are price takers

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

answer

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

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In purely competitive industries, firms can freely:

answer

enter and exit

question

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

answer

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

question

Which of the following best summarizes why a firm in a purely competitive market will not increase its prices?

answer

Asking a price higher than the market price would be futile because consumers could substitute with identical products that are cheaper

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

answer

elastic

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The market demand curve for a purely competitive industry:

answer

slopes downward

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Which statement about obstacles to selling in a purely competitive market is true?

answer

There are no significant obstacles to selling.

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A purely competitive firm is a price __________

answer

taker

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

answer

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

question

In pure competition the demand curve faced by individual firm graphs as a(n) ______ line and the market demand in pure competition is graphed as a(n) ______________ curve.

answer

horizontal; downward sloping

question

Since firms within pure competition are _____ all or a majority of firms within an industry must agree to change output in order to affect price

answer

price takers

question

In a purely competitive market, a firm's demand schedule is also its __________ - _____________ schedule

answer

average- revenue

question

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

answer

total revenue

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

answer

marginal

question

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

answer

price

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Which action would increase market price in a purely competitive market?

answer

All firms reducing its output.

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

answer

average revenue to a seller

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A purely competitive firm's total revenue (TR) is a straight line that slopes __________ and to the _____________.

answer

upward, the right

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

answer

price

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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 $______.

answer

393; 131

question

In pure competition, marginal revenue and __________ are equal.

answer

price

question

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

answer

average revenue
marginal revenue

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A purely competitive firm's total revenue curve will

answer

have a constant slope because each extra unit of sales increases total revenue by a constant amount

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

answer

total revenue

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In regard to its slope, a purely competitive firm's demand curve is perfectly ___________

answer

horizontal

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

answer

marginal

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

answer

pure

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A purely competitive firm's marginal revenue curve will ______ the firm's demand curve.

answer

coincide with

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A purely competitive firm's horizontal demand curve indicates ________________.

answer

perfect price elasticity

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In pure competition, a firm's average revenue will be ____________ the product's price.

answer

equal to

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

answer

is a price taker

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

answer

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

question

A purely competitive firm's average revenue curve is equal to or coincides with which of the following?

answer

Price and Demand curve

question

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

answer

marginal

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

answer

output

question

After a company has determined that it should produce a product and the amount of the product to produce, what basic question should it ask?

answer

What economic profit (or loss) will we realize?

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

answer

total cost; marginal cost

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In the table, total economic profits at the profit-maximizing level of output are calculated as a total revenue of $______ minus approximate total costs of $______.

answer

1179; 880

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Because of the law of diminishing returns, marginal costs eventually fall as more units of outputs are produced.

answer

False

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

answer

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

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Confronted with the market of its product, a purely competitive producer will ask which three questions?

answer

What economic profit or loss will we realize if we produce this product?
If we produce this product, in what amount?
Should we produce this product?

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A purely competitive firm will maximize its profits by producing up to the point where

answer

the vertical distance between the total revenue and total cost curves is the greatest.

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A firm within pure competition will maximize its profit when total cost is maximized over total revenue

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false

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The equation for determining economic profit or loss is _________________ minus _______________

answer

total revenue; total cost

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Which of the following best describes the marginal revenue?

answer

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

question

Because of the law of diminishing returns, marginal costs ______________ at a(n) __________________ rate at higher levels of output

answer

increase; increasing

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

answer

normal

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Which of the following indicates the profit-maximizing level of output?

answer

The vertical distance between the total revel and total cost cruves

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A purely competitive firm's profit is _______ when total revenue exceeds total cost by the maximum amount.

answer

maximized

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_______________ revenue is the additional revenue that an additional unit of ______________ would add to the total revenue

answer

marginal; output

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

answer

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

question

A firm should not produce a unit of output when the marginal cost is _______________ than its marginal revenue.

answer

greater

question

Which of the following are scenarios in which a firm should continue to produce?

answer

Marginal revenue is $5 and marginal cost is $4.75.
Marginal revenue is $0.25 and marginal cost is $0.20.
Marginal revenue is $1.50 and marginal cost is $1.45.

question

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

answer

marginal cost exceeds marginal revenue

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In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ___ is equal to ___.

answer

revenue; marginal cost
revenue; price
cost; price

question

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

answer

Not produce that additional unit of output

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A firm should produce any unit of output whose

answer

marginal revenue is greater than marginal cost

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At which stage of production is marginal revenue most likely to exceed marginal cost?

answer

The initial stage

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The MR = MC rule can be applied to ______ firms; however, the rule can be restated as P = MC only when applied to ______ firms.

answer

all; purely competitive

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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.

answer

equals

question

In which type of market does profit-maximizing output occur at the level at which price is equal to marginal cost?

answer

Pure competition

question

Based on the information given in the table, which of the following statements are true?

answer

Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost
The ninth unit of output is the profit-maximizing level of output

question

In the initial stages of production, where output is relatively low, marginal revenue will usually ________________ marginal cost

answer

exceed

question

Which of the following are true about the profit-maximizing rule of MR=MC?

answer

The rule is an accurate guide to profit maximization for all firms regardless of their market structure?
The rule applies only if producing is preferable to shutting down
The rule can be restated as P=MC when applied to a purely competitive firm because product price and MR are equal.

question

For purely competitive firms, the MR=MC rule can be restated so that ____________ replaces marginal revenue.

answer

price

question

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

answer

price

question

In this table, at a price of $131, the profit-maximizing level of output is _____ units of output.

answer

question

At a profit-maximizing level of output of 25 units, a perfectly competitive firm's marginal revenue is $4, average variable cost is $.30, average total cost is $1.22, and marginal cost is $3.75. What is the firm's economic profit?

answer

69.50

question

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

answer

Price minus average total

question

Based on the graph, at which level of output does the firm maximize its total profit?

answer

9 units

question

A firm produces 10 units of a product with a market price of $5 and an average total cost of $3. What is the firm's economic profit?

answer

$20

question

Based on the graph, what happens at a price of $131 and 7 units of output?

answer

Per-unit profit is maximized but total profit is not

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

answer

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

question

The MR=MC rule is known as the

answer

profit-maximizing rule

question

Which of the following improves as production increases?

answer

Price- marginal cost relationship

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If a firm's loss-minimizing output is 10 units and its average total cost at that level of output is $25, it will suffer a loss of $______ give a price of $20

answer

question

The shaded area on the graph represents

answer

total economic profit

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Which of the following best explains why a purely competitive firm would not stop producing if the loss is less than its fixed costs?

answer

Fixed costs are paid regardless of whether something or nothing is produced, and the firm receives enough revenue per unit to cover AVC and some FC.

question

In maximizing profits at 9 units of output, the firm in this graph is adhering to which of the following rules?

answer

Produce to the point where additional units of output add positively to total profit.

question

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

answer

6 units

question

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

answer

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

question

At a price of $10 and a profit-maximizing (or loss-minimizing) level of output of 20 units, a perfectly competitive firm's average total cost is $15. This firm's economic profit or loss equals:

answer

-$100

question

A firm would not stop producing if the loss is less than its __________ costs.

answer

fixed

question

In this graph, a firm incurs a loss but continues to operate because the price is ______ than the lowest average total cost but above the lowest average ______ cost.

answer

less; variable

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Whenever the price is ______ average variable costs but is ______ average total costs, the firm can pay part, but not all, of its fixed costs by producing.

answer

greater than; less than

question

A firm should always stop producing if its average _________ cost is ____________ price

answer

variable; greater than

question

A purely competitive firm in the short run will maximize profit by producing up to the point where marginal revenue is equal to marginal cost if the market price is less than minimum average variable cost.

answer

False

question

Which of the following statements is true of the firm represented by this graph?

answer

The firm incurs a loss but should continue to operate because the price exceeds the lowest average variable cost.

question

The supply schedule for a purely competitive firm confirms that there is a direct relationship between which two factors?

answer

Product price and quantity supplied.

question

In which scenario can a firm pay part, but not all, of its fixed costs and should therefore continue producing even though it is experiencing a loss.

answer

Price exceeds average variable cost but is less than average total cost

question

In this table, at a price of $71, the profit-maximizing or loss minimizing level of output is ___________

answer

0 units

question

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

answer

increase

question

In the short run, a purely competitive firm will maximize profit by producing up to the point where marginal revenue is equal to marginal cost only if which of the following is true?

answer

Market price exceeds minimum average variable cost

question

Based on the information in this chart, at which price will a firm shut down?

answer

question

Within pure competition, a supplier will ______ production as price rises, as long as marginal cost is less than marginal revenue.

answer

increase

question

What is the firm's most likely response if price is exactly equal to minimum average variable cost?

answer

Indifference to producing or shutting down

question

Based on the chart, what happens at a price P3 and an output of Q3?

answer

The firm incurs a loss but covers part of its fixed cost.

question

Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output

answer

False

question

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

answer

total revenue; total cost

question

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

answer

variable

question

When will a firm earn an economic profit?

answer

When price is greater than average total cost

question

At which point will a firm be indifferent whether to shut down or continue to produce?

answer

Point B

question

Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:

answer

MR=P=MC

question

Given an output of Q4, at which price will the firm break even or earn a normal profit?

answer

question

At any price above ______, the firm will obtain economic profit by producing to the point where MR=P=MC.

answer

question

The portion of a firm's marginal cost curve that lies above its average variable cost is the firm's short-run ___________ curve.

answer

supply

question

In this graph, the firm's short-run supply curve is represented as the portion above point ______.

answer

question

In which scenario will production result in an economic profit?

answer

Price exceeds average total cost.

question

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

answer

supply

question

In this graph, which curve represents the firm's short-run supply curve?

answer

The marginal-cost curve

question

The portion of a firm's _________ cost curve lying above its average _____________ cost curve is its short-run supply curve.

answer

marginal, variable

question

A wage ______ would raise marginal cost and shift the supply curve _______.

answer

increase; upward

question

In pure competition, a firm should produce if price is ______.

answer

equal to or greater than minimum average variable cost

question

What are the effects of technology on the firm and its short-run supply curve?

answer

The short-run supply curve shifts downward (to the right).
Productivity increases.
Marginal costs decrease.

question

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

answer

Technology
Prices of variable inputs

question

Total revenue equals ____________ times _______________.

answer

price; quantity

question

A wage increase would increase marginal costs and shift the supply curve:

answer

upward
to the left

question

Which of the following explains why technological progress reduces marginal cost?

answer

Technological progress increases the productivity of labor.

question

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

answer

technology

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

Assume that there are 100 identical firms in an industry that produces a product with a market price of $10. Each firm has an average total cost of $2 and an equilibrium output of 10 units. What is the industry's economic profit?

answer

$8,000

question

Each purely competitive firm's demand curve is perfectly _____________ at the equilibrium price.

answer

elastic

question

Which of the following is a given fact to the individual competitive firm, but a basic determinant of quantity supplied for the entire competitive industry?

answer

Product Price

question

The shaded box in this graph represents the firm's

answer

economic profit calculated as (P-ATC)Q

question

Which of the following explains why a purely competitive firm's demand curve is perfectly elastic?

answer

Because the individual firm is a price taker, the marginal revenue coincides with the firm's demand curve.

question

Which of the following describes the individual competitive firm's supply curve?

answer

The individual firm's supply curve represents a negligible fraction of total supply and therefore cannot affect price.

question

Which of the following statements about product price are true?

answer

All competitive producers as a group can influence product price with their supply plans.
Product price is a given fact for the individual firm.

question

What is the primary difference between the individual firm's supply curve and the industry supply curve?

answer

The individual supply curve has no effect on price, whereas the industry supply curve has an important bearing on price.

1 of 163

question

Economists group industries into ____ distinct market structures

answer

question

Pure ___________ involves a very large number of firms

answer

competition

question

Which market structure has the fewest obstacles to entry or exit?

answer

Pure Competition

question

The market structure in which individual firms have the least amount of control over price is ______, whereas in ______ a single firm has significant control over price.

answer

pure competition, pure monopoly

question

Match each market structure with the correct type of product that it produces

answer

standardized product-purely competitive
differentiated product- monopolistically competitive
standardized or differentiated- oligooly
unique, no close substitute- monopoly

question

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

answer

Oligopoly
Pure monopoly
Monopolistic Competition
Pure competition

question

Which of the following best describes pure competition?

answer

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.

question

A purely competitive industry has a very ______ number of sellers, whereas the other three market structures reflect a progressively ______ or ______ number of sellers.

answer

large; smaller; decreasing

question

Match each market structure with the description that best describes the conditions for exit and entry into that industry.
Instructions

answer

very easy, no objectives- purely competitive
relatively easy- monopolistically competitive
significant obstacles- oligopoly
block- monopoly

question

True or false: A pure monopoly involves a very large number of firms producing a single unique product.

answer

False

question

Match each market structure with the correct description of how price control is exerted

answer

none- purely competitive
some, but within narrow limits -monopolistically competitive
limited by mutual independence- oligopoly
considerable control- monopoly

question

In which type of market structure does a single firm produce a unique product with no close substitutes?

answer

Pure monopoly

question

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

answer

Monopolistic competition

question

Which of the following best describes oligopoly?

answer

Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals.

question

Match the market models based on the number of firms present in each model.

answer

very large number- pure competition
relatively large number- monopolistic competition
few- obligopoly
one- monopoly

question

Which of the following best describes a pure monopoly?

answer

One firm selling a single unique product, where entry of additional firms is blocked and there is considerable control over price

question

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

answer

A relatively large number of sellers producing differentiated products

question

Select all the market structures that are considered forms of imperfect competition.

answer

Pure Monopoly
Monopolistic competition
Oligopoly

question

An oligopoly has ___ sellers and must consider the decisions of its rivals in determining its own ___ and output.

answer

few; price

question

______________ competition is considered to be rare in the real world.

answer

Pure

question

Firms within pure competition are considered to be price ___________

answer

taker

question

Which of the following features occur in a purely competitive market?

answer

Many independently acting sellers
Sales in both national and international markets

question

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

answer

Pure competition, relevant

question

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

answer

A purely competitive market

question

Firms that operate in a purely competitive industry:

answer

do not differentiate their products

question

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

answer

- Very large numbers of firms or sellers
- Standardized Product
- Free entry and exit

question

In a purely competitive industry, buyers view the products of firms B, C, D and E as ______ for the product of firm A.

answer

perfect substitutes

question

A basic feature of the purely competitive markets is the presence of _______________

answer

a large number of sellers

question

In purely competitive markets, an individual firm lacks control over which factor

answer

Product Price

question

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.

answer

large; only a fraction

question

Firms within pure competition will produce standardized products

answer

True

question

Which of the following best summarizes why firms in purely competitive industries do not differentiate their products?

answer

Because there are so many of them selling a standardized product

question

In a purely competitive industry, an increase in the price of the product produced by firm A will cause buyers to ______.

answer

substitute with products of firms B, C, or D

question

A firm will increase its product price in a(n) _______________ competitive market because consumers can switch to a lower-prices identical product.

answer

purely

question

Which of the following are true of purely competitive firms?

answer

They produce a small fraction of total supply
They do not exert control over product price
They are price takers

question

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

answer

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

question

In purely competitive industries, firms can freely:

answer

enter and exit

question

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

answer

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

question

Which of the following best summarizes why a firm in a purely competitive market will not increase its prices?

answer

Asking a price higher than the market price would be futile because consumers could substitute with identical products that are cheaper

question

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

answer

elastic

question

The market demand curve for a purely competitive industry:

answer

slopes downward

question

Which statement about obstacles to selling in a purely competitive market is true?

answer

There are no significant obstacles to selling.

question

A purely competitive firm is a price __________

answer

taker

question

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

answer

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

question

In pure competition the demand curve faced by individual firm graphs as a(n) ______ line and the market demand in pure competition is graphed as a(n) ______________ curve.

answer

horizontal; downward sloping

question

Since firms within pure competition are _____ all or a majority of firms within an industry must agree to change output in order to affect price

answer

price takers

question

In a purely competitive market, a firm's demand schedule is also its __________ - _____________ schedule

answer

average- revenue

question

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

answer

total revenue

question

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

answer

marginal

question

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

answer

price

question

Which action would increase market price in a purely competitive market?

answer

All firms reducing its output.

question

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

answer

average revenue to a seller

question

A purely competitive firm's total revenue (TR) is a straight line that slopes __________ and to the _____________.

answer

upward, the right

question

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

answer

price

question

answer

393; 131

question

In pure competition, marginal revenue and __________ are equal.

answer

price

question

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

answer

average revenue
marginal revenue

question

A purely competitive firm's total revenue curve will

answer

have a constant slope because each extra unit of sales increases total revenue by a constant amount

question

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

answer

total revenue

question

In regard to its slope, a purely competitive firm's demand curve is perfectly ___________

answer

horizontal

question

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

answer

marginal

question

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

answer

pure

question

A purely competitive firm's marginal revenue curve will ______ the firm's demand curve.

answer

coincide with

question

A purely competitive firm's horizontal demand curve indicates ________________.

answer

perfect price elasticity

question

In pure competition, a firm's average revenue will be ____________ the product's price.

answer

equal to

question

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

answer

is a price taker

question

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

answer

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

question

A purely competitive firm's average revenue curve is equal to or coincides with which of the following?

answer

Price and Demand curve

question

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

answer

marginal

question

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

answer

output

question

After a company has determined that it should produce a product and the amount of the product to produce, what basic question should it ask?

answer

What economic profit (or loss) will we realize?

question

answer

total cost; marginal cost

question

In the table, total economic profits at the profit-maximizing level of output are calculated as a total revenue of $______ minus approximate total costs of $______.

answer

1179; 880

question

Because of the law of diminishing returns, marginal costs eventually fall as more units of outputs are produced.

answer

False

question

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

answer

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

question

Confronted with the market of its product, a purely competitive producer will ask which three questions?

answer

What economic profit or loss will we realize if we produce this product?
If we produce this product, in what amount?
Should we produce this product?

question

A purely competitive firm will maximize its profits by producing up to the point where

answer

the vertical distance between the total revenue and total cost curves is the greatest.

question

A firm within pure competition will maximize its profit when total cost is maximized over total revenue

answer

false

question

The equation for determining economic profit or loss is _________________ minus _______________

answer

total revenue; total cost

question

Which of the following best describes the marginal revenue?

answer

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

question

Because of the law of diminishing returns, marginal costs ______________ at a(n) __________________ rate at higher levels of output

answer

increase; increasing

question

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

answer

normal

question

Which of the following indicates the profit-maximizing level of output?

answer

The vertical distance between the total revel and total cost cruves

question

A purely competitive firm's profit is _______ when total revenue exceeds total cost by the maximum amount.

answer

maximized

question

_______________ revenue is the additional revenue that an additional unit of ______________ would add to the total revenue

answer

marginal; output

question

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

answer

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

question

A firm should not produce a unit of output when the marginal cost is _______________ than its marginal revenue.

answer

greater

question

Which of the following are scenarios in which a firm should continue to produce?

answer

Marginal revenue is $5 and marginal cost is $4.75.
Marginal revenue is $0.25 and marginal cost is $0.20.
Marginal revenue is $1.50 and marginal cost is $1.45.

question

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

answer

marginal cost exceeds marginal revenue

question

In a purely competitive industry, at the profit-maximizing or loss-minimizing level of output, marginal ___ is equal to ___.

answer

revenue; marginal cost
revenue; price
cost; price

question

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

answer

Not produce that additional unit of output

question

A firm should produce any unit of output whose

answer

marginal revenue is greater than marginal cost

question

At which stage of production is marginal revenue most likely to exceed marginal cost?

answer

The initial stage

question

The MR = MC rule can be applied to ______ firms; however, the rule can be restated as P = MC only when applied to ______ firms.

answer

all; purely competitive

question

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.

answer

equals

question

In which type of market does profit-maximizing output occur at the level at which price is equal to marginal cost?

answer

Pure competition

question

Based on the information given in the table, which of the following statements are true?

answer

Every unit of output up to and including the ninth unit represents greater marginal revenue than marginal cost
The ninth unit of output is the profit-maximizing level of output

question

In the initial stages of production, where output is relatively low, marginal revenue will usually ________________ marginal cost

answer

exceed

question

Which of the following are true about the profit-maximizing rule of MR=MC?

answer

question

For purely competitive firms, the MR=MC rule can be restated so that ____________ replaces marginal revenue.

answer

price

question

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

answer

price

question

In this table, at a price of $131, the profit-maximizing level of output is _____ units of output.

answer

question

answer

69.50

question

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

answer

Price minus average total

question

Based on the graph, at which level of output does the firm maximize its total profit?

answer

9 units

question

A firm produces 10 units of a product with a market price of $5 and an average total cost of $3. What is the firm's economic profit?

answer

$20

question

Based on the graph, what happens at a price of $131 and 7 units of output?

answer

Per-unit profit is maximized but total profit is not

question

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

answer

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

question

The MR=MC rule is known as the

answer

profit-maximizing rule

question

Which of the following improves as production increases?

answer

Price- marginal cost relationship

question

If a firm's loss-minimizing output is 10 units and its average total cost at that level of output is $25, it will suffer a loss of $______ give a price of $20

answer

question

The shaded area on the graph represents

answer

total economic profit

question

Which of the following best explains why a purely competitive firm would not stop producing if the loss is less than its fixed costs?

answer

Fixed costs are paid regardless of whether something or nothing is produced, and the firm receives enough revenue per unit to cover AVC and some FC.

question

In maximizing profits at 9 units of output, the firm in this graph is adhering to which of the following rules?

answer

Produce to the point where additional units of output add positively to total profit.

question

In this table, at a price of $81.00, the loss-minimizing level of output is _____.

answer

6 units

question

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

answer

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

question

At a price of $10 and a profit-maximizing (or loss-minimizing) level of output of 20 units, a perfectly competitive firm's average total cost is $15. This firm's economic profit or loss equals:

answer

-$100

question

A firm would not stop producing if the loss is less than its __________ costs.

answer

fixed

question

In this graph, a firm incurs a loss but continues to operate because the price is ______ than the lowest average total cost but above the lowest average ______ cost.

answer

less; variable

question

Whenever the price is ______ average variable costs but is ______ average total costs, the firm can pay part, but not all, of its fixed costs by producing.

answer

greater than; less than

question

A firm should always stop producing if its average _________ cost is ____________ price

answer

variable; greater than

question

answer

False

question

Which of the following statements is true of the firm represented by this graph?

answer

The firm incurs a loss but should continue to operate because the price exceeds the lowest average variable cost.

question

The supply schedule for a purely competitive firm confirms that there is a direct relationship between which two factors?

answer

Product price and quantity supplied.

question

In which scenario can a firm pay part, but not all, of its fixed costs and should therefore continue producing even though it is experiencing a loss.

answer

Price exceeds average variable cost but is less than average total cost

question

In this table, at a price of $71, the profit-maximizing or loss minimizing level of output is ___________

answer

0 units

question

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

answer

increase

question

In the short run, a purely competitive firm will maximize profit by producing up to the point where marginal revenue is equal to marginal cost only if which of the following is true?

answer

Market price exceeds minimum average variable cost

question

Based on the information in this chart, at which price will a firm shut down?

answer

question

Within pure competition, a supplier will ______ production as price rises, as long as marginal cost is less than marginal revenue.

answer

increase

question

What is the firm's most likely response if price is exactly equal to minimum average variable cost?

answer

Indifference to producing or shutting down

question

Based on the chart, what happens at a price P3 and an output of Q3?

answer

The firm incurs a loss but covers part of its fixed cost.

question

Quantity supplied increases as price decreases, and economic profit is usually higher at lower product prices and output

answer

False

question

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

answer

total revenue; total cost

question

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

answer

variable

question

When will a firm earn an economic profit?

answer

When price is greater than average total cost

question

At which point will a firm be indifferent whether to shut down or continue to produce?

answer

Point B

question

Between P2 and P4, the firm will minimize its losses by producing and supplying the quantity at which:

answer

MR=P=MC

question

Given an output of Q4, at which price will the firm break even or earn a normal profit?

answer

question

At any price above ______, the firm will obtain economic profit by producing to the point where MR=P=MC.

answer

question

The portion of a firm's marginal cost curve that lies above its average variable cost is the firm's short-run ___________ curve.

answer

supply

question

In this graph, the firm's short-run supply curve is represented as the portion above point ______.

answer

question

In which scenario will production result in an economic profit?

answer

Price exceeds average total cost.

question

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

answer

supply

question

In this graph, which curve represents the firm's short-run supply curve?

answer

The marginal-cost curve

question

The portion of a firm's _________ cost curve lying above its average _____________ cost curve is its short-run supply curve.

answer

marginal, variable

question

A wage ______ would raise marginal cost and shift the supply curve _______.

answer

increase; upward

question

In pure competition, a firm should produce if price is ______.

answer

equal to or greater than minimum average variable cost

question

What are the effects of technology on the firm and its short-run supply curve?

answer

The short-run supply curve shifts downward (to the right).
Productivity increases.
Marginal costs decrease.

question

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

answer

Technology
Prices of variable inputs

question

Total revenue equals ____________ times _______________.

answer

price; quantity

question

A wage increase would increase marginal costs and shift the supply curve:

answer

upward
to the left

question

Which of the following explains why technological progress reduces marginal cost?

answer

Technological progress increases the productivity of labor.

question

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

answer

technology

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

answer

$8,000

question

Each purely competitive firm's demand curve is perfectly _____________ at the equilibrium price.

answer

elastic

question

Which of the following is a given fact to the individual competitive firm, but a basic determinant of quantity supplied for the entire competitive industry?

answer

Product Price

question

The shaded box in this graph represents the firm's

answer

economic profit calculated as (P-ATC)Q

question

Which of the following explains why a purely competitive firm's demand curve is perfectly elastic?

answer

Because the individual firm is a price taker, the marginal revenue coincides with the firm's demand curve.

question

Which of the following describes the individual competitive firm's supply curve?

answer

The individual firm's supply curve represents a negligible fraction of total supply and therefore cannot affect price.

question

Which of the following statements about product price are true?

answer

All competitive producers as a group can influence product price with their supply plans.
Product price is a given fact for the individual firm.

question

What is the primary difference between the individual firm's supply curve and the industry supply curve?

answer

The individual supply curve has no effect on price, whereas the industry supply curve has an important bearing on price.

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