Chapter 10 Micro Smartbook - Assignment Essays

question

Economists group industries into ____ distinct market structures

answer

four

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

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

answer

Oligopoly, Pure monopoly, Pure competition, Monopolistic 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

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

Match each market structure with the description that best describes the conditions for exit and entry into that industry:
Very easy, no obstacles:
Relatively easy:
Significant obstacles:
blocked:

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

question

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

answer

monopolistic competition

question

Match each market structure with the correct description of how price control is exerted.
none:
some, but within narrow limits:
limited by mutual interdependence:
considerable control:

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

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

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

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

answer

False

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 is a characteristic of a monopolistically competitive market?

answer

A relatively large number of sellers producing differentiated products

question

Match the market models based on the number of firms present in each model.
very large number:
relatively large number:
few:
one:

answer

pure competition
monopolistic competition
oligopoly
monopoly

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

Match each market structure with the correct description of how price control is exerted.
none:
some, but with narrow limits:
limited by mutual interdependence
considerable control

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

question

Firms within pure competition are considered to be price _________

answer

takers

question

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

answer

a large number of sellers

question

True or false: 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 (A standardized product limits the ability to differentiate. Consider foreign exchange, stocks, bonds, and agricultural products.)

question

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

answer

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

question

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

answer

Sales in both national and international markets, Many independently acting sellers

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

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

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

answer

Product price (Each firm produces such a small fraction of total output that increasing or decreasing its output will not perceptibly influence total supply or therefore, product price.)

question

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.

answer

large; only a fraction

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

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

answer

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

question

Which of the following are true of purely competitive firms?

answer

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

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

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

answer

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.

question

A purely competitive firm is a price _________

answer

taker

question

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

answer

cost, average

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

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

answer

elastic

question

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

answer

average revenue to a seller

question

A firm's total revenue is calculated as ____________ time quantity produced

answer

price

question

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 total revenue curve will

answer

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

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

purely

question

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

answer

perfect price elasticity

question

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

answer

upward, right

question

In pure competition, a firm's product price is ______ marginal revenue.

answer

equal to

question

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

answer

output

question

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

answer

price

question

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?

answer

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

question

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

answer

marginal revenue, average revenue

question

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

answer

horizontal

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

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

answer

coincide with

question

The equation for determining economic profit or loss is ______ minus ______.

answer

total revenue; total cost

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

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 ______.

answer

total cost; marginal cost

question

True or false: Because of the law of diminishing returns, marginal costs eventually fall as more units of output are produced.

answer

False

question

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

answer

purely

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

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

answer

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

question

Which of the following best describes marginal revenue?

answer

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

question

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

answer

output

question

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

answer

increase; increasing

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

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

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

answer

Marginal; output

question

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

answer

greater

question

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

answer

marginal cost exceeds marginal revenue

question

A firm should produce any unit of output whose ______

answer

marginal revenue is greater than marginal cost

question

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

answer

revenue; marginal cost
cost; price
revenue; 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

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

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

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

answer

Price minus average total cost multiplied by quantity

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 (Profit/Loss = (price - ATC) x Q; where price = MR)

question

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

answer

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

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

marginal

question

The MR = MC rule is known as the:

answer

profit maximizing rule

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

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

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 $ ________ given a price of $20

answer

question

In pure competition, to calculate economic profit, we first calculate the difference between ________ and average total cost and multiply itty output.

answer

price

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

Whenever price is ______ average variable costs but is ______ average total costs, the firm can pay part, but not all, 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

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

answer

False

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

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

answer

increase

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

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

When will a firm earn an economic profit?

answer

When price is greater than average total cost.

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

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

answer

technology

question

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

answer

to the left, upward

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

Total revenue equals ______ times ______.

answer

price; quantity

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

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

answer

increase; upward

question

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

answer

The marginal-cost curve

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

The shaded box in this graph represents the firm's _______,

answer

economic profit calculated as (P-ATC)Q

question

The portion of a firm's ________ cost curve that is above the average ________ cost curve is its short-run supply curve

answer

marginal, variable

question

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

answer

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

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.

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 (An industry's economic profit can be determined by subtracting average total cost from price and multiplying by output, then multiplying the total by the number of firms in the industry.)

question

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

answer

elastic

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.

1 of 113

question

Economists group industries into ____ distinct market structures

answer

four

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

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

answer

Oligopoly, Pure monopoly, Pure competition, Monopolistic 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

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

Match each market structure with the description that best describes the conditions for exit and entry into that industry:
Very easy, no obstacles:
Relatively easy:
Significant obstacles:
blocked:

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

question

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

answer

monopolistic competition

question

Match each market structure with the correct description of how price control is exerted.
none:
some, but within narrow limits:
limited by mutual interdependence:
considerable control:

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

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

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

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

answer

False

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 is a characteristic of a monopolistically competitive market?

answer

A relatively large number of sellers producing differentiated products

question

Match the market models based on the number of firms present in each model.
very large number:
relatively large number:
few:
one:

answer

pure competition
monopolistic competition
oligopoly
monopoly

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

Match each market structure with the correct description of how price control is exerted.
none:
some, but with narrow limits:
limited by mutual interdependence
considerable control

answer

purely competitive
monopolistically competitive
oligopoly
monopoly

question

Firms within pure competition are considered to be price _________

answer

takers

question

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

answer

a large number of sellers

question

True or false: 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 (A standardized product limits the ability to differentiate. Consider foreign exchange, stocks, bonds, and agricultural products.)

question

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

answer

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

question

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

answer

Sales in both national and international markets, Many independently acting sellers

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

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

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

answer

Product price (Each firm produces such a small fraction of total output that increasing or decreasing its output will not perceptibly influence total supply or therefore, product price.)

question

answer

large; only a fraction

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

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

answer

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

question

Which of the following are true of purely competitive firms?

answer

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

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

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

answer

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.

question

A purely competitive firm is a price _________

answer

taker

question

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

answer

cost, average

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

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

answer

elastic

question

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

answer

average revenue to a seller

question

A firm's total revenue is calculated as ____________ time 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 total revenue curve will

answer

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

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

purely

question

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

answer

perfect price elasticity

question

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

answer

upward, right

question

In pure competition, a firm's product price is ______ marginal revenue.

answer

equal to

question

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

answer

output

question

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

answer

price

question

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?

answer

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

question

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

answer

marginal revenue, average revenue

question

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

answer

horizontal

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

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

answer

coincide with

question

The equation for determining economic profit or loss is ______ minus ______.

answer

total revenue; total cost

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

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 ______.

answer

total cost; marginal cost

question

True or false: Because of the law of diminishing returns, marginal costs eventually fall as more units of output are produced.

answer

False

question

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

answer

purely

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

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

answer

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

question

Which of the following best describes marginal revenue?

answer

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

question

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

answer

output

question

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

answer

increase; increasing

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

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

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

answer

Marginal; output

question

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

answer

greater

question

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

answer

marginal cost exceeds marginal revenue

question

A firm should produce any unit of output whose ______

answer

marginal revenue is greater than marginal cost

question

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

answer

revenue; marginal cost
cost; price
revenue; 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

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

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

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

answer

Price minus average total cost multiplied by quantity

question

answer

$69.50 (Profit/Loss = (price - ATC) x Q; where price = MR)

question

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

answer

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

marginal

question

The MR = MC rule is known as the:

answer

profit maximizing rule

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

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

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 $ ________ given a price of $20

answer

question

In pure competition, to calculate economic profit, we first calculate the difference between ________ and average total cost and multiply itty output.

answer

price

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

Whenever price is ______ average variable costs but is ______ average total costs, the firm can pay part, but not all, 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

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

answer

False

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

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

answer

increase

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

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

When will a firm earn an economic profit?

answer

When price is greater than average total cost.

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

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

answer

technology

question

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

answer

to the left, upward

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

Total revenue equals ______ times ______.

answer

price; quantity

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

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

answer

increase; upward

question

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

answer

The marginal-cost curve

question

Multiplying product price by output reveals which of the following?

answer

Total revenue

question

The shaded box in this graph represents the firm's _______,

answer

economic profit calculated as (P-ATC)Q

question

The portion of a firm's ________ cost curve that is above the average ________ cost curve is its short-run supply curve

answer

marginal, variable

question

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

answer

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

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.

question

answer

$8,000 (An industry's economic profit can be determined by subtracting average total cost from price and multiplying by output, then multiplying the total by the number of firms in the industry.)

question

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

answer

elastic

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.

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