Chapter 23: Pure Competition - Assignment Essays

Q: when profits rise

firms enter, price drops, left supply curve

Q: when losses form

firms exit, price up, long run loss to 0, supply curve to right

question

Pure competiton characteristics

answer

large number of firms
standardized product
easy enter or exit
price takers

question

price takers

answer

firms that take or accept the market price and have no ability to influence that price

question

demand curve is what in pure competiton

answer

perfectly elastic- straight line

question

total revenue

answer

multiplying price by quantity

question

marginal revenue

answer

change in total revenue from selling 1 more unit or output

question

marginal revenue is equal to

answer

price

question

how to maximize profit

answer

TR-TC
MR=MC

question

breakeven point

answer

where cost equals revenue

question

if MR does not equal or exceed AVC it will

answer

shut down

question

constant cost industry

answer

an industry that can expand or contract without affecting the long run per-unit cost of production; the long-run industry supply curve is horizontal

question

increasing cost industry

answer

an industry that faces higher per-unit production costs as industry output expands in the long run; the long run industry supply curve slopes upward

question

decreasing cost industry

answer

An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs.

question

productive efficiency

answer

price= minimum ATC

question

allocative efficiency

answer

P= MC

question

underallocation

answer

P > MC

question

overallocation

answer

P < MC

question

the supply curve is..

answer

MC at or above AVC

question

when profits rise

answer

firms enter, price drops, left supply curve

question

when losses form

answer

firms exit, price up, long run loss to 0, supply curve to right

question

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

answer

downsloping, perfectly elastic

question

A purely competitive seller's average revenue curve coincides with:

answer

both its demand and marginal revenue curves.

question

The MR = MC rule applies:

answer

to firms in all types of industries.

question

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

answer

total variable costs

question

If a purely competitive firm is producing at some level less than the profit-maximizing output, then:

answer

marginal revenue exceeds marginal cost

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC

question

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

answer

higher and total output will be larger than originally

question

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

there is no tendency for the firm's industry to expand or contract

question

The MR = MC rule applies:

answer

in both the short run and the long run.

1 of 29

question

Pure competiton characteristics

answer

large number of firms
standardized product
easy enter or exit
price takers

question

price takers

answer

firms that take or accept the market price and have no ability to influence that price

question

demand curve is what in pure competiton

answer

perfectly elastic- straight line

question

total revenue

answer

multiplying price by quantity

question

marginal revenue

answer

change in total revenue from selling 1 more unit or output

question

marginal revenue is equal to

answer

price

question

how to maximize profit

answer

TR-TC
MR=MC

question

breakeven point

answer

where cost equals revenue

question

if MR does not equal or exceed AVC it will

answer

shut down

question

constant cost industry

answer

an industry that can expand or contract without affecting the long run per-unit cost of production; the long-run industry supply curve is horizontal

question

increasing cost industry

answer

an industry that faces higher per-unit production costs as industry output expands in the long run; the long run industry supply curve slopes upward

question

decreasing cost industry

answer

An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs.

question

productive efficiency

answer

price= minimum ATC

question

allocative efficiency

answer

P= MC

question

underallocation

answer

P > MC

question

overallocation

answer

P < MC

question

the supply curve is..

answer

MC at or above AVC

question

when profits rise

answer

firms enter, price drops, left supply curve

question

when losses form

answer

firms exit, price up, long run loss to 0, supply curve to right

question

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

answer

downsloping, perfectly elastic

question

A purely competitive seller's average revenue curve coincides with:

answer

both its demand and marginal revenue curves.

question

The MR = MC rule applies:

answer

to firms in all types of industries.

question

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

answer

total variable costs

question

If a purely competitive firm is producing at some level less than the profit-maximizing output, then:

answer

marginal revenue exceeds marginal cost

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC

question

answer

higher and total output will be larger than originally

question

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

there is no tendency for the firm's industry to expand or contract

question

The MR = MC rule applies:

answer

in both the short run and the long run.

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