question
Each firm in a perfectly competitive industry is so _____ that it ______ effect the price of the product.
answer
small; cannot
question
The demand curve facing the perfectly competitive firm is ______ while the demand facing the entire industry is ______.
answer
perfectly elastic; relatively elastic
question
True or false: A manager in a price-taking, competitive industry must make the decision about whether to produce any output using only the average fixed costs.
answer
False
question
Managers will maximize profit by maximizing the difference between
answer
total revenue and total cost.
question
If the manager of a price-taking firm in a competitive industry chooses to produce, she will produce the quantity at which
answer
P = MC.
question
All firms in a perfectly competitive industry sell ______ products.
answer
homogeneous
question
The demand curve facing the perfectly competitive industry is _____.
answer
perfectly elastic
question
The two decisions that a manager in a price-taking firm in a competitive industry must make are
answer
whether to produce and if so, how much.
question
The profit margin for a firm is
answer
price minus average total costs.
question
The profit maximizing output occurs where
answer
P = MC.
question
A firm will continue to operate if total losses are ______ fixed costs, but shut down if total losses are ______ fixed costs.
answer
less than; more than
question
The characteristics of perfect competition include
answer
price-taking behavior
unrestricted entry and exit
homogeneous product
unrestricted entry and exit
homogeneous product
question
The demand facing the perfectly competitive firm is
answer
perfectly elastic.
question
Fixed costs are not considered in the profit-maximizing quantity decision because
answer
marginal costs are not affected by changes in fixed costs.
question
When price equals AVC, the firm _______.
answer
is indifferent to operating
question
The short-run supply curve for the competitive firm is the
answer
marginal cost curve above average variable cost.
question
The industry supply curve is the ______ of the marginal cost curves of each producer.
answer
horizontal sum
question
In the short-run, producer surplus can be calculated as
answer
TR - TVC.
question
Average variable costs are important in the decision about
answer
whether to produce or not.
question
A firm that has decided to enter a competitive industry in which profits are being earned will choose the profit maximizing output ______ .
answer
where P = LMC.
question
Because the _______ shows the quantity that the firm will be willing and able to sell at each price, it is the ______ for the firm.
answer
MC curve above AVC; short-run supply curve
question
_____ encourage existing firms to leave a competitive industry.
answer
Losses
question
In the short-run, producer surplus is _____ profit.
answer
greater than
question
As existing firms leave a competitive industry in which they are incurring losses, prices will ______, causing losses to ______.
answer
rise; fall
question
A(n) ______ industry is one in which input prices remain the same as all firms in the industry expand output.
answer
constant-cost
question
Long-run supply price for a constant-cost industry is
answer
constant at minimum LAC.
question
_____ encourage new firms to enter into a competitive industry.
answer
Profits
question
The long-run supply curve in an increasing-cost industry will be a(n) ______ line that follows the minimum of the long-run average cost curve(s).
answer
up-sloping
question
Existing firms will continue to leave a competitive industry in which existing firms are incurring losses until
answer
prices rise enough to eliminate losses.
question
A(n) ______ industry is one in which input prices rise as all firms in the industry expand output.
answer
increasing-cost
question
Even firms in competitive industries with lower costs than other firms will earn zero economic profits in the long-run because
answer
...
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