Econ (MC, ATC, AVC, MR. DARP) - Assignment Essays

question

For which market model are there a very large number of firms?

A.) Monopolistic Competition
B.) Oligopoly
C.) Pure monopoly
D.) Pure competition

answer

D.) Pure competition

question

In which market model is the individual seller of a product a price taker?
A.) Pure competition
B.) Pure monopoly
C.) Monopolistic competition
D.) Oligopoly

answer

A.) Pure competition

question

Which industry comes closest to being purely competitive?
A.) Agriculture
B.) Retail trade
C.) Electricity
D.) Automobile

answer

A.) Agriculture

question

In a purely competitive industry

A.) Each existing firm will engage in various forms of nonprice competition

B.) New firms are free to enter and existing firms are able to leave the industry very easily

C.) Individual firms have a price policy

D.) Each firm produces a differentiated (non-standardized) product

answer

B.) New firms are free to enter and existing firms are able to leave the industry very easily

question

The demand schedule or curve confronted by the individual purely competitive firm is
A.) Perfectly inelastic
B.) Inelastic but not perfectly inelastic
C.) Perfectly elastic
D.) Elastic but not perfectly elastic

answer

C.) Perfectly elastic

question

Total revenue for producing 10 units of output is $6. Total revenue for producing 11 units of output is $8. Given this information, the

A.) Average revenue for producing 11 units is $2

B.) Average revenue for producing 11 units is $8

C.) Marginal revenue for producing the 11th unit is $2

D.) Marginal revenue for produing the 11th unit is $8

answer

C.) Marginal revenue for producing the 11th unit is $2

question

In pure competition, product price is
A.) Greater than marginal revenue
B.) Equal to marginal revenue
C.) Equal to total revenue
D.) Greater than total revenue

answer

B.) Equal to marginal revenue

question

The individual firm's short-run supply curve is that part of its marginal-cost curve lying above its
A.) Average-total-cost curve
B.) Average-variable-cost curve
C.) Average-fixed-cost curve
D.) Average-revenue curve

answer

B.) Average-variable-cost curve

question

Which statement is true of a purely competitive industry in short-run equilibrium?
A.) Price is equal to average total cost

B.) Total quantity demanded is equal to total quart:, supplied.

C.) Profits in the industry are equal to zero.

D.) Output is equal to the output at which average to-.= cost is a minimum.

answer

B.) Total quantity demanded is equal to total quart:, supplied.

question

Suppose that when 2,000 units of output are produced, the marginal cost of the 2,001st unit is $5. This amount is equal to the minimum of average total cost, and marginal cost is rising. If the optimal level of output in the short run is 2,500 units, then at that level,

A.) Marginal cost is greater than $5 and marginal cost is less than average total cost

B.) Marginal cost is greater than $5 and marginal cost is greater than average total cost

C.) Marginal cost is less than $5 and marginal cost is greater than average total cost

D.) Marginal cost is equal to $5 and marginal cost is equal to average total cost

answer

B.) Marginal cost is greater than $5 and marginal cost is greater than average total cost

question

The Zebra, Inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should

A.) Produce zero units of output

B.) Decrease output to 200 unites

C.) Continue to produce 250 units

D.) Increase output to maximize profits

answer

A.) Produce zero units of output

question

What is the formula to calculate total fixed costs?

answer

ATC - AVC x output

question

How do you calculate AFC?

answer

FC/ Total Production

question

How do you calculate AVC?

answer

VC/ Total Production

question

How do you calculate ATC?

answer

AFC + AVC

question

Amount of Labor Amount of Output
1 3
2 8
3 12
4 15
5 17
6 18

The marginal product of the 4th unit of labor is
a. 2
b. 3
c. 4
d. 15

answer

question

Amount of Labor Amount of Output
1 3
2 8
3 12
4 15
5 17
6 18

When the firm hires four units of labor the average product of labor is
a. 3
b. 3.75
c. 4.25
d. 15

answer

question

Because the marginal product of a variable resource at the first increases and then decreases as the output of the firm is increased

a) total cost first increases at a decreasing rate and then increases at an increasing rate.

b) average fixed cost declines as the output of the firm expands

c) variables cost at first increase by increasing amounts and then increases by decreasing amounts

d) marginal cost at first increases and then decreases

answer

a. total cost first increases at a decreasing rate and then increases at an increasing rate.

question

Output Total Variable cost
1 $200
2 $360
3 $500
4 $700
5 $1000
6 $1800

The average total cost of the firm when 4 units of output are being produced is
a) $175
b) $200
c) $300
d) $400

answer

c) $300

700+500=1200
1200/4= 300

question

Marginal cost and average variable cost cost are equal al the output at which
a) marginal cost is a minimum
b) marginal product is a maximum
c) average product is a maximum
d) average variable cost is a maximum

answer

question

Average variable cost may be either increasing decreasing when
(a) marginal cost is decreasing
(b) marginal product is increasing
(c) average fixed cost is decreasing
(d) average total cost is increasing

answer

question

Why does the short run marginal cost curve eventually increase for the typical firm?
(a) diseconomies of scale
(b) minimum efficient scale
(c) the law of diminishing returns
(d) economic profit eventually decreases

answer

question

If the price of labor or some other variable resource increased, the
(a) AVC curve would shift downward
(b) AFC curve would shift upward
(c) AFC curve would shift downward
(d) MC curve would shift upward

answer

question

At an output of 10,000 units per year, a firm's total variable costs are $50,000 and its average fixed costs are $2. The total costs per year for the firm are
a) $50,000
(b) $60,000
(c) $70,000
(d) $80,000

answer

question

A firm has total fixed costs of $4,000 a year. The average variable cost is $3.00 for 2,000 units of output. At this level of output, its average total costs are
(a) $2.50
(b) $3.00
(c) $4.50
(d) $5.00

answer

(d) $5.00

4000/2000=$2
$3+$2=$5

question

If you know that total fixed cost is $100, total variable cost is $300, and total product is 4 units, then
(a) marginal cost is $50
(b) average fixed cost is $45
(c) average total cost is $125
(d) average variable cost is $75

answer

d

300/4=$75

question

If the short-run average variable cost of production for a firm is decreasing then it follows that
a) average variable costs are above average fixed costs
b) marginal costs are below average variable costs
c) average fixed costs are constant
d) total costs are falling

answer

question

Which pairs of lines are perfectly inverse?

answer

Marginal Cost and Marginal Product
Avg Price and Average cost

question

How to calculate Marginal Cost?

answer

Change in Total Cost/Change in Quantity

question

Examples of fixed costs

answer

rent, taxes, insurance

question

Examples of variable costs

answer

labor, utilities, materials

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Name all the lines from top to bottom

answer

1. MC
2.ATC
3.AVC

question

When MC goes up what happens to the AVC

answer

It also goes up

question

What is happening when MC is below ATC

answer

ATC is falling

question

What is happening when MC is above ATC

answer

ATC is rising

question

economies of scale

answer

a proportionate saving in costs gained by an increased level of production

aka

factors that cause a producer's average cost per unit to fall as output rises

question

diseconomies of scale

answer

increases in cost per unit when output increases

the situation in which a firm's long-run average costs rise as the firm increases output

question

economies of scale/diseconomies of scale example

answer

1. The more cars Ford started producing the cheaper their cars became...for a time

2. This economies of scale affect only lasts for so long

3. Eventually, the more cars Ford started producing after a specific point, the more expensive it was to produce the cars

question

When the ATC line is sloping down what is the effect called

answer

economies of scale

question

When the ATC line is sloping up what is the effect called

answer

diseconomies of scale

question

What happens to ATC when AVC goes up?

answer

ATC goes up

question

What happens to ATC when AVC goes down?

answer

ATC goes down

question

perfect competition

answer

the degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product

question

What are requirements for perfect competition market?

answer

1. Many buyers and sellers
2. All products are identical(all corn sold is the same)
3. All firms are price takers(can't raise prices)
4. There are no barriers to enter
5. There is perfect information(everyone knows the price, easy to make, no secret ingredients)

question

Graph Key:
How to find Q on a perfect competition graph

answer

Its where MR = MC

question

Where is the perfect point of competition on a perfect competition graph

answer

Where MR = MC

question

Economic Profit

answer

The remaining surplus left after deducting total costs from total revenue

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Normal Profit

answer

The least amount of profit needed for its survival

question

How to calculate economic profit

answer

TR - TC

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What is the best outcome in the long run

answer

break even

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What directions do markets and firms move?

answer

Opposite

question

Graph Key:
How to know if you PROFIT on a perfect competition graph?

answer

P > ATC

question

Graph Key:
How to know if you LOSS on a perfect competition graph?

answer

P < ATC

question

Graph Key:
How to know if you BREAKING EVEN on a perfect competition graph?

answer

P = ATC

question

Graph Key:
How to know if you STAY OPEN on a perfect competition graph?

answer

P > AVC

question

Graph Key:
How to know if you CLOSE on a perfect competition graph?

answer

P < AVC

question

What are the possibilities in the short run?

answer

1. Profit
2. Loss
3. Break Even

question

What are the possibilities in the long run?

answer

1. Break Even

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How does it change from the short run to the long run?

answer

All fixed costs become variable costs.

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How to calculate total revenue?

answer

Price x Q

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How to calculate marginal revenue?

answer

Change in total revenue/change in quantity

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At which point do firms maximize profit and minimize cost?

answer

When MR = MC

question

A perfectly competitive firm that is in long-run equilibrium will

a. Earn an economic profit, be allocatively efficient, and be productively efficient.

b. Not earn an economic profit, but be allocatively efficient and productively efficient.

c. Not earn an economic profit, not be allocatively efficient, but be productively efficient.

d. Not earn an economic profit, not be productively efficient, but be allocatively efficient.

answer

question

Which of the following is not a valid option for a perfectly competitive firm?

a. Increasing its output.
b. Decreasing its output.
c. Increasing its price.
d. Increasing its resources.

answer

question

A perfectly competitive firm should always:

a. Earn an economic profit.

b. Increase its price if it is experiencing an economic loss.

c. Produce the quantity where its marginal cost equals its marginal revenue.

d. Produce at the productively efficient level of output.

answer

question

What type of cost falls during economies of scale

answer

long run average cost

question

As its output increases, a firm's short-run marginal cost will eventually increase because of

a. diseconomies of scale

b. a lower product price

c. inefficient production

d. the firm's need to break even

e. diminishing returns

answer

question

Which of the following is always true of the relationship between average and marginal costs?

a. Average total costs are increasing when marginal costs are increasing.

b. Marginal costs are increasing when average variable costs are higher than marginal costs.

c. Average variable costs are increasing when marginal costs are increasing.

d. Average variable costs are increasing when marginal costs are higher than average variable costs.

E.Average total costs are constant when marginal costs are constant.

answer

question

A market is clearly NOT perfectly competitive if which of the following is true in equilibrium?
a. Price exceeds marginal cost.

b. Price exceeds average variable cost.

c. Price exceeds average fixed cost.

d. Price equals opportunity cost.

e. Accounting profits are positive.

answer

question

If a perfectly competitive industry is in long-run equilibrium, which of the following is most likely to be true?
a. Some firms can be expected to leave the industry.

b. Individual firms are not operating at the minimum points on their average total cost curves.

c. Firms are earning a return on investment that is equal to their economic costs.

d. Some factors are not receiving a return equal to their opportunity costs.

e. Consumers can anticipate price increases.

answer

question

Economies of scale occurs when
a. The average variable cost is greater than the marginal cost.

b. The average fixed cost is equal to the marginal cost.

c. The total cost falls as output increases.

d. The long-run average total cost falls as output increases.

e. The marginal cost is greater than the average total cost.

answer

question

In the short run, if a firm's marginal cost is higher than the average total cost,

a. The marginal cost curve is at its highest point.

b. The average total cost curve is rising.

c. The marginal cost curve is falling.

d.The average total cost curve is falling.

e.The average total cost curve is at its lowest point.

answer

question

At a particular output, a perfectly competitive firm's marginal cost and average total cost are lower than the price. To maximize profit, the firm should
a. Raise the product price.

b. Remain at the same level of output.

c.Increase output.

d. Decrease output.

e. Shut down.

answer

question

Which of the following is always true of the relationship between average and marginal costs?

a. Average total costs are constant when marginal costs are constant.

b. Average total costs are increasing when marginal costs are increasing.

c. Average variable costs are increasing when marginal costs are higher than average variable costs.

d. Average variable costs are increasing when marginal costs are increasing.

e. Marginal costs are increasing when average variable costs are higher than marginal costs.

answer

question

As its output increases, a firm's short-run marginal cost will eventually increase because of
a. A lower product price.

b. Diseconomies of scale.

c. Diminishing returns.

d. The firm's need to break even.

e. Inefficient production.

answer

question

In a perfectly competitive market, a firm produces Snuggies at a certain quantity with an average total cost of $17 and a marginal cost of $13. It sells its Snuggies for a price of $15. This firm should:

a. Increase the quantity produced because the marginal cost is less than the average total cost

b. Decrease the price because it is higher than the marginal cost

c. Increase the quantity produced because marginal cost is less than price

d. Decrease the quantity produced because the price is greater than the marginal cost

e. Shut down because it is incurring a loss

answer

question

A firm produces 800 eyebrow rings for $1000. The marginal cost for the last unit produced is $1. What is the average total cost?
a. $1.00

b. $0.80

c. 1.25

d. 2.50

answer

question

The marginal revenue for the 110th unit of door knobs produced is $6 in a perfectly competitive firm. At this quantity, what is the total revenue of the firm?

a. $330

b. $660

c. $600

d. Unable to determine the total revenue with the given information

answer

question

The total cost of producing 250 units of air deodorizers is $750. The total variable cost is $500. What is the average fixed cost?
a. $250

b. $3

c. $.18

d. $330

e.$1

answer

question

A profit-maximizing perfectly competitive firm is selling 500 units of Nalgene water bottles for $10 each. The total cost of production is $3000. This firm is experiencing:
a. A loss of $2000

b. A profit of $2000

c. The break-even point

d. A loss of $2500

e. A profit of $3500

answer

question

Assume a perfectly competitive firm producing toenail accessories is in long-run equilibrium. Due to a nuclear spill, thousand of babies are born with 12 or more toes. (It is all the rage to accessorize all of your baby's toes) This firm will experience:
a. Economic loss

b. Economic profit and a increase production in the short run

c. Economic profit and a decrease production in the short run

d. No economic profit and will continue producing at the same quantity

answer

question

A perfectly competitive firm's short-run supply curve is its:

(A) marginal cost curve below average variable cost

(B) average total cost curve above average variable cost

(C) marginal cost curve above average variable cost

(D) marginal revenue curve above average variable cost

(E) marginal revenue curve below average variable cost

answer

question

If a certain brand of shoes are sold in a competitive market and the technology used to produce these shoes increases productivity, it can be said that

(A) the equilibrium price of shoes in the market will increase

(B) some producers of shoes will leave the industry

(C) the equilibrium quantity of shoes in the market will increase

(D) the equilibrium price of shoes in the market will decrease

(E) the equilibrium price and quantity of shoes in the market will both decrease

answer

question

A profit-maximizing perfectly competitive industry in long-run equilibrium exhibits which of the following features?
I. Allocative efficiency
II. Productive efficiency
III. Firms earning economic profit
IV. Firms earning normal profit

(A) II only

(B) III only

(C) I, III, and IV only

(D) I, II, and IV only

(E) I, II, III, and IV

answer

question

Which of these is not a characteristic of a perfectly competitive market?

(A) price-taking individual firms

(B) a large number of firms

(C) no significant barriers to entry or exit

(D) identical products

(E) long-run economic profit

answer

question

The marginal cost curve in a perfectly competitive industry

(A) is the sum of the average fixed cost and average variable cost curves

(B) is inversely related to the average total cost curve

(C) increases slightly and then falls

(D) equals average total cost at the lowest point on the average total cost curve

(E) equals the average total cost curve at the highest point of the marginal cost curve

answer

question

An increase in demand causes the individual firm to experience a short-run increase in a perfectly competitive industry in its
(A) marginal revenue
(B) average total cost
(C) average fixed cost
(D) average variable cost
(E) normal profit

answer

question

A perfectly competitive firm in long-run equilibrium that is profit maximizing will produce

(A) where marginal revenue is greater than marginal cost

(B) at both productive and allocative efficiency

(C) at an output that stays at long-run equilibrium

(D) at the output where marginal cost is at its minimum

(E) where the marginal cost equals the average variable cost

answer

question

If a firm's marginal cost is higher than the average total cost in the short-run

(A) the marginal cost curve is at its highest point

(B) the marginal cost curve is falling

(C) the total cost curve is falling

(D) the average total cost curve is at its lowest point

(E) the average total cost curve is rising

answer

question

Why does a purely competitive firm's marginal revenue equal the product price?

(A) The firm maximizes profit by raising the product price

(B) As a price taker, the firm must sell each product at the same price

(C) As a price maker, the firm increases the product price by
restricting output

(D) There is a price ceiling on the product

(E) Lower product demand increases product price

answer

question

An increase in the fixed cost of production at a particular output causes
(A) an increase in the average total cost
(B) an increase in the average variable cost
(C) an increase in the marginal cost
(D) an increase in the marginal product
(E) an increase in the marginal revenue

answer

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The difference between the price a producer is willing to sell a product for and the actual price of the product is
(A) consumer surplus
(B) producer surplus
(C) profit
(D) average total cost
(E) elasticity

answer

question

A perfectly competitive firm's marginal cost and average total cost are lower than the price. To maximize profit, the firm should
(A) increase output
(B) decrease output
(C) remain at the same output level
(D) shut down
(E) raises the product price

answer

question

The long-run average cost curve

(A) is always below the short-run average cost curve

(B) is always above the short-run average cost curve

(C) always intersects the short-run average cost curve at the minimum of short-run average cost

(D) is above the short-run average cost except at the one point

(E) is below the short-rum average cost except at one point

answer

question

In perfect competition, firms can sell

(A) as much as they want at the market price

(B) at most the quantity at which marginal cost eqals average total cost

(C) at most the quantity at which marginal cost equals average variable cost

(D) at most the quantity at which marginal revenue equals average total cost

(E) at most the quantity at which marginal revenue equals average variable cost

answer

question

Marginal cost always intersects average variable cost at
(A) the profit-maximizing quantity
(B) the minimum of marginal cost
(C) the maximum of average variable cost
(D) the minimum of average variable cost
(E) the maximum of marginal cost

answer

question

A characteristic of individual firms in a perfectly competitive market is that they
(A) engage in product differentiation
(B) earn positive long-run economic profits
(C) advertise to sell more of their product
(D) have a downward-sloping demand curve
(E) may enter and exit an industry in the long run

answer

question

A market is NOT perfectly competitive when which of the following is true in equilibrium?
(A) Price > MC
(B) Price > AVC
(C) Price > AFC
(D) Price = Opportunity cost
(E) accounting profits are positive

answer

question

Which statement best describes perfect competition?

(A) many small firms producing differentiated products, with significant barriers to entry

(B) many small firms producing homogeneous products, with no significant barriers to entry

(C) a few large firms producing differentiated products, with no significant barriers to entry

(D) a single firm producing a unique product, with significant barriers to entry

(E) many small firms producing homogeneous products, with significant barriers to entry

answer

question

Total revenue will_________when a perfectly competitive firm sells additional units of output
(A) remain constant
(B) increase at a decreasing rate
(C) increase at an increasing rate
(D) increase, then decrease
(E) increase at a constant rate

answer

question

If a perfectly competitive firm is producing where price exceeds both MC and AVC and it wishes to maximize profits, then the firm is
(A) producing too little output
(B) not earning economic profit
(C) charging too high of a price
(D) using too much input
(E) producing where MR < MC

answer

question

In the short run, a perfectly competitive industry demand curve & firm demand curve will, respectively, have which of the following slopes?
(A) downward & horizontal
(B) horizontal & downward
(C) horizontal & horizontal
(D) downward & downward
(E) vertical & horizontal

answer

question

Consider the following perfectly competitive industry: market product price is $12, the firm's ATC is $16, MC is $16, and AVC is $8. To maximize profit, the firm should
(A) increase selling price
(B) decrease selling price
(C) decrease output, but keep producing
(D) keep price and output the same
(E) shut down

answer

question

Average fixed cost is represented by what?
(A) average revenue minus AVC
(B) sum of ATC and AVC
(C) price where MR. DARP is, divided by quantity of production
(D) difference between ATC curve and AVC curve
(E) where marginal cost equals AVC

answer

question

In a firm is perfectly competitive, in the long run it will operate when
(A) price=average cost=MC
(B) price=average cost=total cost
(C) price=marginal revenue=total cost
(D) total revenue=total variable cost
(E) marginal cost= total variable cost

answer

1 of 106

question

For which market model are there a very large number of firms?

A.) Monopolistic Competition
B.) Oligopoly
C.) Pure monopoly
D.) Pure competition

answer

D.) Pure competition

question

In which market model is the individual seller of a product a price taker?
A.) Pure competition
B.) Pure monopoly
C.) Monopolistic competition
D.) Oligopoly

answer

A.) Pure competition

question

Which industry comes closest to being purely competitive?
A.) Agriculture
B.) Retail trade
C.) Electricity
D.) Automobile

answer

A.) Agriculture

question

answer

B.) New firms are free to enter and existing firms are able to leave the industry very easily

question

answer

C.) Perfectly elastic

question

answer

C.) Marginal revenue for producing the 11th unit is $2

question

In pure competition, product price is
A.) Greater than marginal revenue
B.) Equal to marginal revenue
C.) Equal to total revenue
D.) Greater than total revenue

answer

B.) Equal to marginal revenue

question

answer

B.) Average-variable-cost curve

question

answer

B.) Total quantity demanded is equal to total quart:, supplied.

question

answer

B.) Marginal cost is greater than $5 and marginal cost is greater than average total cost

question

answer

A.) Produce zero units of output

question

What is the formula to calculate total fixed costs?

answer

ATC - AVC x output

question

How do you calculate AFC?

answer

FC/ Total Production

question

How do you calculate AVC?

answer

VC/ Total Production

question

How do you calculate ATC?

answer

AFC + AVC

question

Amount of Labor Amount of Output
1 3
2 8
3 12
4 15
5 17
6 18

The marginal product of the 4th unit of labor is
a. 2
b. 3
c. 4
d. 15

answer

question

Amount of Labor Amount of Output
1 3
2 8
3 12
4 15
5 17
6 18

When the firm hires four units of labor the average product of labor is
a. 3
b. 3.75
c. 4.25
d. 15

answer

question

answer

a. total cost first increases at a decreasing rate and then increases at an increasing rate.

question

Output Total Variable cost
1 $200
2 $360
3 $500
4 $700
5 $1000
6 $1800

The average total cost of the firm when 4 units of output are being produced is
a) $175
b) $200
c) $300
d) $400

answer

c) $300

700+500=1200
1200/4= 300

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answer

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answer

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answer

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(d) $5.00

4000/2000=$2
$3+$2=$5

question

answer

d

300/4=$75

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answer

question

Which pairs of lines are perfectly inverse?

answer

Marginal Cost and Marginal Product
Avg Price and Average cost

question

How to calculate Marginal Cost?

answer

Change in Total Cost/Change in Quantity

question

Examples of fixed costs

answer

rent, taxes, insurance

question

Examples of variable costs

answer

labor, utilities, materials

question

Marginal cost

answer

the cost of producing one more unit of a good

question

Name all the lines from top to bottom

answer

1. MC
2.ATC
3.AVC

question

When MC goes up what happens to the AVC

answer

It also goes up

question

What is happening when MC is below ATC

answer

ATC is falling

question

What is happening when MC is above ATC

answer

ATC is rising

question

economies of scale

answer

a proportionate saving in costs gained by an increased level of production

aka

factors that cause a producer's average cost per unit to fall as output rises

question

diseconomies of scale

answer

increases in cost per unit when output increases

the situation in which a firm's long-run average costs rise as the firm increases output

question

economies of scale/diseconomies of scale example

answer

question

When the ATC line is sloping down what is the effect called

answer

economies of scale

question

When the ATC line is sloping up what is the effect called

answer

diseconomies of scale

question

What happens to ATC when AVC goes up?

answer

ATC goes up

question

What happens to ATC when AVC goes down?

answer

ATC goes down

question

perfect competition

answer

the degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product

question

What are requirements for perfect competition market?

answer

question

Graph Key:
How to find Q on a perfect competition graph

answer

Its where MR = MC

question

Where is the perfect point of competition on a perfect competition graph

answer

Where MR = MC

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Economic Profit

answer

The remaining surplus left after deducting total costs from total revenue

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Normal Profit

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The least amount of profit needed for its survival

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How to calculate economic profit

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TR - TC

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What is the best outcome in the long run

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break even

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What directions do markets and firms move?

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Opposite

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Graph Key:
How to know if you PROFIT on a perfect competition graph?

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P > ATC

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Graph Key:
How to know if you LOSS on a perfect competition graph?

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P < ATC

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Graph Key:
How to know if you BREAKING EVEN on a perfect competition graph?

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P = ATC

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Graph Key:
How to know if you STAY OPEN on a perfect competition graph?

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P > AVC

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Graph Key:
How to know if you CLOSE on a perfect competition graph?

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P < AVC

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What are the possibilities in the short run?

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1. Profit
2. Loss
3. Break Even

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What are the possibilities in the long run?

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1. Break Even

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How does it change from the short run to the long run?

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All fixed costs become variable costs.

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How to calculate total revenue?

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Price x Q

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How to calculate marginal revenue?

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Change in total revenue/change in quantity

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At which point do firms maximize profit and minimize cost?

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When MR = MC

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Which of the following is not a valid option for a perfectly competitive firm?

a. Increasing its output.
b. Decreasing its output.
c. Increasing its price.
d. Increasing its resources.

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What type of cost falls during economies of scale

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long run average cost

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A firm produces 800 eyebrow rings for $1000. The marginal cost for the last unit produced is $1. What is the average total cost?
a. $1.00

b. $0.80

c. 1.25

d. 2.50

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The total cost of producing 250 units of air deodorizers is $750. The total variable cost is $500. What is the average fixed cost?
a. $250

b. $3

c. $.18

d. $330

e.$1

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