question
For any firm for which price is greater than or equal to average variable cost, regardless of market structure, profits are maximized by producing and selling the quantity at which
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a. marginal revenue is equal to marginal cost.
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Perfectly competitive firms are "price takers." In other words, perfectly competitive firms take the market price as given. Which of these characteristics of perfect competition is necessary for firms to be price takers?
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E. (a) and (b) only are necessary for firms to be price takers.
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Profit per unit is equal to
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c)
price minus average total cost.
price minus average total cost.
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The short-run supply curve of a perfectly competitive firm is given by
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D. the marginal-cost curve if price is equal to or greater than average variable cost; for prices less than average variable cost, quantity supplied is zero.
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Jones Company is a perfectly competitive firm. The market price of its output is $10. The firm is currently producing 50 units of output. At this level of output, the firm's average total cost is $8 per unit, its average variable cost is $6 per unit, and its marginal cost is $8. On the basis of this information, what can we say?
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B. Jones Company is not maximizing profit; it can increase profit by increasing output.
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Smith Company is a perfectly competitive firm. The market price of its output is $10. The firm is currently producing 100 units of output. At this level of output, the firm's average total cost is $10 per unit, its average variable cost is $9 per unit, and its marginal cost is $10 per unit. On the basis of this information, what can we say?
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A. Smith Company is maximizing its profit, and should stay in business.
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Garcia Company is a perfectly competitive firm. The market price of its output is $10. The firm is currently producing 100 units of output. At this level of output, the firm's average total cost is $8 per unit, its average variable cost is $6 per unit, and its marginal cost is $10 per unit. What is the firm's profit?
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C. $200
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Lee Company is a perfectly competitive firm. The market price of its output is $10. The firm is currently producing 100 units of output. At this level of output, the firm's average total cost is $12 per unit, its average variable cost is $9 per unit, and its marginal cost is $10 per unit. On the basis of this information, what can we say?
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D. Lee Company is suffering a loss, but it should stay in business in the short run.
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The szczyff industry is perfectly competitive. The firms in the industry are currently earning positive economic profits. What do we expect will happen in the future in this industry?
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B. New firms will enter the industry, and the market price will fall until zero economic profits are restored.
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The demand curve for the output of an individual perfectly competitive firm is
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E. Perfectly Elastic
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Average revenue, or revenue per unit, is equal to
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E.
(a) and (b) only.
(a) and (b) only.
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Which of the following industries comes closest to fitting the definition of a perfectly competitive industry?
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B.
Soybean Farming
Soybean Farming
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Economic cost is _________ accounting cost, and economic profit is ________ accounting profit.
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D.
greater than, less than.
greater than, less than.
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Which of these characteristics is the reason why a perfectly competitive industry has a tendency to move toward zero economic profit?
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C.
The industry is characterized by free entry and exit.
The industry is characterized by free entry and exit.
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When a firm is earning positive economic profit,
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A.
price is greater than average total cost.
price is greater than average total cost.
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A profit-maximizing perfectly competitive firm will choose to produce and sell the quantity at which price is equal to marginal cost: P=MC. Also, the tendency in a perfectly competitive industry is toward zero economic profit, which means that price is equal to average total cost: P = ATC. If P = MC, and if P = ATC, then MC = ATC. Thus, when an industry of profit-maximizing perfectly competitive firms is experiencing zero economic profit, marginal cost is equal to average total cost. In this situation,
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B.
The average-total-cost curve is at its minimum.
The average-total-cost curve is at its minimum.
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Lecture Clicker Question:
Gargantuan Corp. is a monopolist. at a price of $5, the firm can sell 5 units. In order to sell a sixth unit, the firm has to decrease the price to $4. What is the marginal revenue to the sixth unit?
Gargantuan Corp. is a monopolist. at a price of $5, the firm can sell 5 units. In order to sell a sixth unit, the firm has to decrease the price to $4. What is the marginal revenue to the sixth unit?
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E. -$1
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Clicker Question:
For a perfectly competitive firm, marginal revenue is equal to average revenue. For a monopoly, marginal revenue is _________ average revenue.
For a perfectly competitive firm, marginal revenue is equal to average revenue. For a monopoly, marginal revenue is _________ average revenue.
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C. (marginal revenue is )Less than (average revenue)
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CLicker:
when a monopoly is producing at it profit-maximizing quantity, it is in the ________ region of the demand curve.
when a monopoly is producing at it profit-maximizing quantity, it is in the ________ region of the demand curve.
answer
A. Elastic
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