question
Total Revenue Formula
answer
price x quantity
question
Average Revenue Formula
answer
total revenue / quantity
question
Marginal Revenue Formula
answer
change in total revenue / change in quantity
question
Price > Average Total Cost
answer
Firm is making a profit
question
Price < Average Total Cost
answer
Firm is making a loss
question
Price = Average Total Cost
answer
Firm is breaking even
question
In the long run, if price is GREATER than average total cost, then firms will ___ the market
answer
Enter
question
In the long run, if price is LESS than average total cost, then firms will ___ the market
answer
Exit
question
If new firms enter the market, then the supply curve will shift to the ___ and ___ market price
answer
Right; decrease
question
If existing firms exit the market, then the supply curve will shift to the ___ and ___ market price
answer
Left; increase
question
Cost industry that has a horizontal long run supply curve... Average costs do not change as the industry expands
answer
Constant-cost industry
question
Cost industry that has an upward sloping long run supply curve... Average costs increase as the industry expands
answer
Increasing-cost industry
question
Cost industry that has a downward sloping long run supply curve... Average costs decrease as the industry expands
answer
Decreasing-cost industry
question
In the long run, firms will enter the market until the marginal firm is earning
answer
zero economic profit
question
A market is perfectly competitive if...
It has ___ buyers and sellers
It has ___ buyers and sellers
answer
many
question
A market is perfectly competitive if...
All firms are selling ___ products
All firms are selling ___ products
answer
identitcal
question
A market is perfectly competitive if...
Firms can enter the market with ___ barriers
Firms can enter the market with ___ barriers
answer
no
question
Perfectly competitive firms should produce to the quantity where the difference between total revenue and total cost is
answer
as large as possible
question
Profit formula
answer
(Price-Average Total Cost) x Q
question
The supply curve for a firm in a perfectly competitive market in the short run is also the
answer
marginal cost curve
question
Why do single firms face horizontal demand curves?
answer
Firms have no effect on market price because many firms are selling an identical product
question
When is profit maximized?
answer
when marginal revenue = marginal cost
question
Long run equilibrium occurs when the economic profit is
answer
zero
question
No matter how much quantity changes, MR is ___ in a perfectly competitive market
answer
constant
question
Profit maximizing level is when p=mc so...
answer
p=mr=mc
question
Profit by unit formula
answer
(Profit/Q) = Price - ATC
question
When is profit per unit, or average profit, maximized?
answer
At the minimum of Average Total Cost
question
Graphically, where is profit maximization?
answer
where MC curve intersects MR curve
question
Sunk costs
answer
fixed costs, irrelevant for decision to stay open or close
question
When Total Revenue < Variable Costs then the seller should
answer
shut down
question
When firms enter the market, supply ___ and prices ___
answer
increases; decrease
question
When firms leave the market, supply ___ and prices ___
answer
decreases; increase
question
Productive efficiency
answer
producing at the lowest possible cost
question
Allocative efficiency
answer
the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it
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