question
price taker
answer
a firm that cannot significantly
affect the market price for its output or the
prices at which it buys its inputs.
affect the market price for its output or the
prices at which it buys its inputs.
question
Profit maximization
answer
π = R − C.
R = revenue
C = cost
R = revenue
C = cost
question
The firm's profit function is
answer
π(q) = R(q) − C(q)
question
Output decision
answer
If the firm produces, what output
level, q*, maximizes its profit or minimizes its loss?
level, q*, maximizes its profit or minimizes its loss?
question
Shutdown decision
answer
Is it more profitable to produce
q* or to shut down and produce no output?
q* or to shut down and produce no output?
question
output rules for profit maximization
answer
* If MR > MC, firm should increase output
* IF MR < MC, firm should decrease output
* IF MR = MC, profit maximizing level of output
* IF MR < MC, firm should decrease output
* IF MR = MC, profit maximizing level of output
question
short run output decision
answer
MR = p
question
short run equilibrium
answer
the price level and real GDP that occur when the aggregate demand curve intersects the short-run aggregate supply curve
question
Increasing-cost market
answer
a market in which input prices rise with output
question
Constant-cost market
answer
a market in which input prices remain constant as output increases
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