8.2: Profits, Competition and Break-even Analysis

Question 1

Marginal revenue (MR) is…

Answer 1

The additional revenue the firm realizes from the decision to increase output by one unit per time period:

Question 2

Marginal revenue (MR) formula:

Answer 2

MR = ΔTR/ΔQ.

Question 3

Marginal cost (MC) is…

Answer 3

The increase to total cost resulting from the firm’s decision to increase output by one additional unit per time period:

Question 4

Marginal cost (MC) formula:

Answer 4

MC = ΔTC/ΔQ.

Question 5

What are the main two types of marginal cost?

Answer 5

Short-run marginal cost (SMC) and long-run marginal cost (LMC).

Question 6

Shutdown point is the point at which…

Answer 6

Average revenue is equal to the firm’s average variable cost.

Question 7

Breakeven point - represents…

Answer 7

The price of the underlying in a derivative contract in which the profit to both counterparties would be zero.

Question 8

Short-run average total cost (SATC) - the curve describing…

Answer 8

Average total cost when some costs are considered fixed.

Question 9

Long-run average total cost (LATC) - the curve…

Answer 9

Describing average total cost when no costs are considered fixed.

Question 10

Economies of scale is a situation in which…

Answer 10

Average costs per unit of good or service produced fall as volume rises.