Chapter 10 Key Terms

Question 1

perfect competition

Answer 1

when an industry is made up of many small firms producing homogeneous products, when there is no impediment to the entry or exit of firms, and when full information is available

Question 2

price taker

Answer 2

under perfect competition, when a firm has no choice but to accept the price that has been determined by the market

Question 3

variable cost

Answer 3

a cost whose total amount changes when the quantity of output of the supplier changes

Question 4

supply curve of a firm

Answer 4

shows the different quantities of output that the firm would be willing to supply at different possible prices during some given period of time

Question 5

supply curve of an industry

Answer 5

shows the different quantities of output that the industry would supply at different possible prices during some given period of time

Question 6

economic profit

Answer 6

net earnings, in the accountant’s sense, minus the opportunity costs of capital and of any other inputs supplied by the firm’s owners