Chapter 13

Question 1

The Competitive Market

Answer 1

-The market many buyers and sellers
-Goods offered for sale are largely the same

Question 2

Perfectly Competitive Market

Answer 2

Firms can enter or exit the market

Question 3

Profit

Answer 3

Total Revenue - Total Cost

Question 4

Average Revenue

Answer 4

Total Revenue / Quantity

Question 5

Marginal Revenue

Answer 5

Change in Total Revenue / Quantity

For competitive firms, marginal revenue equals the price of the good.

Question 6

Marginal Cost increases as the Output ________

Answer 6

Rises

Question 7

Rules for Profit Maximization

Answer 7

-If marginal revenue exceeds marginal cost, the firm should increase output to increase profit.
-If marginal revenue does not exceed marginal cost, the firm should decrease output to increase profit.
-At the profit maximization level, marginal revenue and marginal costs are equal.

Question 8

The firm’s ________________ determines how much the firm is willing to supply at any price, is the competitive’s firm supply curve.

Answer 8

Marginal-cost curve

Question 9

A firm will shut temporarily if the revenue that it would get from producing is less that ______________

Answer 9

Variable costs

Question 10

The firm ignores fixed cost because they’re considered ______________

Answer 10

Sunk costs

Question 11

Firm would shut down if Price is less than
________________

Answer 11

Average Variable Cost

Question 12

The competitive firm long-run supply curve is the portion of its marginal-cost curve that lies _________________________________

Answer 12

Above average total cost curve

Question 13

Competitive Firm Profit

Answer 13

(P-ATC)*Q

Question 14

If price is above ATC, firm is

Answer 14

Profitable

Question 15

If price is below ATC, firm is

Answer 15

Not profitable, losses

Question 16

In the long run, firms cannot quickly enter or exit the market

Answer 16

TRUE

Question 17

Market Supply Curve

Answer 17

Sum of the quantities supplied by each firm in the market at each price

Question 18

In the long run, firms are able to exit or enter the market

Answer 18

TRUE

Question 19

-Firms in the competitive market are making __________

Answer 19

0 profit

Question 20

Long run market supply curve must be horizontal,

Answer 20

Perfectly elastic

Question 21

The supply decisions are based on marginal analysis. Profit maximizing firms that supply goods in competitive markets.

Answer 21

TRUE