Chapter 21 Flashcards
A firm produces at that output at which marginal cost = marginal revenue
all of the time
A consultant has advised Consolidated Fish, Inc that is should cut back its production in order to increase its profits. We can conclude from this that
CF’s marginal cost must be greater than the price of its product.
To find the output at which the firm maximizes its profits you must know the firms
MC
To maximize profits, a firm should product at an output up to the point where
price equals marginal cost
When MC>MR, the firm should
decrease production
If marginal cost is equal to marginal revenue
the frim should hold output constant
Marginal analysis is useful to a firm that seeks to
both maximize its profits and minimize its losses
Which statement is true 1?
The minimum point on the firms’s average variable cost curve is the shutdown point
The lowest point on the firms’s long-run supply curve is
the break-even point
The minimum possible average total cost of the computer repair shop is $40 and the minimum possible average variable cost is #30. If you operate this shop, you will shut down immediately if the equilibrium price of the computer repairs falls below
$30
Total revenue divided by output equals
price
The lowest point on a firm’s short run supply curve is a the
shutdown point
The firm’s long-run supply curve runs alon its _____ curve.
MC
Which curve tells us the output at which a firm is porductin at peack efficiency?
ATC
The firms’ break-even point occurs at an output of (graph 1)
About 58
The firm’s shutdown occurs at an output of (graph 2)
About 44
This firm’s most profiable output is at (graph 3)
63
A company is operating most efficiently when it is at
the break-even point
We say that a business is operatin at peak efficiency when its ——— is held to a minimum.
average total cost
A firm will go out of business if price is below
average total cost
In the short run if the price is below average variable cost the firm will
shut down
If the firm operates in the short run and goes out of business in the long run, then the price
must be bewtween the shurdown and the break-even point
Which statement is true 2?
A firm will operate in the short run if the total revenue is greater than variable costs.
If the price is between the shutdown and the break-even points, in the short run the firm will ——— and the in the long run the firm will ________.
operate and go out of business
If price is above the break-even point, in the short run the firm will ________ and in the long run the firm will ______.
operate and stay in business
