Chapter 8 Flashcards

1
Q

A firm that makes zero economic profits

A

covers all its costs, including a provision for normal profit.

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2
Q

Normal profit

A

includes the full opportunity cost of the resources used by the firm.

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3
Q

(Table 22.1) The accounting profit is equal to

A

$925.

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4
Q

(Table 22.1) Suppose the entrepreneur could earn $1,000 as an employee elsewhere. This means the economic profit is

A

−$75.

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5
Q

Market structure is determined by the

A

number and relative size of the firms in an industry.

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6
Q

In which of the following types of markets does a single firm have the most market power?

A

monopoly

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7
Q

A perfectly competitive firm is a price taker because

A

the price of the product is determined by many buyers and sellers.

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8
Q

Competitive firms cannot individually affect market price because

A

their individual production is insignificant relative to the production of the industry.

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9
Q

The demand curve for each perfectly competitive firm is

A

horizontal.

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10
Q

The demand curve confronting a competitive firm

A

equals the marginal revenue curve.

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11
Q

A firm maximizes profit when

A

total revenue exceeds total cost by the greatest amount.

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12
Q

(Figure 22.1) The total fixed costs for this firm are approximately

A

$50.

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13
Q

(Figure 22.1) The profit-maximizing output for this firm is

A

200 units.

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14
Q

Marginal revenue is the change in

A

total revenue when the output is changed.

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15
Q

For the perfectly competitive firm, the marginal revenue is always

A

constant.

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16
Q

Short-run profits are maximized at the rate of output where the

A

marginal revenue is equal to the marginal cost.

17
Q

A perfectly competitive firm should expand output when

18
Q

(Figure 22.2) For a perfectly competitive firm, the profit-maximizing quantity of output is

19
Q

(Figure 22.3) For a perfectly competitive firm, if the market price is $15,

A

economic profits will be zero.

20
Q

(Figure 22.3) For a perfectly competitive firm, if the market price is $23,

A

the firm will have above-normal profits.

21
Q

(Figure 22.3) A perfectly competitive firm should shut down at any price below

22
Q

(Figure 22.3) For a perfectly competitive firm, at a market price of $23, the profit per unit is maximized at an output of

23
Q

(Figure 22.3) For a perfectly competitive firm, at a market price of $23, the total profits are maximized at an output of

24
Q

(Figure 22.3) For a perfectly competitive firm, the law of diminishing returns takes effect at an output of

25
Q

(Figure 22.3) For a perfectly competitive firm, which of the following statements is true for this firm between the prices of $10 and $15?

A

The firm is experiencing economic losses but should continue to produce.