Chapter 8

Question 1

Break Even Point

Answer 1

Level of output where the marginal cost curve intersects the average cost curve at the minimum point of AC; If the price is at this point, the firm is earning zero economic profits

Question 2

Entry

Answer 2

The long run process of firms entering an industry in response to industry profits

Question 3

Exit

Answer 3

The long run process of firms reducing production and shutting down in response to industry losses

Question 4

Long-run equilibrium

Answer 4

Where all firms earned zero economic profits producing the output level where P=MR=MC & P=AC

Question 5

Marginal revenue

Answer 5

The additional revenue gained from selling one more unit

Question 6

Market Structure

Answer 6

The conditions in an industry, such as number of sellers how easy/difficult it is for a new firm to enter, and the type of products being sold

Question 7

Perfect competition

Answer 7

Each firm faces many competitors that sell identical products

Question 8

Price taker

Answer 8

A firm in a perfectly competitive market that must take the prevailing market price as given