Chapter 9

Question 1

Price Taker

Answer 1

Has no control over the price set by the market. It accepts the price determined by the overall supply and demand conditions that regulates the market.

Question 2

Profit Maximizing Rule

Answer 2

A film will continue producing until MR=MC

Question 3

Marginal Revenue

Answer 3

The change in total revenue a firm receives when it produces one additional unit of output.

Question 4

If P>ATC (Short term)

Answer 4

The film makes a profit

Question 5

ATC>P>AVC (Short term)

Answer 5

The firm will operate at a loss to cover variable costs.

Question 6

AVC>P (Short term)

Answer 6

The firm will temporarily shut down

Question 7

P> ATC (Long term)

Answer 7

The firm makes a profit

Question 8

P

Answer 8

The firm makes a loss and should shut down.

Question 9

Sunk costs

Answer 9

Are unrecoverable costs that have been incurred as a result of past actions.

Question 10

Signals

Answer 10

Signals of profits and losses convey information ab out the profitability of various markets.