modul 13 Flashcards
Under what conditions will a perfectly competitive firm shut down in the long run?
When total revenue is less than total cost
How does a firm in a perfectly competitive market maximize economic profit?
A firm in a perfectly competitive market maximizes economic profit by producing at the level of output where marginal cost equals marginal revenue.
How can a firm’s supply curve be derived from its marginal cost curve?
A firm’s supply curve is derived from its marginal cost curve by taking the portion of the marginal cost curve above the average variable cost curve.
What is the slope of a total revenue curve for a perfectly competitive firm?
Marginal revenue
What is marginal revenue?
Marginal revenue is the increase in total revenue associated with a 1-unit increase in output.
What is the relationship between price and average variable cost?
Price is greater than average variable cost
What happens if price falls below average variable cost?
If price falls below average variable cost, the firm will shut down in the short run and reduce output to zero.
What is the profit-maximizing output determined by?
Average total cost
According to the marginal decision rule, a profit-maximizing firm should increase output until __.
marginal revenue equals marginal cost
What is the relationship between price and average variable cost for Madame LaFarge?
Price is always greater than average variable cost in the short run
The industry supply curve is derived from the supply curves of ______ firms.
individual
How is the firm’s supply curve derived?
From the firm’s marginal cost curve
What is the relationship between a perfectly competitive firm’s marginal revenue curve and the market price?
They are the same curve
What is economic profit?
Economic profit is the difference between total revenue and total cost.
What is the relationship between marginal revenue and the market price for a perfectly competitive firm?
Marginal revenue is equal to the market price
What determines the output level for a firm in a perfectly competitive market in the short run?
Marginal cost
Under what conditions will a perfectly competitive firm shut down in the long run?
When total revenue is less than total cost
How is the industry supply curve derived from the supply curves of individual firms?
The industry supply curve is derived by horizontally summing the supply curves of individual firms at each price level.
The slope of a total revenue curve measures the rate at which total revenue increases as ______ increases.
output
What determines the level of output in a perfectly competitive market in the short run?
Market price
The firm’s supply curve is derived from the firm’s ______ cost curve.
marginal
What is the relationship between the marginal revenue curve and the market price for a perfectly competitive firm?
The marginal revenue curve is a horizontal line at the market price
What is the relationship between market price and total revenue for a perfectly competitive firm?
No relationship
How does a firm’s supply curve relate to its marginal cost curve?
The supply curve is the same as the marginal cost curve
The equilibrium price and industry output in a perfectly competitive market are determined by __ and supply.
demand
What is the level of output that maximizes economic profit for an individual firm in a perfectly competitive market?
The level of output where total revenue is equal to total cost
What determines a firm’s total revenue in a perfectly competitive market?
The firm’s output level
What is the relationship between a perfectly competitive firm’s marginal revenue curve and its average revenue curve?
They are the same curve
What is the slope of a total revenue curve for a perfectly competitive firm?
Marginal revenue
A firm in a perfectly competitive market determines its output level in the __ run.
short
What is the output level at which a firm maximizes economic profit or minimizes economic loss?
Intersection of marginal cost and marginal revenue curves
What is economic profit per unit?
the difference between average total cost and price
What is the relationship between price and average variable cost?
Price is greater than average variable cost
To determine profit-maximizing output, the firm produces the output at which ______ equals marginal revenue.
marginal cost
Economic profit per unit is the difference between ______ and price
ATC
The firm maximizes profit by selecting an output at which ______ equals MC
MR
Economic profit per unit is calculated by subtracting ______ from price.
marginal cost
When will a firm shut down in the short run?
When price is below average variable cost
How can the profit-maximizing output be determined using the marginal decision rule?
The profit-maximizing output can be determined by finding the point at which marginal revenue equals marginal cost.
What is the concept of economic losses in the short run?
When price is less than average variable cost
What is the relationship between marginal revenue and marginal cost in determining profit-maximizing output?
Profit-maximizing output is determined when marginal revenue equals marginal cost.
How do you compute economic profit per unit?
Economic profit per unit is the difference between price and average total cost.
What is the profit-maximizing output determined by?
Marginal cost
According to the marginal decision rule, a profit-maximizing firm should increase output until __.
marginal revenue equals marginal cost
What is the relationship between price and average variable cost in determining whether a firm should continue to produce or shut down in the short run?
Price must be above average variable cost
What is the concept that represents the minimum level of average variable cost at which a firm should shut down?
Shutdown point
How can a firm determine its profit-maximizing output using the marginal decision rule?
by finding the intersection of marginal revenue and marginal cost curves
What determines the profit-maximizing output for Madame LaFarge?
The intersection of marginal cost and marginal revenue curves
