test 2 competitive markets

Question 1

The height
&
the width of a rectancle

Answer 1

ATC- Price

Q

Question 2

The area

Answer 2

(ATC-P) x Q

Question 3

at the end of the process of entry & exit, firms that remain in the market must be making

Answer 3

ZERO economic profit

(only accounting profit but NOT economic profit)

Question 4

Entry & exit stop when (formula)

Why (2)?

Answer 4

Price =ATC

because this means that there is stabilization of exit & entering the market.

(They are working at their efficient scale producing at the amount that they should be producing.)

Question 5

If firms can freely enter & exit the market the price also equals the lowest possible

Answer 5

ATC of production

Question 6

2 ways to use for the efficient scale

Answer 6

MR< MC
MR> MC

Question 7

In a competitive market how do you identify a profit?

and a loss?

Answer 7

Price is ABOVE ATC

Price is BELOW ATC

Question 8

WT do u mean by “O economic profit”

Answer 8

you gain nothing by staying and you gain nothing by leaving

BUT your accounting profit should compensate for ur economic profit.

Question 9

0 economic profit & LOSS in accounting profit you should _____ the market.

Answer 9

leave
(it doesn’t matter if u r making 0 economic profit BUT YES if your making LOSS OF Accounting Profit.

Question 10

Quantity does not depend on price
why?

Answer 10

he firms produce at a certain quantity where Marginal cost and Marginal revenue are equal which means profits are maximized