Unit 3 Perfect Competition (Practice Quiz) Flashcards
A competitive firm’s short-run supply curve is part of which of the following curves?
Marginal Cost
A firm finds that producing 30,000 vases costs $180,000 while producing 40,000 vases costs $200,000. This might be explained by __________.
economies of scale
A market is competitive if ____________.
each buyer is small compared to the market and each seller is small compared to the market
A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7. It follows that the firm’s ___________.
average total cost curve intersects the marginal cost curve at an output level of less than 200 units
average variable cost curve intersects the marginal cost curve at an output level of less than 200 units
profit of $400
Because the goods offered for sale in a competitive market are largely the same, ___________.
sellers will have little reason to charge less than the going market price
Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm’s ______________.
total revenue
For a firm in a perfectly competitive market, the price of the good is always ___________.
equal to marginal revenue
Free entry means that ______________.
no legal barriers prevent a firm from entering an industry
How is revenue for a firm calculated?
By multiplying quantities by product price.
If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit, then ______________.
its total cost is less than $9,000
If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will __________.
exactly triple
If ABC Company sells its product in a competitive market, then __________.
ABC Company’s total revenue must be proportional to its quantity of output
If Company A produces 5,000 harmonicas per year at an average variable cost of $4 and an average fixed cost of $2 per harmonica, then the company’s total cost is _________.
$30,000
If total product of labor is rising at an increasing rate, ____________.
marginal product of labor is rising
In a competitive market, no single producer can influence the market price because ____________.
many other sellers are offering a product that is essentially identical
In a competitive market, the actions of any single buyer or seller will ___________.
have a negligible impact on the market price
In calculating accounting profit, accountants typically do not include _____________.
opportunity costs that do not involve an outflow of money
In the long-run _____________.
all inputs are variable
One of the defining characteristics of a perfectly competitive market is _________.
a standardized product
Productive efficiency is achieved at a particular output level if _________.
average total cost is as low as possible
Profit-maximizing firms enter a competitive market when, for existing firms in that market, ____________.
price exceeds average total cost
Short-run decisions are ___________.
constrained because some inputs are fixed while others are variable
Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?
$10 and 100
The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing _____________.
the quantity at which market price is equal to the farm’s marginal cost of production
Total profit for a firm is calculated as ____________.
(price minus average cost) times (quantity of output)
When a perfectly competitive firm decides to shut down, it is most likely that _________.
price is below the firm’s average variable cost
When firms have an incentive to exit a competitive market, their exit will ____________.
raise profits for firms that remain in the market
When fixed costs are ignored because they are irrelevant to a business’s production decision, they are called __________.
sunk costs
When new firms have an incentive to enter a competitive market, their entry will ___________.
drive down profits of existing firms in the market
When price is below average variable cost, a firm in a competitive market will ___________.
shut down and incur fixed costs
When price is greater than marginal cost for a firm in a competitive market, ____________.
there are opportunities to increase profit by increasing production
Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue ___________.
does not change
