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Micro Final
| Question | Answer |
|---|---|
| Competitive Market ? | a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker |
| What is a price taker ? | you are a price taker when you accept the price the market determines |
| What do firms in competitive markets try to do ? | Maximize profit |
| Profit is.... | Total Revenue - Total Cost |
| Average Revenue | total revenue divided by the quantity sold |
| Marginal Revenue | the change in total revenue from an additional unit sold |
| For all firms average revenue _____ the price of the good | equals |
| For competitive firms marginal revenue _____ the price of a good | equals |
| Average revenue tells us............ | how much revenue a firm receives for the typical unit sold |
| If marginal revenue is ______ than marginal cost, the firm should ______ its output | greater , increase |
| If marginal cost is ______ than marginal revenue, the firm should _______ its output | greater , decrease |
| At the profit maximizing level of output, marginal revenue ______ marginal cost | equals |
| How does a firm maximize profit ? | by producing the quantity at which marginal cost equals marginal revenue |
| The firm ______ if the revenue that it would earn from producing is ______ than it's variable cost of production | shuts , less |
| Short run: Shut down if _______ | Total Revenue less than Variable Cost |
| Short run: Shut down if ________ | TR/Q < VC/Q |
| Short run: Shut down if ________ | Price is less than Average Variable Cost |
| What is sunk cost ? | a cost that has already been committed and cannot be recovered |
| Short run: If the price falls below ________ the firm is better of shutting down | Average Variable Cost |
| Long Run: Exit if ______ | Total Revenue is less than Total Cost |
| Long Run: Exit if ______ | Average Revenue is less than Average Total Cost |
| Long Run: Exit if ______ | Price is less than Average Total Cost |
| Long Run: Enter if _____ | Price is greater than Average Total Cost |
| Long run: If the price falls below ________ the firm is better of shutting down | Average Total Cost |
| Long Run: Firms that remain in the market must be ______ | making zero economic profit |
| The process of entry and exit end only when price and average total cost are driven to ______ | equality |
| Long run supply curve is typically more ______ than short run supply curve | elastic |
| A perfectly competitive firm a. chooses its price to maximize profits. b. sets its price to undercut other firms selling similar products. c. takes its price as given by market conditions. d. picks the price that yields the largest market share. | C |
| A competitive firm maximizes profit by choosing the quantity at which a. average total cost is at its minimum. b. marginal cost equals the price. c. average total cost equals the price. d. marginal cost equals average total cost. | B |
| A competitive firm’s short-run supply curve is its ________ cost curve above its ________ cost curve. average total, marginal average variable, marginal marginal, average total marginal, average variable | marginal, average variable |
| If a profit-maximizing, competitive firm is producing a quantity at which MC is between AVC and ATC, it will keep producing in the short run but exit the market in the long run keep producing both in the short run and in the long run | A |
| In the long-run equilibrium of a competitive market with identical firms, what are the relationships among price P, MC, and average total cost ATC? a. P > MC and P > ATC. b. P > MC and P = ATC. c. P = MC and P > ATC. d. P = MC and P = ATC. | D |
| P stands are a perfectly competitive industry in long-run equilibrium. The city starts imposing a 100 a month tax on stand. Does this affect number of pretzels consumed in the short and the long? no change in the short, down in the long no change in t | C |
Created by:
michael_mcl
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