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Assignment 6 (Chp 10, 11)
Terms in this set (30)
Refer to the diagram, which pertains to a purely competitive firm. Curve C represents:
average revenue and marginal revenue.
Which of the following conditions is true for a purely competitive firm in long-run equilibrium?
P = MC = minimum ATC.
An industry comprised of four firms, each with about 25 percent of the total market for a product, is an example of:
Under what conditions would an increase in demand lead to a lower long-run equilibrium price?
The firms in the market are part of a decreasing-cost industry.
When a firm is maximizing profit, it will necessarily be:
maximizing the difference between total revenue and total cost.
Economists use the term imperfect competition to describe:
those markets that are not purely competitive.
Which of the following statements applies to a purely competitive producer?
It will not advertise its product.
Resources are efficiently allocated when production occurs where:
price is equal to marginal cost.
Which of the following is not a characteristic of pure competition?
Price strategies by firms.
We would expect an industry to expand if firms in that industry are:
earning economic profits.
An increasing-cost industry is the result of:
higher resource prices that occur as the industry expands.
The primary force encouraging the entry of new firms into a purely competitive industry is:
economic profits earned by firms already in the industry.
Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:
there is no tendency for the firm's industry to expand or contract.
In long-run equilibrium, purely competitive markets:
maximize the sum of consumer surplus and producer surplus.
If a purely competitive firm shuts down in the short run:
it will realize a loss equal to its total fixed costs.
(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?
Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market.
Refer to the data. The marginal cost column reflects:
the law of diminishing returns.
If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:
price and minimum average variable cost.
A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:
producing less output than allocative efficiency requires.
Marginal revenue is the:
change in total revenue associated with the sale of one more unit of output.
Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price:
and industry output will be less than the initial price and output.
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:
is realizing an economic profit of $40.
The diagram portrays:
the equilibrium position of a competitive firm in the long run.
(Consider This) An otherwise unprofitable motel located on a largely abandoned roadway might be able to stay open for several years by:
reducing or eliminating its annual maintenance expenses.
If a purely competitive firm is producing where price exceeds marginal cost, then:
the firm will fail to maximize profit and resources will be underallocated to the product.
A purely competitive seller is:
a "price taker."
Refer to the diagram. Line (2) reflects the long-run supply curve for:
a constant-cost industry.
Refer to the diagram. The firm will produce at a loss if price is:
Under pure competition in the long run:
both allocative efficiency and productive efficiency are achieved.
Refer to the diagram. Line (2) reflects a situation where resource prices:
remain constant as industry output expands.