35 terms

# Chapter 11 Notes

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Curve (2) (horizontal line) in the above diagram is a purely competitive firm's
marginal revenue curve
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.
Refer to the above data. At 5 units of output average fixed cost, average variable cost, and average total cost are: (5 units, TFC 50, TVC 300, TC 350)
A) \$10, \$60, and \$70 respectively.
Refer to the above data. If product price is \$75, the firm will produce:
4 units of output. 4 has the largest margin ( need to do a chart of all profit-total cost
Assume a purely competitive firm is selling 200 units of output at \$3 each. At this output its total fixed cost is \$100 and its total variable cost is \$350. This firm:
is making a profit, but not necessarily the maximum profit
Refer to the above diagram showing the average total cost curve for a purely competitive firm. Suppose this firm is maximizing its total profit and the market price is \$15. The firm's per unit profit is:
positive amount less than \$5. Why? at 10 units they make 15 or 1.5/ per unit. still positive
Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue: (40 units at \$10)
is \$400.
Refer to the above diagram showing the average total cost curve for a purely competitive firm. Suppose that average variable cost is \$8 at 40 units of output. At that level of output, total fixed cost:
is \$80. \$8 variable x \$10 line
The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:
profit-maximizing rule
Which of the following is correct?
Marginal product rises faster than average product and also falls faster than average product.
Which of the following definitions is correct?
Economic profit = accounting profit - implicit costs.
Normal profit is
The relationship between the marginal cost and the average total cost schedule is such that:
if MC is declining, ATC must also be declining
"If a variable input is added to some fixed input, beyond some point the resulting extra output will decline." This statement describes
the law of diminishing returns.
Refer to the above data. The marginal cost of the fifth unit of output is: AFC \$10 AVC \$10
Add extra total cost column. Add fc+vc. Then do a mc column. This is difference between tc and tc in unit before
If a firm decides to produce no output in the short run, it's cost will be
Fixed costs
The basic characteristic of the short run is that
The firm does not have sufficient time to change the size of plant
In the above figure. Curves 1, 2 and 4 represent. 1 is nike curve, 2 is a u, 4 is going down
MC, ATC, AVC, and AFC curves
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from \$5 to \$4. It was also found that total revenue decreased when price was raised from \$5 to \$6, thus,
The demand for pizza is elastic above \$5 and inelastic below \$5
The price of product x is reduced from \$100 to \$90 and as a result, the quantity demanded increases from 50 to 60. Demand for x in this price range
Elastic
The larger the positive cross elasticity coefficient of demand between products x and y, the
Greater the substitutability
An income elasticity coefficient of -1.8 means the product is a normal good
False. Must be positive number, demand increases when income increases
Other things the same, if a price change causes total revenue to change in the opposite direction, demand is
Relatively elastic
Suppose a firm's total economic cost in producing 1000 aluminum baseball bats is \$10,000. These bats are then sold by the firm for \$12,000.
The firm's economic profit are \$2000
On the basis of the above information and assuming trade occurs between the three states we can expect
Washington to exchange apples and receive money from texas
The Ajax manufacturing co is selling in a purely competitive market. It's output is 100 units which sell at \$4 each. At this level of output total cost is \$600, total fc is \$100 and marginal cost is \$4. The firm should
Produce zero units of output. Market price is less than total cost
Average fixed costs can be determined graphically by
Vertical distance between ATC and AVC
The above diagram shows two product supply curves. It indicates that
Over range Q1Q2 price elasticity of supply is greater for S1 than for S2.
The market system's answer to the fundamental question "how will goods and services be produced?" Is
"At least cost production"
The division of labor means
Workers specialize in various production tasks
Which of the following is not a basic characteristic of pure competition
Considerable no price competition
Assume for a competitive firm that mc=AVC at \$12, mc=ATC at \$20, and mc=mr T \$16. The firm will
Minimize its losses by producing it in short run
Which of the following is a basic characteristic of pure competition?
no barriers to the entry or exodus of firms
a standardized or homogeneous product
a large number of buyers and sellers
Assume for a competitive firm that MC = AVC at \$12, MC = ATC at \$20, and MC = MR at \$16. This firm will:
minimize its losses by producing in the short run.
Refer to the above diagram, which pertains to a purely competitive firm. Curve C represents: (horizontal line)
total revenue and average revenue.