Podcast
Questions and Answers
In the short run, a firm will produce if
In the short run, a firm will produce if
- total revenue exceeds total cost
- marginal cost is less than average variable cost
- price is greater than average total cost
- price is greater than the shutdown price (correct)
In perfect competition, firms stay in business with zero profit because
In perfect competition, firms stay in business with zero profit because
- revenue compensates the owners for the time and money they expend to keep the business going (correct)
- there are no opportunity costs involved
- total revenue exceeds total cost
- the market price is equal to average total cost
The short-run supply curve in a competitive market is
The short-run supply curve in a competitive market is
- the portion of its marginal cost curve that lies below average variable cost
- the portion of its marginal cost curve that lies above average variable cost (correct)
- the portion of its average total cost curve above the minimum point
- equal to the marginal revenue curve
The long-run supply curve in a competitive market is
The long-run supply curve in a competitive market is
In the long run, a firm exits if
In the long run, a firm exits if
The profit-maximizing level of output for a price-taking firm occurs where
The profit-maximizing level of output for a price-taking firm occurs where
Economists measure a firm’s economic profit as
Economists measure a firm’s economic profit as
Accountants measure accounting profit as
Accountants measure accounting profit as
The break-even price for a price-taking firm is where
The break-even price for a price-taking firm is where
The long-run equilibrium in perfect competition occurs when
The long-run equilibrium in perfect competition occurs when
Marginal revenue for a price-taking firm is equal to
Marginal revenue for a price-taking firm is equal to
In a perfectly competitive market, what is the characteristic of the product being traded?
In a perfectly competitive market, what is the characteristic of the product being traded?
What best describes the market share of individual buyers and sellers in a perfectly competitive market?
What best describes the market share of individual buyers and sellers in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What is the profit maximising level of output for a firm in a perfectly competitive market?
What is the profit maximising level of output for a firm in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What best describes the influence of individual firms on market price in a perfectly competitive market?
What best describes the influence of individual firms on market price in a perfectly competitive market?
What does it mean for buyers and sellers to have perfect information in a perfectly competitive market?
What does it mean for buyers and sellers to have perfect information in a perfectly competitive market?
What does it mean for firms to be 'price takers' in a perfectly competitive market?
What does it mean for firms to be 'price takers' in a perfectly competitive market?
In a perfectly competitive market, what does it mean for firms to be 'price takers'?
In a perfectly competitive market, what does it mean for firms to be 'price takers'?
What best describes the influence of individual firms on market price in a perfectly competitive market?
What best describes the influence of individual firms on market price in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
In a perfectly competitive market, what is the characteristic of the product being traded?
In a perfectly competitive market, what is the characteristic of the product being traded?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What best describes the long-run supply curve in a competitive market?
What best describes the long-run supply curve in a competitive market?
What best describes how individual buyers and sellers are characterized in a perfectly competitive market?
What best describes how individual buyers and sellers are characterized in a perfectly competitive market?
What best describes how production decisions are made by firms in a perfectly competitive market?
What best describes how production decisions are made by firms in a perfectly competitive market?
In perfect competition, what is the relationship between marginal revenue and market price for price-taking firms?
In perfect competition, what is the relationship between marginal revenue and market price for price-taking firms?
What is the profit-maximizing level of output for a firm in a perfectly competitive market?
What is the profit-maximizing level of output for a firm in a perfectly competitive market?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What happens to individual firm's total revenue if they increase their quantity sold in a perfectly competitive market?
What best describes the long-run supply curve in a competitive market?
What best describes the long-run supply curve in a competitive market?
What does it mean for firms to be 'price takers' in a perfectly competitive market?
What does it mean for firms to be 'price takers' in a perfectly competitive market?
What best describes how production decisions are made by firms in a perfectly competitive market?
What best describes how production decisions are made by firms in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What does 'free entry and exit' imply in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
What type of profit is considered when analyzing firms in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
What is the relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market?
Study Notes
Short-Run and Long-Run Supply Curves
- A firm will produce in the short run if the revenue is greater than or equal to variable costs.
- Firms in perfect competition stay in business with zero profit because they have no market power to influence prices.
Profit Maximization
- The profit-maximizing level of output for a price-taking firm occurs where marginal revenue equals marginal cost.
- Economists measure a firm's economic profit as total revenue minus total cost.
- Accountants measure accounting profit as total revenue minus total explicit cost.
Market Structure
- In a perfectly competitive market, the product being traded is homogeneous.
- The market share of individual buyers and sellers is negligible.
- 'Free entry and exit' implies that firms can enter or exit the market without barriers.
Firm Behavior
- The profit-maximizing level of output for a firm in a perfectly competitive market is where marginal revenue equals marginal cost.
- The relationship between total revenue ($TR$) and quantity sold ($Q$) for a firm in a perfectly competitive market is $TR=PQ$, where $P$ is the market price.
- Firms in perfect competition are price takers, meaning they have no influence on market price.
- If a firm increases its quantity sold, its total revenue will increase by the market price.
Market Characteristics
- Buyers and sellers have perfect information in a perfectly competitive market, meaning they have complete knowledge of prices and product characteristics.
- Individual firms have no influence on market price in a perfectly competitive market.
- The long-run supply curve in a competitive market is perfectly elastic, meaning firms can produce at any level at the market price.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on the characteristics of perfectly competitive markets, where there are many buyers and sellers with small market shares, and the products are standardized across sellers. In this market, both buyers and sellers are price-takers, and individual actions have no effect on the market price.
