A firm with explicit costs of $2,000,000, no implicit costs, and total revenue of $3,000,000 would have:
B. an accounting profit and an economic profit of $1,000,000
At which outpout is the firm operating most efficiently?
Where MC = ATC
The marginal cost curve intersects the ATC curve at its
C. minimum point, which is the break-even point
A profit-maximizing firm will increase production when
C. price exceeds marginal cost
The lowest point on a firm's short-run supply curve is at the
A. shutdown point
A firm will operate at that output where MC equals MR
C. both when it is maximizing its profits and when it is minimizing its losses
When marginal cost is rising, but is less than average total cost, we are definitely below the
B. break-even point
Which statement is true?
A. Accouting profits are greater than economic profits.
Statement 1: Price is equal to total revenue divided by output. Statement 2: A firm never maximizes profits.
D. Statement 1 is true, and statement 2 is false.
If a firm is producing a level of output at which that output's marginal cost is less than the price of the good, ______
C. higher profits could be obtained with increased production
The firm's long-run supply curve runs along its _____ curve.
D. MC
A firm will operate at that output at which MC = MR _______
C. in both the short run and the long run
Statement 1: The firm's short-run supply curve runs up the marginal cost curve from the shutdown point to the break-even point.
Statement 2: The firm will not accept a price below the break-even pointin the short run.
B. Both statements are false.
A business firm is in the short-run _______
E. virtually all the time
If the price is between the shutdown point and the break-even point, the firm is in there __________
B. short run taking a loss
The most efficient output of a firm is located _______
A. at the break-even point
Which one of these markets would definitely not be perfectly competetive?
C. HDTV's
Perfect competition is _________
D. probably impossible to find
Under perfect competition, _________
C. no firm has any influence over price
Under perfect competition, theere are ________
C. many firms producing an identical product
The perfect competitor is __________
B. a price taker rather than a price maker
***
The determination of whether two products are identical ________
d is done by the sellers
B. takes place in the minds of the buyers
The perfect competitor's demand curve is _______
C. always horizontal
Which statement about the perfect competitor is true?
C. She will always charge the market price.
Each of the following is a characteristic of perfect competition except _______
A. varying prices charged by different firms
In the short run the perfect competitor will probably ______
A. make a profit or take a loss
In the long run the perfect competitor will ______
A. break even
Under perfect competition ______ profits are always zero in the long run.
B. economic
Use the choices below to answer:
B. in the short run making a profit
Use the choices below to answer:
D. in the long run breaking even
The perfect competitors demand and marginal revenue curves are ______
D. always identical
The most efficient output ______
A. is equal to the most profitable output for othe perfect competitor only in the long run
Use Figure 4 to answer
Total profit is ______
B. the rectangle bounded by HGJI
Output is ______
B. OM
Profit per unit is _____
E. GJ
The firm's most efficient output is ______
A. OL
Statement 1: The advent of the Internet has brought "perfect knowledge" clsoer to reality.
Statement 2: The cost of businesses buying th eir supplies online is convenient, but they generally pay more than they would if they used customary channels.
A. Statement 1 is true, and statement 2 is false.
Statement 1: No firm will stay in business more than one year if it is losing large sums of money.
Statement 2: Many dot-coms have lost money in the short run.
A. Statement 2 is true, and statement 1 is false.
When an industry is in long-run equilibrium economic profits are ______ and ______ will be entering or leaving the industry.
B. zero; none
If a perfectly competitive firm sells 10 units of output at a price of $10 per unit, its marginal revenue per unit is ________
C. $10
Under perfect competition there are so many firms that no one firm has any influence over ______
price
The determination that a product is identical takes place in ___________
the mind of the buyer
The perfect competitor's demand curve is a ________, the marginal revenue curve is a ________
perfectly elastic horizontal line; the same perfectly elastic horizontal line
A perfect competitor will never charge more than market price because ______; the perfect competitor woudl never charge less than market price because _______.
he wouldn't sell anything; it would be unnecessary since he could sell all he wanted at the market price.
In the short run the perfect competitor may make a _____ or take a _____; in the long run the perfect competitor will _____
profit, loss; break even
In a perfectly competitive industry, if firms are making profits _____, which will result in zero profits in the long run; if there are losses in the short run _____, resulting in zero profits (and losses) in the long run.
new firms enter the industry; some firms will leave the industry
The perfect competitor operates at the _____ point of her average total cost curve in the long run.
minimum
If the firms in a competitive industry are earning profits, in the long run new firms will _____, but if most firms are losing money, then in the long run some of the firms will _____.
enter; exit (in perfect competition firms have perfect mobility – ease of entry/exit)
Use figure 5
How much will output be in the short run if the price is (a) $70? (b) $120? (c) $160?
a. 0
b. 240
c. 280
Use figure 5
How much is the firm's most efficient output?
260
If price is $180, how much is total profit?
Total profit = (P-ATC)*Q
= ($180 - $152)*260
= ($28)*260= $7,280
If price is $120, how much is total profit?
= ($120 - $153)*240
= (-$33)*240
= - $7,920 (loss of $7,920)
How much is output at (a) the break-even point? (b) the shut-down point?
a. 260
b. 200
How much is the lowest price the firm will accept in (a) the short run? (b) the long run?
a. 80
b. 150
How much is the most efficient output?
26
a. If the price is $55, how much is the most profitable output?
b. Calculate total profit.
a) 32
b) total profit = (P-ATC)*Q
= (($55 - $42)*32
= ($13)*32= $416
How much is output in the short run if price is (a) $65? (b) $30? (c) $15?
a) 34
b) 24.5
c) 0
If price is $30, what will the firm do in (a) the short run? (b) the long run?
a) operate
b) go out of business
Label the break-even and shut-down points
break even point is at the minimum of the ATC and shut down is at the minimum of AVC(which is were MC crosses each curve)
Label the short-run supply curve and the long-run supply curve.
The short run supply curve runs along the MC curve from the shut down point up. The long run supply curve runs along the MC curve from the break even point up.
Shutdown point at output = 20
Break-even point at output = 26
At an output of 14, MC = $50 and ATC = $55. At an output of 15, MC = $65 and ATC = $56. Estimate the ATC at the break-even point.
these two questions are similar to the one we talked about in class - #13 on the multiple choice questions. $54.50 (must be a little below $55)
At an output of 9, MC = $20 and AVC = $25. At an output of 10, MC = $32 and AVC = $26. What is the lowest price the firm will accept in the short run?
