Chapter 9 Flashcards
(19 cards)
What is a characteristic of a firm in a price-taker market?
Will sell its output at the price that is determined in the overall market.
In a price-taker market, what must a firm do to sell a larger quantity of output?
Must reduce its price.
Which statement describes the primary difference between price takers and price searchers?
Price searchers can set the price of their product, while price takers will have to take the price determined in the market.
What is the dynamic process of competition responsible for?
Puts competition between firms and the profit motive of sellers to work to deliver a better deal for buyers.
What does a barrier to entry refer to?
An obstacle that makes it difficult for new firms to enter a market.
In a competitive price-taker market, the actions of any single buyer or seller will
Have a negligible impact on the market price.
Which statement is always true in competitive price-taker markets?
Barriers to entry into the market are low.
In short-run equilibrium, a competitive price-taker firm may earn
An economic profit or an economic loss.
To maximize profit, a wheat farmer should produce the quantity at which
The farm’s marginal cost of production is equal to the market price.
The intersection of a firm’s marginal revenue and marginal cost curves determines the level of output at which
Profit is maximized.
If the equilibrium price in a competitive price-taker market is $10 and a firm is producing at a marginal cost of $10, what is true?
The firm is producing the output level that maximizes its profit.
In the competitive price-taker model, the firm’s marginal revenue curve is
The same as the firm’s demand curve.
If the market price of chairs is $100, which output level should the price-taker firm produce to maximize profit?
30.
When operating in a price-taker market, marginal revenue will always equal
Price.
If an amusement park cannot cover its variable costs during winter months, it should
Operate during the summer months but shut down during the winter months.
The supply curve of a price-taker firm in the short run is the
Portion of the firm’s marginal cost curve that lies above average variable cost curve.
What happens when new firms enter a competitive price-taker market?
Market supply will increase, leading to a reduction in the market price.
If the current market price of a firm’s product is $15, which output should this firm produce?
Refer to the graph for specific output level.
What does Figure 22-12 illustrate about a competitive price-taker firm?
A competitive price-taker firm that is making economic losses.
