modul 13

Question 1

Under what conditions will a perfectly competitive firm shut down in the long run?

Answer 1

When total revenue is less than total cost

Question 2

How does a firm in a perfectly competitive market maximize economic profit?

Answer 2

A firm in a perfectly competitive market maximizes economic profit by producing at the level of output where marginal cost equals marginal revenue.

Question 3

How can a firm’s supply curve be derived from its marginal cost curve?

Answer 3

A firm’s supply curve is derived from its marginal cost curve by taking the portion of the marginal cost curve above the average variable cost curve.

Question 4

What is the slope of a total revenue curve for a perfectly competitive firm?

Answer 4

Marginal revenue

Question 5

What is marginal revenue?

Answer 5

Marginal revenue is the increase in total revenue associated with a 1-unit increase in output.

Question 6

What is the relationship between price and average variable cost?

Answer 6

Price is greater than average variable cost

Question 7

What happens if price falls below average variable cost?

Answer 7

If price falls below average variable cost, the firm will shut down in the short run and reduce output to zero.

Question 8

What is the profit-maximizing output determined by?

Answer 8

Average total cost

Question 9

According to the marginal decision rule, a profit-maximizing firm should increase output until __.

Answer 9

marginal revenue equals marginal cost

Question 10

What is the relationship between price and average variable cost for Madame LaFarge?

Answer 10

Price is always greater than average variable cost in the short run

Question 11

The industry supply curve is derived from the supply curves of ______ firms.

Answer 11

individual

Question 12

How is the firm’s supply curve derived?

Answer 12

From the firm’s marginal cost curve

Question 13

What is the relationship between a perfectly competitive firm’s marginal revenue curve and the market price?

Answer 13

They are the same curve

Question 14

What is economic profit?

Answer 14

Economic profit is the difference between total revenue and total cost.

Question 15

What is the relationship between marginal revenue and the market price for a perfectly competitive firm?

Answer 15

Marginal revenue is equal to the market price

Question 16

What determines the output level for a firm in a perfectly competitive market in the short run?

Answer 16

Marginal cost

Question 17

Under what conditions will a perfectly competitive firm shut down in the long run?

Answer 17

When total revenue is less than total cost

Question 18

How is the industry supply curve derived from the supply curves of individual firms?

Answer 18

The industry supply curve is derived by horizontally summing the supply curves of individual firms at each price level.

Question 19

The slope of a total revenue curve measures the rate at which total revenue increases as ______ increases.

Answer 19

output

Question 20

What determines the level of output in a perfectly competitive market in the short run?

Answer 20

Market price

Question 21

The firm’s supply curve is derived from the firm’s ______ cost curve.

Answer 21

marginal

Question 22

What is the relationship between the marginal revenue curve and the market price for a perfectly competitive firm?

Answer 22

The marginal revenue curve is a horizontal line at the market price

Question 23

What is the relationship between market price and total revenue for a perfectly competitive firm?

Answer 23

No relationship

Question 24

How does a firm’s supply curve relate to its marginal cost curve?

Answer 24

The supply curve is the same as the marginal cost curve

Question 25

The equilibrium price and industry output in a perfectly competitive market are determined by __ and supply.

Answer 25

demand

Question 26

What is the level of output that maximizes economic profit for an individual firm in a perfectly competitive market?

Answer 26

The level of output where total revenue is equal to total cost

Question 27

What determines a firm’s total revenue in a perfectly competitive market?

Answer 27

The firm’s output level

Question 28

What is the relationship between a perfectly competitive firm’s marginal revenue curve and its average revenue curve?

Answer 28

They are the same curve

Question 29

What is the slope of a total revenue curve for a perfectly competitive firm?

Answer 29

Marginal revenue

Question 30

A firm in a perfectly competitive market determines its output level in the __ run.

Answer 30

short

Question 31

What is the output level at which a firm maximizes economic profit or minimizes economic loss?

Answer 31

Intersection of marginal cost and marginal revenue curves

Question 32

What is economic profit per unit?

Answer 32

the difference between average total cost and price

Question 33

What is the relationship between price and average variable cost?

Answer 33

Price is greater than average variable cost

Question 34

To determine profit-maximizing output, the firm produces the output at which ______ equals marginal revenue.

Answer 34

marginal cost

Question 35

Economic profit per unit is the difference between ______ and price

Answer 35

ATC

Question 36

The firm maximizes profit by selecting an output at which ______ equals MC

Answer 36

MR

Question 37

Economic profit per unit is calculated by subtracting ______ from price.

Answer 37

marginal cost

Question 38

When will a firm shut down in the short run?

Answer 38

When price is below average variable cost

Question 39

How can the profit-maximizing output be determined using the marginal decision rule?

Answer 39

The profit-maximizing output can be determined by finding the point at which marginal revenue equals marginal cost.

Question 40

What is the concept of economic losses in the short run?

Answer 40

When price is less than average variable cost

Question 41

What is the relationship between marginal revenue and marginal cost in determining profit-maximizing output?

Answer 41

Profit-maximizing output is determined when marginal revenue equals marginal cost.

Question 42

How do you compute economic profit per unit?

Answer 42

Economic profit per unit is the difference between price and average total cost.

Question 43

What is the profit-maximizing output determined by?

Answer 43

Marginal cost

Question 44

According to the marginal decision rule, a profit-maximizing firm should increase output until __.

Answer 44

marginal revenue equals marginal cost

Question 45

What is the relationship between price and average variable cost in determining whether a firm should continue to produce or shut down in the short run?

Answer 45

Price must be above average variable cost

Question 46

What is the concept that represents the minimum level of average variable cost at which a firm should shut down?

Answer 46

Shutdown point

Question 47

How can a firm determine its profit-maximizing output using the marginal decision rule?

Answer 47

by finding the intersection of marginal revenue and marginal cost curves

Question 48

What determines the profit-maximizing output for Madame LaFarge?

Answer 48

The intersection of marginal cost and marginal revenue curves