# Shared Flashcard Set

## Details

ch 14
ch14
52
04/16/2012

Term
 1. Refer to Table 14-1. The price and quantity relationship in the table is most likely that faced by a firm in a
Definition
 competitive market
Term
 2. Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will
Definition
 b. increase by exactly \$39.
Term
 3. When firms are said to be price takers, it implies that if a firm raises its price,
Definition
Term
 4. Which of the following statements best reflects a price-taking firm?
Definition
 a. If the firm were to charge more than the going price, it would sell none of its goods.
Term
 Suppose a firm in a competitive market received \$1,000 in total revenue and had a marginal revenue of \$10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?
Definition
 d. \$10 and 100
Term
 Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue
Definition
 does not change
Term
 a competitive market,
Definition
 a. no single buyer or seller can influence the price of the product.
Term
 8. Which of the following expressions is correct for a competitive firm?
Definition
 a. Profit = (Quantity of output) x (Price - Average total cost)
Term
 9. For a competitive firm,
Definition
 d. Average revenue = Marginal revenue.
Term
 9. For a competitive firm,
Definition
 d. Average revenue = Marginal revenue.
Term
 10. When a competitive firm triples the amount of output it sells,
Definition
 a. its total revenue triples.
Term
 Refer to Table 14-2. Consumers are willing to pay \$120 per unit of port wine. What is the average revenue when 4 units are sold?
Definition
 120
Term
 12. Refer to Table 14-3. If the firm finds that its marginal cost is \$11, it should
Definition
 d. reduce production to increase profit.
Term
 13. Refer to Table 14-3. If the firm finds that its marginal cost is \$5, it should
Definition
 b. increase production to maximize profit.
Term
 marginal cost exceeds marginal revenue, the firm
Definition
 d. may still be earning a positive accounting profit.
Term
 15. When marginal revenue equals marginal cost, the firm
Definition
 b. may be minimizing its losses, rather than maximizing its profit.
Term
 16. When calculating marginal cost, what must the firm know?
Definition
 variable cost
Term
 17. Refer to Figure 14-1. When price falls from P3 to P1, the firm finds that
Definition
 d. it should shut down immediately.
Term
 18. When price is greater than marginal cost for a firm in a competitive market,
Definition
 c. there are opportunities to increase profit by increasing production.
Term
 short-run supply curve for a firm in a perfectly competitive market is
Definition
 d. the portion of its marginal cost curve that lies above its average variable cost.
Term
 20. When total revenue is less than variable costs, a firm in a competitive market will
Definition
 c. shut down.
Term
 20. When total revenue is less than variable costs, a firm in a competitive market will
Definition
 c. shut down.
Term
 21. When price is below average variable cost, a firm in a competitive market will
Definition
 a. shut down and incur fixed costs.
Term
 22. Refer to Figure 14-3. Which line segment best reflects the long-run supply curve for this firm?
Definition
 a. ABCD
Term
 23. When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
Definition
 c. sunk costs.
Term
 24. When profit-maximizing firms in competitive markets are earning profits,
Definition
 c. new firms will enter the market.
Term
 25. Profit-maximizing firms enter a competitive market when, for existing firms in that market,
Definition
 d. price exceeds average total cost.
Term
 When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to
Definition
 d. marginal cost.
Term
 a competitive firm's short-run supply curve is part of which of the following curves?
Definition
 d. Marginal cost
Term
 By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be
Definition
 b. maximization of profit.
Term
 the long run, a profit-maximizing firm will choose to exit a market when
Definition
 d. total revenue is less than total cost.
Term
 30. A rises to \$14 and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, which of the following statements is correct?competitive firm has been selling its output for \$10 per unit and has been maximizing its profit. Then, the price
Definition
 c. The firm's quantity of output is higher than it was previously.
Term
 Suppose you bought a ticket to a football game for \$30, and that you place a \$35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket?
Definition
 c. \$35
Term
 32. The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average
Definition
 c. total cost.
Term
 If the market price is \$8, how many units should the firm produce to maximize profit? TABLE
Definition
 6
Term
 34. The competitive firm's short-run supply curve
Definition
 is its marginal cost curve, but only the portion above the minimum of average variablecost.
Term
 35. Which of the following could be used to calculate the profit for a firm?
Definition
 d. Profit = (P - AC)Q
Term
 36. Which of the following represents the firm's long-run condition for exiting a market?
Definition
 c. Exit if P < ATC
Term
 Mrs. Smith operates a business in a competitive market. The current market price is \$8.50, and at her profit-maximizing level of production, the average variable cost is \$8.00 and the average total cost is \$8.25.
Definition
 c. Mrs. Smith should continue to operate in both the short run and long run.
Term
 38. Refer to Table 14-4. What is the marginal revenue from selling the 1st unit?
Definition
 80
Term
 39. Refer to Table 14-4. What is the marginal revenue from selling the 5th unit?
Definition
 80
Term
 40. Refer to Table 14-4. At what quantity does John’s Vineyard maximize profits?
Definition
 6
Term
 Refer to Table 14-5. This table provides information on a firm’s output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do?
Definition
 c. Continue to operate at 14 units.
Term
 Refer to Table 14-5. This table provides information on a firm’s output, marginal revenue, and marginal cost for a firm. If the firm is maximizing profit, how much profit is it earning?
Definition
 d. There is insufficient data to determine the firms profit.
Term
 if there is an increase in market demand in a perfectly competitive market, then in the short run
Definition
 d. profits will rise.
Term
 sunk cost is one that
Definition
 b. was paid in the past and will not change regardless of the present decision.
Term
 Refer to Figure 14-6. If there are 200 identical firms in this market, what level of output will be supplied to the market when price is \$1.00?
Definition
 20000
Term
 46. Entry into a market by new firms will
Definition
 a. increase the supply of the good.
Term
 Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,
Definition
 c. price will fall below average total cost for some firms.
Term
 Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price
Definition
 b. is determined by the minimum point on the firms' average total cost curve.
Term
 49. When market conditions in a competitive industry are such that firms cannot cover their production costs, then
Definition
 some firms will exit the market, causing prices to rise until the remaining firms can covertheir production costs.
Term
 in a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is
Definition
 c. the market supply curve.
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