Perfect Competition
Production
Graphs
Short-Run
Long-Run
101
What kind of firms are perfectly competitive firms?
a) Wage Takers
b) Price Takers
c) Price Makers
B!
101
What is the Profit - Maximizing Point?
MR = MC
101
The Profit Maximizing Quantity AND Price
What is:
Quantity = 3
Price = 4
101
Define: Short Run
A period of time in which at least one resource is fixed
101
Define: Long Run
A period of time in which all resources can change
202
CerealCo is one of many producers that make corn flakes in a perfectly competitive market. If they sell their corn flakes at $6/box, what price does Wheat Ltd. have to sell their corn flakes at?
Wheat Ltd. must also sell at $6
202
At what unit does Diminishing Marginal Returns set in?
At the 3rd worker
202
Name the cost curves from A - C
What is
A = Average Variable Cost
B = Average Total Cost
C = Marginal Cost
202
Short run marginal costs eventually increase because of the effects of...
Diminishing Marginal Products
202
What type of profit do competitive firms make in the long run?
Zero Economic Profit
303
What is a factor that makes it difficult for firms to enter called? What kind do perfectly competitive firms have?
1. Barrier to entry
2. Low barriers to entry
303
Define: Diminishing Marginal Returns
As you add variable resources to fixed resources, the additional output will eventually decrease
303
What type of market is this
Perfect Competition Market
303
A profit-maximizing firm will shut down in the short run any time the firm’s total revenue is less than its:
Total Variable Cost
303
Which of the following must be true of the long run?
A) All factors of production are fixed
B) Factors of production are not considered
C) At least one factor of production is fixed
D) All factors of production are variable
D
404
The elasticity of a perfectly competitive demand curve is:
Perfectly Elastic
404
A firm expands its fixed resources and its overall costs of production go up. It is experiencing...
Negative returns to scale
404
What is the shaded region?
A Loss
404
Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?
The firm is covering its variable costs but failing to cover all of its fixed costs
404
What's must be true if a firm is in economies of scale?
A) The LRATC decreases as output increases
B) The LRATC increases as output increases
C) The LRATC shifts right, towards the output
D) The LRATC shifts left, away from the output
A
505
At Price G, the area of which rectangle represents total revenue for the profit-maximizing competitor?
0GKC
505
Answer only 1a and 1b
505
Suppose that price in a perfectly competitive industry decreases and it is now below minimum average total cost but remains above minimum average variable cost. Which of the following will occur in the short run?
Firms will produce the output at which marginal cost equals the new price.