microeconomics 8 – Flashcards
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price taker
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The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
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what quantity to produce
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In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
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Hypothetical extreme
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A perfectly competitive industry is a
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High degree of similarity to competitor's products
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Why are some producers forced to sell their products at the prevailing market price?
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Are two stark realities any business firm must recongnize
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The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
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Marginal cost curve crosses the average variable cost curve
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In economics, the term "shutdown point" refers to the point where the
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Long run; increasing its production
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In the ________, the perfectly competitive firm will react to profits by __________________________ .
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is dictated by the forces of demand and supply.
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I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
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Keep the business open in the short run, but plan to go out of business in the long run
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Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
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Average
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If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
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average cost
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If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses
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price of competing products
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If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
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could likely result in a notable loss of sales to competitors
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It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.
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to produce the highest profitable quantity of output at the lowest possible marginal cost
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Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
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shutdown point
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If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________
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Pressure from competing firms will force acceptance of the prevailing market price
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If a perfectly competitive firm is a price taker, then
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preparing to exit operations
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When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is
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Accounting profit; excluding oppurtunity cost
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An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________
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perfect competition
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Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
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entry; a sustained pattern of profits
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A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ . entry; a sustained pattern of profits
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Devrived demand
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In economics, labor demanded is synonymous with
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marginal costs
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Under perfect competition, any profit-maximizing producer faces a market price equal to its
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short run; losses are smallest
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In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ .
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including its opportunity costs.
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Economic profit can be derived from calculating total revenues minus all of the firm's costs,
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marginal revenue
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______________________ refers to the additional revenue gained from selling one more unit.
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marginal revenue; marginal cost
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In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .
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short run; the quantity of output where profits are highest
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In the _________, the perfectly competitive firm will seek out ________________________ .
