unit 3

if a single supplier produces such a small portion of the total market output that changes in its production have no impact on the overall market price

• the firm will eventually be forced out of business

• demand for the firms output is perfectly elastic

• the firms supply curve is perfectly inelastic

• the market supply is horizontal

a market becomes more competitive as there are ___ buyers and ___ sellers

• fewer; fewer

• fewer; more

• more; fewer

• more; more

a market becomes more competitive as the product becomes ___ homogeneous and there are ___ potential sellers

• more and more; more

• less and less; more

• more and more; fewer

• less and less; fewer

the difference between a sunk cost and a fixed cost is:

• a sunk cost changes in the short run, while a fixed cost changes in the long run

• a sunk cost changes in the long run, while a fixed cost changes in the short run

• a sunk cost can be changed, while a fixed cost cannot be changed

• a sunk cost cannot be changed, while a fixed cost can be changed

implicit costs:

• should not be considered in the profit maximizing decision

• should be included in costs when profit maximizing

• are not important to economists

• are always unknown to firms

economic profits are:

• total revenue are less total costs, including explicit and implicit costs

• total revenue less explicit costs

• total revenue less implicit costs

• total revenue less sunk costs

if marginal revenue is less than marginal cost, a firm should:

• hold output steady

• increase output

• decrease output

• lower its price

profit maximimization occurs when:

• TR>TC

• MR=MC

• MC=AC

• P=AC

if the marginal cost of production at firm 1 is less than the marginal cost of production at firm 2 but the overall costs of production are lower on average at firm 2

• firm 2 should produce all of the output

• firm 1 should produce all of the output

• firm 1 should produce output up to the point that its marginal costs of production are equal to the marginal costs of firm 2

• firm 2 should produce additional output up to the point that its average costs are less than its marginal costs

in a perfectly competitive market:

• marginal costs will be less than average costs

• all firms will produce an equal amount of output

• total industry costs of production are minimized

• market price will equal the total cost of production