constant-cost industry increasing-cost industry long-run equilibrium marginal re
ID: 1203959 • Letter: C
Question
constant-cost industry
increasing-cost industry
long-run equilibrium
marginal revenue product
perfect competition
perfectly elastic demand
shut down
shut-down price
___A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
___The demand facing a price-taking firm.
___A firm produces zero output but must still pay its fixed costs.
___Price below which a firm shuts down in the short run.
___All firms produce where price equals long-run marginal cost, and economic profits are zero.
___Industry in which input prices rise as all firms in the industry expand output.
___Industry in which input prices remain constant as all firms in the industry expand output.
___The additional revenue earned by hiring one more unit of a variable input.
Explanation / Answer
(a) A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker - Perfect competition
(b) The demand facing a price-taking firm - Perfectly elastic demand (A horizontal demand curve)
(c) A firm produces zero output but must still pay its fixed costs - Shut down
(d) Price below which a firm shuts down in the short run - Shut down price
(e) All firms produce where price equals long-run marginal cost, and economic profits are zero - Long run equilibrium
(f) Industry in which input prices rise as all firms in the industry expand output - Increasing cost industry
(g) Industry in which input prices remain constant as all firms in the industry expand output - Constant cost industry
(h) The additional revenue earned by hiring one more unit of a variable input - Marginal revenue
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