Word Bank If you fill in the blanks with words, the grading algorithm will mark
ID: 1225664 • Letter: W
Question
Word Bank
If you fill in the blanks with words, the grading algorithm will mark your answer as incorrect.
Make sure that there are no blanks spaces before or after the number when you enter it.
GRAPH 1
1
a
21
elastic
41
marginal revenue
2
b
22
enter
42
market participants
3
c
23
equal
43
more
4
d
24
equal to
44
normal profit
5
e
25
equals
45
perfectly elastic
6
P(1)
26
exit
46
price
7
p(2)
27
fall
47
productive
8
P(3)
28
firms
48
profits
9
allocative
29
fixed cost
49
rise
10
average fixed cost
30
free entry and exit
50
sellers
11
average revenue
31
greater
51
shut down
12
average total cost
32
homogeneous
52
standardized
13
average variable cost
33
horizontal
53
taker
14
barriers or obstacles
34
industry
54
takers
15
buyers
35
leave
55
total cost
16
competitive
36
less
56
unique
17
continue producing
37
losses
57
unique characteristics
18
downward sloping
38
many
58
upward sloping
19
economic loss
39
marginal cost
59
variable cost
20
economic profit
40
marginal profits
60
zero
QUESTION 4
1. Refer to Graph 1 on the Resource Sheet. The current demand curve, D(1), is also the firm's BLANK curve and BLANK curve. Given this demand for this firm's product, the firm will charge a price of (P1-3 -- enter number from Word Bank, do not enter letter ) BLANK and will produce (a-e -- enter number from Word Bank, do not enter letter) BLANK units of output. That's because it is profitable to produce all products for which the BLANK exceeds the BLANK . The firm will stop producing when the former no long exceeds the latter -- that is, when the two areBLANK . As you can see by the difference between AR and ATC, given this price/quantity combination, the firm is earning BLANK .
6 points
QUESTION 5
1. BLANK , in a perfectly BLANK industry, are not sustainable in the long run. That's because other firms are free to BLANK the industry. As they do, the supply of the product will BLANK causing the price of the product (and the demand curve) to BLANK . If the price falls to something just above P2 on the graph, the firm will still be making BLANK and other firms will continue to BLANK the industry, causing both the product BLANK and the demand curve for the product to continue to .BLANK
8 points
QUESTION 6
1. If, on the other hand, the entry by other firms into the BLANK caused the product price to fall somewhere between P2 and P3, the firm would now be experiencing BLANK . With the product price within that range, firms wouldBLANK because P> BLANK . That's because even if the firm BLANK , it would still incur BLANK obligations, which do not expire when a firm stops producing. As long as marginal revenue was taking a bite out of fixed costs because it was covering BLANK , the firm will not BLANK . It certainly would, however if the product price fell to (P1-3 -- enter number from Word Bank, do not enter letter ) BLANKor below.
8 points
QUESTION 8
1. In pefectly competitive markets, productive (or technical) efficiency is achieved:
A.
When firms are in equilibrium, firms are earning normal profits.
B.
When firms are in equilibrium, they produce at the lowest average (or per unit) cost.
C.
When firms are in equilibrium, there is no entry of firms into (or exit of firms from) the industry.
D.
When firms are in equilibrium, P = MC.
1 points
QUESTION 9
1. The perfectly competitive industry achieves "allocative efficiency" because:
P=MC at equilibrium
Firms produce at the lowest ATC at equilibrium
There is no entry or exit of firms at equilibrium.
Economic profits are zero at equilibrium.
1 points
QUESTION 10
1. Which of the following industries comes closest to being purely competitive?
A.
Steal smelting and manufacturing
B.
Retail clothing
C.
Agriculture
D.
Commercial airlines
Word Bank
If you fill in the blanks with words, the grading algorithm will mark your answer as incorrect.
Make sure that there are no blanks spaces before or after the number when you enter it.
GRAPH 1
Explanation / Answer
The current demand curve, D(1), is also the firm's average revenue curve and marginal revenue curve. Given this demand for this firm's product, the firm will charge a price of P1 and will produce c units of output. That's because it is profitable to produce all products for which the Price exceeds the Average total cost . The firm will stop producing when the former no long exceeds the latter -- that is, when the two are equal . As you can see by the difference between AR and ATC, given this price/quantity combination, the firm is earning an economic profit .
economic profit , in a perfectly competitive industry, are not sustainable in the long run. That's because other firms are free to enter the industry. As they do, the supply of the product will rise causing the price of the product (and the demand curve) to fall . If the price falls to something just above P2 on the graph, the firm will still be making economic profit and other firms will continue to enter the industry, causing both the product rise and the demand curve for the product to continue to rise.
If, on the other hand, the entry by other firms into the industry caused the product price to fall somewhere between P2 and P3, the firm would now be experiencing loss . With the product price within that range, firms would continue producing because P> AVC . That's because even if the firm losses , it would still incur product obligations, which do not expire when a firm stops producing. As long as marginal revenue was taking a bite out of fixed costs because it was covering variable cost , the firm will not shut down . It certainly would, however if the product price fell to P3 or below.
In pefectly competitive markets, productive (or technical) efficiency is achieved: When firms are in equilibrium, they produce at the lowest average (or per unit) cost.
The perfectly competitive industry achieves "allocative efficiency" because P=MC at equilibrium.
Agriculture comes closest to being purely competitive.
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