EC120 Chapter Notes - Chapter 14: Average Variable Cost, Average Cost, Marginal Revenue

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Competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. 2. the goods ofered by the various sellers are largely the same. 3. firms can freely enter or exit the market (sometimes) Buyers and sellers in a competitive market must accept the price determined by the market, and are therefore price takers! Total revenue is proportional to the amount of output! Average revenue: total revenue divided by quantity sold, ar = Average revenue equals the price of the good! Marginal revenue: the change in total revenue from an additional unit sold. Marginal revenue equals the price of the good! 1. if marginal revenue is greater than marginal cost, the irm should increase its output (production) 2. if marginal cost is greater than marginal revenue, the irm should decrease its output (production) 3. at the proit-maximizing level of output, marginal revenue and marginal cost are exactly equal.

Related Questions

70) In a monopolistically competitive industry, the long-run equilibrium output corresponds to the tangency of the firm's LRAC and its demand curve. This output is also where marginal revenue equals marginal cost because A) firms will have negative profits at any other level of output. B) the average total cost is equal to average revenue at that output. C) firms are price takers in this market structure. D) marginal cost is above price. E) firms prefer it this way.

Homework help and study guide help, all multiple choice

A monopolist:

A) can sell as much as it wants at the chosen price because it is the only seller.

B) can increase the price only if it is willing to decrease the quantity sold.

C) can increase the price and the quantity sold at the same time.

D) is not restricted by the law of demand.

A monopolistically competitive firm:

A) produces where marginal revenue equals marginal cost and charges the price consumers are willing to pay as given by the demand curve.

B) produces where marginal cost equals average total cost and charges the price consumers are willing to pay as given by the demand curve.

C) chooses price and quantity based on where the marginal cost curve meets the demand curve.

D) chooses price and quantity based on where the average total cost curve meets the demand curve.

21) Oligopoly is A) like a monopoly because there are barriers to entry. B) like perfect competition because oligopoly firms all sell homogeneous goods. C) like monopolistic competition because oligopoly firms all sell differentiated goods D) like perfect competition because there are many firms in the industry
ECON 1102 (Microeconomics) Test 4 (043015)

In ________ market structure, a firm's output depends ________.

A) an oligopoly; only on its own marginal revenue and marginal cost curves

B) a monopolistically competitive; in part on its competitors' price and quantity decisions

C) an oligopoly; in part on its competitors' price and quantity decisions

D) a monopolistically competitive; only on its marginal revenue curve

1. Competitive markets are characterized by

a. The interdependence of firms.

b. A small number of buyers and sellers.

c. Free entry and exit by firms.

d. Unique products.

2. A firm that shuts down temporarily has to pay

a. Both its variable costs and fixed costs.

b. Its variable costs but not its fixed costs.

c. Its fixed costs but not its variable costs.

d. Neither its variable costs nor its fixed costs.

3. A profit-maximizing firm will shut down in the short run when

a. Average revenue is greater than the average fixed cost.

b. Price is less than the average total cost.

c. Average revenue is greater than marginal cost.

d. Price is less than average variable cost.

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EC120 Chapter Notes - Chapter 14: Average Variable Cost, Average Cost, Marginal Revenue

EC120 Full Course Notes

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