AP Econ Perfect Competition Flashcard

Front

JC pizzeria has a year remaining on an unbreakable lease on its building, requiring a payment of $20,000 a year. If JC operates over the next year, it estimates that its revenues will be $200,000 and that its expenses, in addition to the lease, will be $190,000. Which of the following statements is true?

Back

JC should operate, since its loss is less than its fixed cost.

Front

If a firm's average total cost decreases as the firm increases its output, what must the firm's marginal cost be?

Back

less than the average total cost

Front

Assume that both the product and labor markets are perfectly competitive. It would be profitable for a firm to hire additional labor if the ratio of the wage to the marginal product of labor is

Back

less than the output price

Front

The graph above shows the cost curves for a perfectly competitive firm that produces 20 units of output. What are the total cost and the total fixed cost of producing 20 units of output?
TOTAL COST .... .... TOTAL FIXED COST

Back

$120 .... .... $20

Front

The graph shows the cost curves for a perfectly competitive firm. If the market price is $10 what are the marginal cost and the per unit profit?
MARGINAL COST .... .... PER UNIT PROFIT

Back

$10 .... .... $4

Front

As a firm hires additional workers for a newly completed plant with a fixed amount of machinery, what is expected to happen to the marginal product?

Back

rise initially, but eventually fall

Front

In the short run, which of the following costs must continuously decrease as output produced increases? Total variable cost, Total fixed cost, Average variable cost, Average fixed cost, Average total cost

Back

Average fixed cost

Front

Assume that a profit-maximizing firm is perfectly competitive in both the output and the factor markets and is at its long-run equilibrium. The firm's output is 100 units, its total revenue is $600.00, and the fixed cost of production is $50.00. Based on this information, which of the following is true for the firm?

Back

Its marginal cost is $6.00, and its average variable cost is $5.50.

Front

Assume that a profit-maximizing firm is perfectly competitive in both the output and the factor markets and is at its long-run equilibrium. The firm's output is 100 units, its total revenue is $600.00, and the fixed cost of production is $50.00. Based on this information, which of the following is true for the firm?

Back

Its average total cost is $6.00, and its average fixed cost is $0.50.

Front

The following firm is in a perfectly competitive market (e.g apples or oranges). The US government decides to subsidize the market. What will happen to this individual firm's price, quantity, and profit/loss after the subsidy is applied?
PRICE ... Quantity ... Profit/Loss

Back

increase ... increase ... economic profit