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Cards In This Set
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Whne firms in a price taker market are temporarily able to charge prices that exceed their production costs
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Additional firms will be attracted into the market until the price falss to the level of per-unit production costs
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Suppose a restraurant that is highly profitable during the summer months is unable to cover its local cost during the winter months. if it wants to max profits the restaurant shouold
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Continue to operate during hte winter months if it isable to cover its variable costs
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The main difference between a firm that is a price search er and a firm that is a price taker is that a
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Price searcher will still be able to sell some of its product if it increases it prices
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In a competitive price-taker market
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Many other sellers are offering a product that is essentially identical
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In short-run equiliibrium, a competitive price-taker firm
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May earn a profit or a loss
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Competitive price-taker firms respond to changing market conditions by varying their
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Output
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The marginal revenue of a price taker is
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Equal to price
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In general, firms will produce at a rate of outpout such that marginal revenue equials marginal cost becuase this output rate will
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Maximize the firms profit
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Suppose that price is below the minimum average total cost (ATC) but above the minimumn average variable cost(AVC)_ and that the market price is expected to rise at leasst to ATC in the near future. in the short run, a firm that is a price taker would
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Continue to produce a quantitiy such that marginal revenue equals marginal cost
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If a firm is making zero economic profit, it
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Will be forced to shutdown and leve the market
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Compared to the outcome when the firms are price takers, competitive price-seracher markets will result in
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A wider variety of products and higher prices
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Which of the following is the genertal distinction between price takers and price searchers
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Price takers confront a perfectly elastic demand curve; price searchers face a downward-sloping demand curve.
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If a firm in a competitive price-searcher mareket raised its price it will
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Loose only some of its sales
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Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit
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New firms would enter hte market, resulting in fewer sales by existing firms
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A picture frame company operates in a competitive price-searcher market. its short-run equilibrium price is $80 and its ATC is $65. It sells 100 picture frames a week. from this we can conclude
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Economic profits are $1500
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