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11 Cards in this Set
- Front
- Back
Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If louise increases her output,
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the price Thelma can charge is unaffected.
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Claude's Copper Clappers sell for $40 each in a competitive price taker market. At its present rate of output, Claude's marginal cost is $39, average varible cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should
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increase output
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The marginal revenue of a price taker is
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equal to price.
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If there is an increase in demand in a competitive price taker market, then in the short run
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profits will rise
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If a restaurant in a summer tourist area is highly profitable during the summer months but unable to cover even its variable costs during the winter months, the restaurant should
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shut down during the winter, but continue operating during the summer as long as the summer profits exceed the fixed costs during the winter shut down period.
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The supply curve of a price-taker firm in the short run is the
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portion of the firm's marginal cost curve that lies above the average variable cost curve.
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The short run supply curve in the price-taking industry is the
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horizontal summation of the individual firms' MC curves above AVC.
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A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because
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it is covering all costs, including the opportunity cost of capital and labor.
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When new firms have an incentive to enter a competitive price taker market, their entry will
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drive down profits of existing firms in the market.
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A perfectly elastic, long-run market supply curve is most likely to be achieved in a(n)
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constant cost industry.
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Suppose a typical firm in a particular industry is making positive economic profits. These economic profits
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signal owners of factors of production to move resources into this industry.
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