Economics

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Key Terms

diseconomiesof scale, p. 182 econorniesof scale, p. I8I equilibrium point for the perfectly

competitive fi rm, 9. 179 industry concentration, p. 183 marginal revenue for the perfe<tly

competitive firm, p. 175

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perfect competition, p. 172 price-cost margin (PCM), p. 185 price-taker, p. 172 proflt maximization, p. 174 profit-maximizing rule, p" 174 shutdown point for the perfectly

<ompetitive firm, p. 177

Teehnical Questions 1. For each of the following graphs, identify the

firm's profit-maximizing (or loss-minimizing) out- put. Is each firm making a profit? If not, should the fim continue to produce in the short mn?

c. At that price, what is the firm's profit or loss? Wilt the firm continue to produce in the shor.t

supply curve for the perfectly

competitive firm, p. 178 supply curve for the perfectly

competitive industry, p. 178

3. The following graph shows the cost curves for a ., perfectly competitive flrm. Identify the shutdown ' point, the breakeven point, and the firm's shor[- run supply curve.

4. Consider the following graph, which shows a

that there is an Compare the equilibrium CASES

about the elasticity ofsupply.

tive industry. The firm has just built that cost $15,000. Each unit of output $5 worth of materials. Each worker per hour. a. Basedon above, filI in the table

on the page. b. If the price is $12.50, how many units of

will the firm produce?

'quantity change in both results to explain what you

Economics for Managers, Third Edition, by Paul G. Famham. Published by Prentice Hall. Copyright O 2014 by pearson Education, lnc.

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