Chapter 14—The Mechanics of Profit Maximization Key
1. The MR=MC rule
2. Perfect competition
3. The goal of managers is to manage resources in such a way
4. The objective of creating value is the same as
5. Profits are maximized when
6. Profits are maximized when
7. If marginal revenue exceeds marginal costs
8. If marginal revenue is less than marginal costs
9. If the marginal cost of flying the next flight is zero and one passenger is on the plane and has paid $50,
10. If the average cost of flying the next flight is zero and one passenger is on the plane and has paid $50,
should the next flight be flown?
11. A market with a single seller is called
12. A market with a few large sellers is called
13. A market that mainly stresses product differentiation is called
14. A market of price takers is called
15. A market with easy entry could include
16. The phrase “price-taker” means
17. With free entry
18. Entry into a competitive market will continue until
19. Exit from a market will stop when
20. The market demand curve is ____ and the demand curve for a single firm in a competitive market is ____.
21. For a competitive firm
22. Entry causes ____ to increase and a firm’s demand curve to ____.
23. Entry continues as long as
24. Monopolies have ____ substitutes.
25. Monopolies exist due to
26. Over the long run, monopolies can earn
27. In a monopoly,
28. In a monopoly, consumer surplus is
29. In a monopoly, producer surplus is
30. Monopolistic competition is characterized by
31. In monopolistic competition
32. In an oligopoly
33. One of the characteristics of an oligopoly is
34. Firms in an oligopoly
35. Examples of strategic behavior include
36. When a firm is a price maker
37. The kinked demand curve is based on the idea that
38. In order to maximize profits
39. Maximizing shareholder value is synonymous with adding value.
40. Firms maximize profits when marginal revenue equals marginal cost.
41. Firms make a profit when they equate marginal revenue with marginal cost.
42. Production should be expanded if marginal cost is greater than marginal revenue.
43. Product differentiation plays an important role in perfect competition.
44. A monopoly can block the entry of others.
45. Strategic behavior is a result of the interdependence in decision making between firms.
46. Price takers face a perfectly inelastic demand curve.
47. A firm in perfect competition perceives the demand curve to be downward sloping.
48. To a firm in perfect competition, price and marginal revenue are equal.
49. Entry causes the competitive firm’s demand curve to fall.
50. Entry drives economic profits to zero.
51. In a monopoly, price is less than marginal revenue.
52. The kinked demand curve is an attempt to model strategic behavior.
53. In order to maximize profits, the derivative of total revenue with respect to quantity must equal the
derivative of total cost with respect to quantity.