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Exam 14: Firms in Competitive Markets

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Question 61

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A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

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B) False

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Question 62

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Scenario 14-4 A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23. -Refer to Scenario 14-4. Calculate the firm's total revenue, total cost, and profit at 200 units of output.

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TR = $20 X 200 = $4,...

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Question 63

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is P₄, individual firms in a competitive industry will earn

Figure 14-7 ​ -Refer to Figure 14-7. If the market starts in equilibrium at point Z in graph (b) , a decrease in demand will ultimately lead to

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost.

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. At Q = 1,000, the firm's profits equal

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

All competitive firms earn zero economic profit in both the short run and the long run.

List and describe the characteristics of a perfectly competitive market.

Which of the following statements is correct?

Which of the following industries is most likely to exhibit the characteristic of free entry?

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Table 14-6 Suppose that a firm in a competitive market faces the following revenues and costs: ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Total Revenue } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (Dollars) }\end{array} \\\hline 0 & 0 & 3 \\\hline 1 & 6 & 5 \\\hline 2 & 12 & 8 \\\hline 3 & 18 & 12 \\\hline 4 & 24 & 17 \\\hline 5 & 30 & 23 \\\hline 6 & 36 & 30 \\\hline 7 & 42 & 38 \\\hline\end{array}$ ​ -Refer to Table 14-6. In order to maximize profits, the firm will produce

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ -Refer to Figure 14-2. If the market price is $10, what is the firm's total cost?

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

A firm that shuts down temporarily has to pay

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ -Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

Under what condition is the long-run market supply curve for a competitive market perfectly elastic?