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Exam 12: Perfect Competition and the Supply Curve

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Question 51

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Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10.Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs.Based on the information given, we can conclude that once all of the adjustments to long-run equilibrium have been made, the price of candy canes will equal: A.$0.05. B.$0.10. C.$0.15. D.The question is impossible to answer without knowing exactly how many firms entered and/or left the industry.

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Question 52

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For a perfectly competitive firm in the short run: A.if the firm produces the quantity at which P > ATC, then the firm is profitable. B.if the firm produces the quantity at which P < ATC, then the firm breaks even. C.if the firm produces the quantity at which P = ATC, then the firm incurs a loss. D.if the firm produces the quantity at which P < ATC, then the firm is profitable.

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Question 53

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Figure: The Profit Maximizing Firm (Figure: The Profit Maximizing Firm) Look at the figure The Profit Maximizing Firm.The figure shows cost curves for a firm operating in a perfectly competitive market.If the market price is P₃, the firm will produce quantity ________ and in the short run. A.Q₂; make a profit B.Q₁; break even C.Q₂; incur a loss D.q4; incur a loss

If a perfectly competitive firm reduces its output, the market price will increase.

Figure: A Perfectly Competitive Firm in the Short Run (Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run.The firm's total revenue from the sale of its most profitable level of output is: A.0GLD. B.0GH C. B.BH. D. DL.

(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots.During the winter, Alexa runs a snow-clearing service, and snow clearing is a perfectly competitive industry.The table provided shows her variable costs for snow clearing and number of lots cleared.Her only fixed cost is $1,000 for a snowplow.Her variable costs include fuel, her time, and hot coffee.If the price to clear a lot is $30, what is Alexa's profit or loss at the optimal output? A.$1,200 B.$1,500 C.$0 D.-$550

A decrease in production costs for firms in a perfectly competitive market will cause a(n): A.permanent increase in the price. B.economic profit for firms in the short run. C.increase in demand. D.increase in firms' marginal revenue.

A perfectly competitive firm is a: A.price-taker. B.price-searcher. C.cost-maximizer. D.quantity-taker.

(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots.During the winter, Alexa runs a snow-clearing service, and snow clearing is a perfectly competitive industry, which is made up of 50 identical firms.The table provided shows her variable costs for snow clearing and number of lots cleared.Her only fixed cost is $1,000 for a snowplow.Her variable costs include fuel, her time, and hot coffee.Which of the following is a point on the industry short-run supply curve? A.P = $40; Q = 60. B.P = $10; Q = 10,000. C.P = $35; Q = 2,500. D.P = $25; Q = 40.

Many furniture stores run "going out of business" sales but never go out of business.In order for the shut-down decision to be the appropriate one, the price of furniture must be ________ than the average variable cost. A.higher; maximum B.lower; minimum C.higher; minimum D.lower; maximum

(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns.During the summer Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry made up of 100 identical firms.The table shows his variable costs for lawn-mowing and the number of lawns mowed.Alex's fixed cost is $1,000 for the mower.His variable costs include fuel, his time, and mower parts.If the price for mowing a lawn is $60, how much is Alex's profit per unit at the profit-maximizing output? A.$7.50 B.$32.50 C.$20.00 D.$10.00

In the short run, if a perfectly competitive firm chooses to produce, then its profits are maximized by producing the quantity of output where marginal cost equals marginal revenue.

(Table: Total Cost and Output) Look at the table Total Cost and Output.The table describes Sergei's costs for his perfectly competitive all-natural ice cream firm.If the market price of a tub of ice cream is $67.50, how many tubs of ice cream will Sergei's firm produce? A.1 B.2 C.3 D.4

(Table: Total Cost and Output) The table describes Sergei's total costs for his perfectly competitive all-natural ice cream firm.Which of the following is a point on Sergei's short-run supply curve? A.P = $10; Q = 0. B.P = $20; Q = 2. C.P = $110; Q = 3. D.P = $75; Q = 5.

A perfectly competitive firm's supply curve is its marginal cost curve above the average variable cost curve.

During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry.In the short run, Alex will shut down his lawn-mowing service rather than continue mowing grass if: A.the total revenues can't cover the total fixed costs. B.the total revenues can't cover the total variable costs. C.the total revenues can't cover the total cost. D.the price exceeds the average total cost.

Figure: The Profit Maximizing Firm (Figure: The Profit Maximizing Firm) Look at the figure The Profit Maximizing Firm.The figure shows cost curves for a firm operating in a perfectly competitive market.M is the ________ curve. A.ATC B.MR C.MC D.AVC

When a firm cannot affect the market price of the good that it sells, it is said to be a: A.price-taker. B.natural monopoly. C.dominant firm. D.cartel.

In the short run, a firm will continue to sell its product as long as:

In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good.Holding everything else constant, this will lead to an increase in price that will result in: A.positive economic profits for firms, which will attract new firms, which in turn will result in a reduction in the price. B.economic losses for firms, which will attract new firms, which in turn will result in a reduction in the price. C.positive economic profits for firms, which will lead some firms to leave the industry and thus result in an even greater price increase. D.economic losses, which will lead some firms to leave the industry and thus result in an even greater price increase.