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Exam 13: Firms in Competitive Markets

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Question 151

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A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob.Which of the following events would decrease the firm's average revenue?

A) The firm increases its output above 500 doorknobs.
B) The firm decreases its output below 500 doorknobs.
C) The market price of doorknobs rises above $10.
D) The market price of doorknobs falls below $10.

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Question 152

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In the short run for a particular market,there are 500 firms.Each firm has a marginal cost of $30 when it produces 200 units of output.One point on the market supply curve is

A) quantity = 200,price = $30.
B) quantity = 500,price = $30.
C) quantity = 100,000,price = $30.
D) quantity = 100,000,price = $15,000.

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Question 153

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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 total cost but greater than the firm's average variable cost.

When a profit-maximizing firm is earning profits,those profits can be identified by

Profit-maximizing firms in a competitive market produce an output level where

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Figure 13-9 In the figure below,panel (a) depicts the linear marginal cost of a firm in a competitive market,and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. -Refer to Figure 13-9.If there are 200 identical firms in this market,what level of output will be supplied to the market when price is $1.00?

Because the goods offered for sale in a competitive market are largely the same,

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

Scenario 13-1 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 13-1.At Q = 999,the firm's profits equal

In the long run,each firm in a competitive industry earns

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.The firm's short-run supply curve is its marginal cost curve above

Figure 13-14 -Refer to Figure 13-14.If the market starts in equilibrium at point C in panel (b) ,a decrease in demand will ultimately lead to

Table 13-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 13-10.At which level of production will the firm maximize profit?

Scenario 13-4 As part of an estate settlement Mary received $1 million.She decided to use the money to purchase a small business in Anywhere,USA.Her business operates in a perfectly competitive industry.If Mary would have invested the $1 million in a risk-free bond fund she could have earned $100,000 each year.She also quit her job with Lucky.Com Inc.to devote all of her time to her new business.Her salary at Lucky.Com Inc.was $75,000 per year. -Refer to Scenario 13-4.How large would Mary's accounting profits need to be to allow her to attain zero economic profit?

If a profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost,it should

Table 13-1 -Refer to Table 13-1.If the firm doubles its output from 3 to 6 units,total revenue will

Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.

Figure 13-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-4.When price rises from P2 to P3,the firm finds that

Figure 13-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-2.Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?