Exam 12: Firms in Perfectly Competitive Markets

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $15. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

If the market price is $40, the average revenue of selling five units is

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone apps?

Figure 12-8 -Refer to Figure 12-8. Suppose the firm produces 4,000 units. What does the shaded area labeled B represent?

When firms exit a perfectly competitive industry, the market supply curve shifts to the left.

Article Summary According to the Department of Agriculture, net farm income in 2017 will rise from $61.5 billion in 2016 to $63.4 billion in 2017, a modest 3.1 percent increase but also the first increase since 2013. Much of the increase came from the sales of grain inventory, along with increased revenue from milk and livestock. The net income for 2017 is still only about half of its peak level, and according to agricultural economist David Widmar, income closer to $72 billion would be a sign of an improving farm economy. -Refer to the Article Summary. Assume that after the slight increase in U.S. farm income in 2017, farmers are expected to break even in 2018. This means that at the quantity being produced in 2018

In a perfectly competitive industry, in the long-run equilibrium

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves. This suggests that the microwave industry is a decreasing-cost industry.

Producing where marginal revenue equals marginal cost is equivalent to producing where

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P₁, the firm would produce

If a firm shuts down in the short run it will

A perfectly competitive firm earns a profit when price is

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $20. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

If a firm's fixed cost exceeds its total revenue, the firm should stop production by shutting down temporarily.

When plasma television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of plasma televisions fell. This example illustrates

In the long run, a perfectly competitive market will

Which of the following is not an assumption of perfectly competitive markets?

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

Which of the following is not true for a firm in perfect competition?