Exam 14: Firms in Competitive Markets

Scenario 14-4 Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year. -Refer to Scenario 14-4. At the end of the first year of operating his new business, Victor's accountant reported an accounting profit of $150,000. What was Victor's economic profit?

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

What is the relationship between price and marginal revenue for a competitive firm?

Which of the following statements regarding a competitive market is not correct?

Which of the following statements regarding a competitive firm is correct?

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

When firms have an incentive to exit a competitive market, their exit will

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. If the marginal cost of producing the 501st unit would be $19, producing and selling the 501st unit would

In the long run, a firm will exit a competitive industry if

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Which of the following statements is correct?

One of the defining characteristics of a perfectly competitive market is

In the long run, a firm will enter a competitive industry if

The competitive firm's short-run supply curve is its

A competitive firm sells its output for $30 per unit. Is the firm's marginal revenue less than, equal to, or greater than $30?

A seller in a competitive market

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total cost, in the short run the firm will

In the long-run equilibrium of a market with free entry and exit, marginal firms are operating

Scenario 14-1. 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 14-1. Calculate the firm's total revenue, total cost, and profit at 200 units of output.