Exam 14: Firms in Competitive Markets

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we don't know by how much.

Table 14-1 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

A competitive firm currently produces and sells 500 units of output. Its total revenue is $6,000; the marginal cost of producing the 500^th unit of output is $14.50; and the average total cost of producing the 500^th unit of output is $9.50. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

A firm in a competitive market has the following cost structure: If the market price is $16, this firm will

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. 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

The analysis of competitive firms sheds light on the decisions that lie behind the

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

In a market with 1,000 identical firms, the short-run market supply is the

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

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm should not produce an output level beyond

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

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.

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

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75. At this new price, if Bob produces and sells the profit-maximizing quantity, how much profit will he earn?

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if