Exam 10: The Firm and the Industry under Perfect Competition

Helga owns Viking, Inc., started with her $100,000 inheritance.Helga's accountant informs her that her firm earned a profit of $100,000 last year, and that if she chooses to invest the money she can expect a 10% return.If Helga did not run Viking, she would not work.What were Helga's economic profits last year?

A perfectly competitive firm is a price

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Explain how the short-run industry supply curve for a perfectly competitive market is derived.

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

If the price falls below minimum SRAVC, the quantity supplied by the firm will be

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to marginal cost.

Show what happens to the industry equilibrium when new firms enter a perfectly competitive market in the long run.

In perfect competition, a firm's marginal revenue equals the price of the product.

The long-run supply curve of an industry equals the industry's

Figure 10-3 -In Figure 10-3, the profit maximizing firm will operate at a level of

In the short-run if TR < TC, a perfectly competitive firm will always shut down.

The short-run market demand schedule in perfect competition is positively sloped.

Why does the supply curve of the perfectly competitive industry shift to the right whenever a new firm enters the industry?

In perfect competition, marginal revenue always equals

If the typical firm's minimum average variable cost is $10 at an output of 50 units, if marginal cost is $20 at 70 units, and there are 1,000 firms in the industry, sketch supply curves for the typical firm and for the industry as a whole.

Figure 10-3 -In Figure 10-3, the perfectly competitive firm is realizing a

What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?

If a competitive firm's short run average cost curve lies above the price of the product, we can conclude that the firm

Sally Rand owns a ceiling fan company.She sells 1,000 ceiling fans at $50 each.Each fan costs her $20.She uses her own money to buy the fans; she withdraws the money from her savings account where it earns 5 percent interest.Before going into the ceiling fan business, she worked as a fan-dancer at $25,000 a year.Should Sally remain in business?