Exam 14: Firms in Competitive Markets

Assume the market for lawn mowing is competitive.If a firm has no fixed costs and constant marginal costs, then a doubling of output will lead to a doubling of total revenue.

When new firms have an incentive to enter a competitive market, their entry will:

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses.Identify costs, revenue and the economic losses on your graph.Using your graph, determine whether this firm will shut down in the short run, or choose to remain in the market.Explain your answer.

Suppose a firm is operating in a competitive market where the price of the good is $12.If, at the current level of output, the firm's average cost is $15, marginal cost is $17, and fixed costs are $10, then the firm will:

Suppose a profit-maximising firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs.In the short run it should:

Which of the following is not a characteristic of a perfectly competitive market?

When you buy a product from a firm in a competitive market, the price you pay for the product is likely to be:

Table 14-3 The market for Whizzly Jigs consists of many identical firms, each with the cost structure below.Suppose the current market price is $2. -Refer to table 14-3.Suppose the current market price is $2.Which of the following is likely to occur?

Kevin is a bricklayer in Melbourne.Bricklaying is a fiercely competitive industry with many small suppliers all offering similar products.Fortunately for Kevin he is one of the best bricklayers in the business, in fact, in one hour Kevin can lay twice as many bricks as any other bricklayer in town, which helps him keep his costs down.Suppose the market is initially at a competitive equilibrium.After a particularly inspiring season of The Block, there is a permanent increase in demand for home renovations.Following the increase in demand, is it possible for Kevin and the other bricklayers to make economic profit in the short-run? How about in the long-run? Explain.

When a profit-maximising firm in a competitive market has zero economic profit, accounting profit:

If all incumbent firms and all potential firms have the same cost curves and the market is characterised by free entry and exit, the long-run:

The Wheeler Wheat Farm has a long-term lease on 5000 acres of land in New South Wales.The annual lease payment is $250,000.Prior to planting in the spring of 2001, the Wheeler Farm accountant predicted that the Farm would have $135 000 left after paying all of its costs except the annual lease payment.In this case, the Wheeler Wheat Farm should:

When will a firm shut-down temporarily? When do firms exit an industry? Holding all else constant, is it ever the case that a firm will shut down in the short-run, but will find it profitable to stay in the long run?

In long-run equilibrium of a competitive market, the number of firms in the markets adjusts so that all of the market demand is satisfied at a price equal to:

A profit-maximising firm that is showing losses (negative profit) most likely faces which of the following conditions?

If rational, profit-maximising firms (like rational people) think at the margin, then marginal adjustments to production:

The long-run equilibrium in a competitive market characterised by firms with identical costs is generally characterised by firms operating at efficient scale.

The market's short-run supply curve will be steeper than an individual firm's supply curve.

The irrelevance of sunk costs is best described by which of the following business decisions?

From the perspective of a price-taking competitive firm, what is the relationship between price, average revenue and marginal revenue?