Exam 14: Firms in Competitive Markets.

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

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

Which of the following statements best reflects a price-taking firm?

Firms operating in perfectly competitive markets try to maximize profits.

A market is competitive if (i)firms have the flexibility to price their own product. (ii)each buyer is small compared to the market. (iii)each seller is small compared to the market.

At the profit-maximizing level of output,

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the 100th unit for $5.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

Scenario 14-5 A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition. -Refer to Scenario 14-5.If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market,the

Which of the following represents the firm's short-run condition for shutting down?

When economists refer to a production cost that has already been committed and cannot be recovered,they use the term

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases,then the firm

Table 14-4 -Refer to Table 14-4.For a firm operating in a competitive market,the price is

Mrs.Smith is operating a firm in a competitive market.The market price is $6.50.At her profit-maximizing level of output,her average total cost of production is $7.00,and her average variable cost of production is $6.00.Which of the following statements about Mrs.Smith's firm is correct?

When market conditions in a competitive industry are such that firms cannot cover their total production costs,then

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.If the market price is $5.00,the firm will earn