Exam 12: Firms in Perfectly Competitive Markets

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $20. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

-Refer to Figure 12-10. The firm's short-run supply curve is its

In 2019, pastured eggs sold for more than twice the price of cage-free eggs and almost 5 times the price of conventional eggs, making pastured eggs more profitable than the other eggs. Over time, the perfectly competitive egg market will approach a long-run equilibrium in which producing pastured eggs

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. Identify the short-run shut down point for the firm.

-Refer to Figure 12-10. Total revenue at the profit-maximizing level of output is

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

In 2019, pastured eggs sold for more than twice the price of cage-free eggs and almost 5 times the price of conventional eggs, making pastured eggs more profitable than the other eggs. Over time, this high price for pastured eggs will likely ________ as more farmers decide to ________ the perfectly competitive pastured egg market.

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $15. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

In 2015, poultry farmers were able to sell cage-free eggs for a price that more than offset the higher costs of raising cage-free chickens. By 2019, most of that higher return had been wiped out as more farmers began raising cage-free eggs, resulting in a decline in the price of those eggs. This example indicates that in a competitive market,

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output?

-Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.

According to the Department of Agriculture, net farm income in 2019 is projected to rise by more than 10 percent, to $92.5 billion in 2019, with much of the increase coming from federal aid and insurance payments to farmers. Without these payments, U.S. net farm income would have dropped by nearly 8 percent. The Trump administration paid an estimated $22.4 billion in aid to U.S. farmers in 2019 to compensate for lower prices and lost sales due to global trade disputes. Source: P.J. Huffstutter, "U.S. farm income expected to rise in 2019, but only because of government aid," Reuters, December 2, 2019. -Refer to the Article Summary. Assume that after the increase in U.S. farm income in 2019, farmers are not expected to receive federal aid the next year and are expected to break even in 2020. This means that at the profit-maximizing quantity in 2020

When LED television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of LED televisions fell. This example illustrates

Competition has driven the economic profits in the dog grooming business to zero. Surya Bacha, who owns a dog grooming business, would be better off leaving the industry for another alternative.

Assuming a market price of $4, fill in the columns in the following table. What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

According to the Department of Agriculture, net farm income in 2019 is projected to rise by more than 10 percent, to $92.5 billion in 2019, with much of the increase coming from federal aid and insurance payments to farmers. Without these payments, U.S. net farm income would have dropped by nearly 8 percent. The Trump administration paid an estimated $22.4 billion in aid to U.S. farmers in 2019 to compensate for lower prices and lost sales due to global trade disputes. Source: P.J. Huffstutter, "U.S. farm income expected to rise in 2019, but only because of government aid," Reuters, December 2, 2019. -Refer to the Article Summary. Net farm income was projected to increase by more than 10 percent in 2019, to $92.5 billion. Graphically, this increase in profit would be represented by ________ at the profit-maximizing quantity.

Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. Table 12-5 shows the firm's cost schedule. Use the table to answer the following questions. a. Complete Table 12-5 by filling in the blank cells. b. Werner is selling in a perfectly competitive market at a price of $40. What is the profit maximizing or loss-minimizing output? c. Calculate the firm's profit or loss. d. Should the firm continue to produce in the short run? Explain. e. If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase, decrease, or remain unchanged compared to your answer in b. f. Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output? g. Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer. h. Suppose the fixed cost remains at $76. What price corresponds to the shut-down point? i. Suppose the fixed cost remains at $76. What price corresponds to the break-even point?

Assume that the medical screening industry is perfectly competitive. Consider a typical firm that is making short-run losses. Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health. How will this affect a typical firm that remains in the industry?