Exam 10: Firms in Perfectly Competitive Markets

Figure 10.2 -Refer to Figure 10.2.What is the amount of profit if the firm produces Q₂ units?

Figure 10.5 Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 10.5.If the market price is $20, what is the firm's profit-maximizing output?

Figure 10.4 Figure 10.4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 10.4.If the market price is $30, the firm's profit-maximizing output level is

If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

Figure 10.11 -Refer to Figure 10.11.Assume that the medical screening industry is perfectly competitive and that some firms are 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.Which of the diagrams in the figure best describes what happens in the industry?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

If a firm shuts down in the short run,

Assume the market for organic produce sold at farmers' markets is perfectly competitive.All else equal, as more farmers choose to produce and sell organic produce at farmers' markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run?

Figure 10.7 -Refer to Figure 10.7.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,

Figure 10.5 Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 10.5.If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?

Which of the following is the best example of a perfectly competitive industry?

Market supply is found by

What is allocative efficiency?

In an increasing-cost industry the long-run supply curve is upward sloping.

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows: Output per Day Total Cost 0 \ 20 1 32 2 37 3 48 4 61 5 75 6 92 7 113 8 136 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).

Figure 10.10 -Refer to Figure 10.10.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not, explain how and why they are different? Illustrate your answer graphically.