Exam 12: Firms in Perfectly Competitive Markets

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.The firm's manager suggests that the firm's goal should be to maximize average profit.In that case, what is the output level and what is the average profit that will achieve the manager's goal?

Which of the following is a characteristic of a monopoly?

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

The demand curve for each seller's product in perfect competition is horizontal at the market price because

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

Figure 12-19 -Refer to Figure 12-19.The figure above shows the cost curves of a perfectly competitive firm in the coffee market.Use the graph in Figure 12-19 to answer the following questions.Assume the market price is $3 per pound. a.What is the lowest price at which the coffee grower will supply output in the short run? b.In the diagram draw the firm's demand curve (label this "MR" for marginal revenue). c.What is the firm's profit-maximizing output? d.Is the firm earning a profit or a loss? Identify the area in the graph that represents the firm's profit or loss. e.Explain how entry or exit will occur in the market to ensure that firms will break even in the long run.

Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.

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).

Figure 12-14 -Refer to Figure 12-14.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?

In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets.Which of the following could explain why these firms did not simply raise their prices and increase their profits?

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm

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

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

Table 12-1 Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. -Refer to Table 12-1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

When firms exit a perfectly competitive industry, the market supply curve shifts to the left.

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run, what happens to output level in the long run?

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the firm's short-run supply curve.

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.