Exam 10: The Firm and the Industry Under Perfect Competition

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing level of output, the firm's short-run TC is represented by area

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

The quantity which a firm will supply in the short run

The entry of new firms into an industry will very likely

When new farmers enter the wheat industry, the equilibrium price of wheat

Figure 10-4 -Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S₃, the firm is

At a perfectly competitive firm's short-run equilibrium level of output,

Economic profit equals gross earnings minus the firm's direct costs.

The short-run supply curve of a perfectly competitive firm

Explain how the short-run industry supply curve for a perfectly competitive market is derived.

To own a taxicab in New York City, you must own a medallion.New York City regulates the number of official cabs by limiting the number of medallions.Explain why the New York cab industry is not competitive by reviewing the four conditions necessary for competition.NYC violates which one?

A firm earns a profit of exactly zero at its optimal output level only if

For a perfectly competitive firm, the long-run supply curve is the long-run average cost curve.

In short-run equilibrium, a perfectly competitive firm

If a firm has short-run losses, will it stay open? Under what conditions will a firm close in the short run? Explain.

Perfectly competitive markets feature relatively high barriers to entry.

Once a firm's marginal revenue curve is known, the output level can be determined.

Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium because ____.

Subsidizing firms that pollute will reduce pollution in the long run.

The market demand schedule in perfect competition is horizontal.