Exam 9: Perfect Competition

Wheat is produced in a perfectly competitive market.Market demand for wheat increases.This will cause the individual wheat farmer's marginal revenue to ________ and his profit-maximizing level of output to ________.

For firms in perfect competition,price is equal to marginal cost at all levels of output.

Since ice production is constant,the supply curve is vertical.

Recall the example in the text of the increasing-cost apartment industry.Why is the supply curve for apartments positively sloped?

If there is an increase in demand in the long run for an increasing-cost industry,the market price will fall.

When price is sufficient to cover average variable cost,firms suffering short-run losses should shut down.

A monopolistic competitive market has the following characteristics EXCEPT

Recall the example in the text of the increasing-cost sugar industry.At a price of 11 cents,the world supply of sugar equals the amount produced in the areas with low production costs.If the price of sugar increases,what will happen in the sugar market?

In a monopoly,the firm specific demand curve is the same as

-Refer to Figure 9.5.For this farmer to maximize profits he should produce ________ bushels of wheat.

Hurricane Andrew caused the price of ice in Florida to decrease in the short run.

The added revenue that a firm earns from selling an additional unit of output is

Explain the relationship between price,short-run marginal cost,short-run average cost,and long-run average cost in the final long-run competitive equilibrium condition.What are economic profits in this long-run equilibrium condition?

In the long run,if product prices rise,firms will not produce more output.

Assume the data backup industry,a perfectly competitive industry,is in long-run equilibrium with a market price of $3 per 10GB.If demand for data backup decreases and this industry is a decreasing-cost industry,long-run equilibrium will be reestablished at a price

A constant-cost industry in the long run faces a

If each firm in a perfectly competitive industry is earning zero economic profit,firms will have an incentive to leave the industry.

Recall the Application about the break-even price for growing switchgrass, a perennial grass that is native to the U.S. plains states and is used to create biofuel, to answer the following question(s). -Recall the Application.Which of the following statements is true about the implications of getting some North Dakota farmers to switch their crops to switchgrass?

Comment on the following statement: "If a firm shuts down in the short run,it will earn zero economic profit."

Table 9.3 -Table 9.3 shows the short-run cost data for the XYZ Widget Company.If widgets sell for $8 each and XYZ's total fixed costs equal $50,what will the firm do? Explain.