Question 1

For the following, please answer "True" or "False" and explain why.
-A competitive firm's supply curve is identical to its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 2

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be true?

Accepted Answer

A)  p < AVC for all levels of output. 
B)  p < AVC only for the level of output at which p = MC. 
C)  p < AVC only if the firm has no fixed costs. 
D)  The firm will earn zero profit. 
A)  p < AVC for all levels of output. 
B)  p < AVC only for the level of output at which p = MC. 
C)  p < AVC only if the firm has no fixed costs. 
D)  The firm will earn zero profit.

Question 3

For the following, please answer "True" or "False" and explain why.
-If the market price in a competitive market is below the minimum of average variable cost,the firm will shut-down.

Accepted Answer

A) True 
 B)False

Question 4

-The above figure shows the cost curves for a competitive firm.If the firm is to earn economic profit,price must exceed

Accepted Answer

A)  $0. 
B)  $5. 
C)  $10. 
D)  $11. 
A)  $0. 
B)  $5. 
C)  $10. 
D)  $11.

Question 5

If a firm makes zero economic profit,then the firm

Accepted Answer

A)  has no incentive to stay in the industry. 
B)  is better of exiting the industry. 
C)  is indifferent between staying and exiting the industry. 
D)  will shut down. 
A)  has no incentive to stay in the industry. 
B)  is better of exiting the industry. 
C)  is indifferent between staying and exiting the industry. 
D)  will shut down.

Question 6

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

Accepted Answer

A)  0 
B)  500 
C)  10,000 
D)  50,000 
A)  0 
B)  500 
C)  10,000 
D)  50,000

Question 7

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profits will be

Accepted Answer

A)  240. 
B)  250. 
C)  260. 
D)  -10 because the firm will shut down. 
A)  240. 
B)  250. 
C)  260. 
D)  -10 because the firm will shut down.

Question 8

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?

Accepted Answer

The long-run market supply curve is hori

Question 9

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

Accepted Answer

A)  should shut down. 
B)  should keep operating. 
C)  should sell less. 
D)  None of the above. 
A)  should shut down. 
B)  should keep operating. 
C)  should sell less. 
D)  None of the above.

Question 10

For the following, please answer "True" or "False" and explain why.
-If a firm cannot earn profits in the short run,it will shut down.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a firm has the following total cost function TC = 100 + 2 q².If price equals $20,what is the firm's output decision? What are its short-run profits?

Accepted Answer

MC = 4q.To maximize profit,set 20 = 4q,o

Question 12

Firms in the sandbox industry have the long-run cost curve
C(q)= F + 6q + 5q²
Where F is a positive constant.The sandbox industry has a market demand of p = 90 - 2q
a.Suppose F = 20.What is the competitive equilibrium price,quantity and number of firms?
b.Suppose F is actually an accreditation fee established by the sandbox sellers association.A firm that avoids this fee will not be able to operate in the industry,and is therefore mandatory.How does the equilibrium price and number of firms vary with F? You do not have to use calculus,but explain whether each increases or decreases with F.How does the profit of each firm vary with F?

Accepted Answer

a.Find the minimum AC point:
AC = 20/q +

For the following, please answer "True" or "False" and explain why. -A competitive firm's supply curve is identical to its marginal cost curve.

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be true?

For the following, please answer "True" or "False" and explain why. -If the market price in a competitive market is below the minimum of average variable cost,the firm will shut-down.

-The above figure shows the cost curves for a competitive firm.If the firm is to earn economic profit,price must exceed

If a firm makes zero economic profit,then the firm

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profits will be

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

For the following, please answer "True" or "False" and explain why. -If a firm cannot earn profits in the short run,it will shut down.

Suppose a firm has the following total cost function TC = 100 + 2 q².If price equals $20,what is the firm's output decision? What are its short-run profits?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 8: Competitive Firms and Markets

For the following, please answer "True" or "False" and explain why. -A competitive firm's supply curve is identical to its marginal cost curve.

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be true?

For the following, please answer "True" or "False" and explain why. -If the market price in a competitive market is below the minimum of average variable cost,the firm will shut-down.

-The above figure shows the cost curves for a competitive firm.If the firm is to earn economic profit,price must exceed

If a firm makes zero economic profit,then the firm

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profits will be

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

For the following, please answer "True" or "False" and explain why. -If a firm cannot earn profits in the short run,it will shut down.

Suppose a firm has the following total cost function TC = 100 + 2 q².If price equals $20,what is the firm's output decision? What are its short-run profits?

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters