Exam 9: Firms in Perfectly Competitive Markets

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Which of the following is a characteristic of a firm in a perfectly competitive market?

In the short run,if price falls below a firm's minimum average total cost,then the firm should shut down.

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's average profit?

A perfectly competitive firm will maximize its profit at the level of output where the vertical distance between its total revenue curve and total cost curve is the largest.This is the same level of output where

In the long run,the entry of new firms in an industry

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

What is productive efficiency?

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Producing where marginal revenue equals marginal cost is equivalent to producing where

If in a perfectly competitive market,firms are facing a price below their average total cost but above average variable cost at the profit maximizing output,then

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

Table 9-1 Quantity Total Cost (dollars) Variable Cost (dollars) 0 \ 1,000 \ 0 100 1,360 360 200 1,560 560 300 1,960 960 400 2,760 1,760 500 4,000 3,000 600 5,800 4,800 Table 9-1 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 9-1.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?

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.

A firm would decide to shut down if its production resulted in

In the short run,a firm that is operating at a loss has two options.These options are

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

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?

Being a price taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?