Exam 9: Firms in Perfectly Competitive Markets

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₃,the firm would produce

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

A perfectly competitive firm's marginal revenue

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009,more than 25,000 apps for the iPhone 3G were available in the iTunes store,an indication that in a competitive market

Figure 9-17 The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 9-17.The graphs depicts a short-run equilibrium.How will this differ from the long-run equilibrium? (Assume this is a constant-cost industry.)

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.The firm will not produce in the short run if the output price falls below

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows: Output per Day Total Cost 1 \ 20 1 32 3 37 3 48 4 61 5 75 6 92 7 113 8 136 Suppose the current equilibrium price in the teapot market is $20.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).

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

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?

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

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

Assume that the market for cage-free eggs is perfectly competitive.All else equal,as farmers find it less profitable to produce and sell cage-free eggs in this market

Perfectly competitive industries tend to produce low-priced,low-technology products.

Figure 9-7 Figure 9-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 9-7.If the market price is P₁

An individual seller in perfect competition will not sell at a price lower than the market price because

What is the difference between "shutting down temporarily" and "exiting the industry"?

For a perfectly competitive firm,average revenue equals marginal cost at the profit-maximizing output.

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

Figure 9-2 -Refer to Figure 9-2.What happens if the firm produces more than Q₄ units?

Figure 9-11 -Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium