Exam 9: Firms in Perfectly Competitive Markets

According to the Department of Agriculture, net farm income in 2017 will rise from $61.5 billion in 2016 to $63.4 billion in 2017, a modest 3.1 percent increase but also the first increase since 2013. Much of the increase came from the sales of grain inventory, along with increased revenue from milk and livestock. The net income for 2017 is still only about half of its peak level, and according to agricultural economist David Widmar, income closer to $72 billion would be a sign of an improving farm economy. Source: Alan Bjerga and Jeff Wilson, "First U.S. Farm-Income Gain in Four Years Signals Hope of Bottom," bloomberg.com, August 30, 2017. -Refer to the Article Summary.Assume that after the slight increase in U.S.farm income in 2017,farmers are expected to break even in 2018.This means that at the quantity being produced in 2018

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

Figure 9-10 -Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

In August 2008,Ethan Nicholas developed the iShoot app for the Apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market,

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Use a graph to show the demand,AVC,ATC,MC,and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output. Quantity Total Revenue (TR) Total Cost (TC) Profit Marginal Revenue (MR) Marginal Cost (MC) 0 0 3 1 5 5 2 10 6 3 15 8 4 20 11 5 25 15 6 30 21 7 35 30 8 40 42 9 45 60 10 50 85

Figure 9-8 -Refer to Figure 9-8.Suppose the firm produces 4,000 units.What does the shaded area labeled B represent?

Which of the following is not a characteristic of a perfectly competitive market structure?

A perfectly competitive firm's short-run supply curve is

Firms in perfect competition are price takers because

The long-run supply curve for a perfectly competitive,constant-cost industry

To maximize profit,a perfectly competitive firm

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 profit?

Using two graphs,illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market.On the first graph,use a supply and demand graph to illustrate the positive technological change.On the second graph,use demand,ATC,MC,and MR curves to illustrate the elimination of economic profit resulting from the positive technological change.Explain what is taking place in each graph.

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30 and the firm is producing output,what is the amount of the firm's profit or loss?

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

For a perfectly competitive firm,average revenue is equal to