Exam 14: Firms in Competitive Markets

Graph 14-6 This graph depicts the cost structure of a firm in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 14-6. When market price is P₁, a profit-maximising firm's total revenue can be represented by the area:

NARRBEGIN 14-2 Graph 14-2 This graph depicts the cost structure for a firm in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 14-2. Which of the following statements best reflects the situation faced by the firm when price falls from P₄ to P₂?

A firm's short-run supply curve is part of which of the following curves?

If a firm wishes to determine its marginal cost, it must need to know its:

If a firm is able to influence the market price of the good it sells, it has market power.

For a firm in a competitive market, marginal revenue is always equal to average revenue.

When calculating economic profit, total costs include:

When profit-maximising firms in competitive markets are making losses:

If a profit-maximising firm in a competitive market discovers that at its current level of production, price is less than marginal cost, it should:

In a competitive market, firms that increase prices experience increases in sales.

The short-run supply curve for a firm in a perfectly competitive market:

In long-run equilibrium of a competitive market, the number of firms in the markets adjusts so that all of the market demand is satisfied at a price equal to:

Graph 14-3 This graph depicts the cost structure of a profit-maximising firm in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 14-3. Which line segment best reflects the short-run supply curve for this firm?

There are 500 profit-maximising firms in a competitive market. When market price is $10 per unit, each firm produces exactly 20 units of output. What are the total quantity supplied to the market, the total revenue, average revenue and marginal revenue of each firm?

When a competitive market that comprises firms that face identical cost structures experiences an increase in demand, which of the following is most likely to occur? (i) new firms will enter the market. (ii) in the long run, price will return to the level that existed before the change in demand (iii) in the long run, all firms will be producing at their efficient scale

A profit-maximising firm in a competitive market produces leather wallets. Suppose the market price for leather wallets drops below the minimum of its average total cost. However, the price still lies above the minimum of average variable cost. This means the firm:

When new firms enter a perfectly competitive market:

The costs of investigating new factories can be regarded as a sunk cost

Prawns Galore, a prawn harvesting business in Southeast Queensland, has a 30-year loan on its prawn trawling boat. The annual loan payment is $25 000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2001 prawn harvesting season, Prawns Galore's accountant predicted that at expected market prices for prawns, Prawns Galore would have a net loss of $75 000 dollars after paying all 2001 expenses (including the annual loan payment). In this case, Prawns Galore should:

When a perfectly competitive firm makes a decision to shut down, it is most likely that: