Exam 14: Firms in Competitive Markets

Graph 14-7 In this graph, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. Use the graph to answer the following question(s). -Refer to Graph 14-7. When 100 identical firms participate in this market, at what price will 15 000 units be supplied to this market?

A profit-maximising firm that is showing losses (negative profit) most likely faces which of the following conditions?

When a profit-maximising firm in a competitive market experiences rising prices, it will respond with an increase in production.

Graph 14-5 The graph depicts the cost structure of a firm in a competitive market. Use the graph to answer the following question(s). -Refer to Graph 14-5. Firms would be encouraged to enter this market for all prices that exceed:

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long-run? Carefully explain your answer.

If a firm in a competitive market sells 25 per cent less, then its total revenue will fall by 25 per cent.

Under what conditions would a firm choose to shut down? When would it decide to exit the market?

Suppose a firm in a competitive market notices that its marginal cost is greater than its price. This means that:

Lee had invested $100 000 in a risk-free unit trust, on which she earned $10 000 each year. She used that money to buy a prawn farm. She also quit her job as a salesperson to devote all of her time to her prawn business. Her salary as a salesperson was $25 000 per year. -According to the information provided, what would Lee's accounting profits need to be to allow her to reach the zero economic profit equilibrium?

The exit of existing firms from a competitive market will:

Explain the relationship between a firm's supply curve and its costs.

In a competitive market, the actions of any single buyer or seller will:

The long-run equilibrium in a competitive market characterised by firms with identical costs is generally characterised by firms operating at efficient scale.

The additional revenue a firm in a competitive market receives if it increases its production by one unit is equal to:

At its current level of production, a profit-maximising firm in a competitive market receives $12.50 for each unit it produces, and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1000 units. What is the firm's current profit? What is likely to occur in this market and why?

Graph 14-8 -Refer to Graph 14-8. If the figure in panel (a) reflects the long-run equilibrium of a profit-maximising firm in a competitive market, the figure in panel (b) most likely reflects:

Suppose a perfectly competitive firm reduces its output by 10 per cent. This means that its:

A long-run supply curve that is more elastic than a short-run supply curve results from which of the following circumstances?

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

The long-run supply curve in a competitive market must be more inelastic than the short-run supply curve.