Exam 14: Firms in Competitive Markets

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, at the end of the first year of operating her new business, Lee's accountant reported an accounting profit of $50 000. What was Lee's economic profit?

Suppose a firm in a perfectly competitive market doubles its sales. This means that the firm's total revenue will:

When a profit-maximising firm's fixed costs are considered sunk in the short run, it:

Table 14-2 The price of each David Butterfly a butterfly farmer in Greytown sells is: -Refer to Table 14-2. If the firm doubles its output from three to six units, total revenue will:

In a competitive market, the actions of any single buyer or seller will have a negligible impact on the market price.

Graph 14-9 -Refer to Graph 14-9. When a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P₁ to P₂, it is most likely the result of:

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Of the following characteristics of competitive markets, which are necessary for firms to be price takers? (i) many sellers (ii) goods offered for sale are largely the same (iii) firms can freely enter or exit the market

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is:

A production cost that has already been committed and cannot be recovered is termed a:

Which of the following are true of comparing marginal revenue to marginal cost? (i) it reveals the contribution of the last unit of production to total profit (ii) it is helpful in making profit-maximising production decisions (iii) it always reveals whether a firm is making an economic profit (iv) it tells a firm whether its fixed costs are too high

If rational, profit-maximising firms (like rational people) think at the margin, then marginal adjustments to production:

Firms in competitive markets are said to be price takers.

For a firm in a perfectly competitive market, the price of the good is always equal to:

When buyers in a competitive market take the selling price as given, they are said to be:

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Firms that shut down in the short run are unable to avoid their:

Suppose a profit-maximising firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs. In the short run it should:

Suppose a firm in a competitive market increase its output by 25 per cent, the price of its output is likely to:

When a new firm decides to enter a perfectly competitive market: