Exam 14: Firms in Competitive Markets

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

Competitive markets are characterized by

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob.Which of the following events would decrease the firm's average revenue?

Table 14-1 -Refer to Table 14-1.For a firm operating in a competitive market,the price is

In a perfectly competitive market,the process of entry and exit will end when firms face

Table 14-6 John's Vineyard -Refer to Table 14-6.What is the average revenue when 4 units are sold?

Figure 14-4 -Refer to Figure 14-4.Firms would be encouraged to enter this market for all prices that exceed

A firm will shut down in the short run if,for all positive levels of output,

A competitive firm would benefit from charging a price below the market price because the firm would achieve

Competitive firms that earn a loss in the short run should

Raiman's Shoe Repair produces custom-made shoes.When Mr.Raiman produces 12 pairs per week,the marginal cost of the twelfth pair is $84,and the marginal revenue of the twelfth pair is $70.What would you advise Mr.Raiman to do?

A firm in a competitive market has the following cost structure: If the market price is $16,this firm will

Table 14-5 -Refer to Table 14-5.At which quantity of output is marginal revenue equal to marginal cost?

A firm's marginal cost has a minimum value of $2,its average variable cost has a minimum value of $4,and its average total cost has a minimum value of $5.Then the firm will shut down if the price of its product falls below

A sunk cost is one that

Table 14-4 -Refer to Table 14-4.What is the firm's profit-maximizing strategy?

Scenario 14-3 As part of an estate settlement Mary received $1 million.She decided to use the money to purchase a small business in Anywhere,USA.Her business operates in a perfectly competitive industry.If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year.She also quit her job with Lucky.Com Inc.to devote all of her time to her new business;her salary at Lucky.Com Inc.was $75,000 per year. -Refer to Scenario 14-3.How large would Mary's accounting profits need to be to allow her to attain zero economic profit?

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

In the long run,a firm will enter a competitive industry if