Exam 14: Firms in Competitive Markets

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has taken in $3,500 in monthly revenue. In the short run, Susan should

Which of the following firms is the closest to being a perfectly competitive firm?

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price rises above $6.30, the firm will earn

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. -When the firm produces and sells 150 units of output, its average total cost is $24.50. -When the firm produces and sells 151 units of output, its average total cost is $24.55. -Refer to Scenario 14-4. When the firm produces 150 units of output, its total cost is

When firms in a competitive market have different costs, it is likely that

Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. -When the firm produces and sells 150 units of output, its average total cost is $24.50. -When the firm produces and sells 151 units of output, its average total cost is $24.55. -Refer to Scenario 14-4. Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units?

Profit-maximizing firms enter a competitive market when existing firms in that market have

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price is determined by

Which of these types of costs can be ignored when an individual or a firm is making decisions?

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

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? Explain your answer.

Which of the following expressions is correct for a competitive firm?

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants, which of the following is most likely to arise?

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

One of the defining characteristics of a perfectly competitive market is

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the marginal revenue is

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue