Exam 14: Firms in Competitive Markets

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

For a particular competitive firm, the minimum value of average variable cost (AVC) is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost (ATC) is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?

In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the marginal revenue is

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P2 to P3, the firm finds that

In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue.

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

Scenario 14-4 Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year. -Refer to Scenario 14-4. What is Victor's opportunity costs of operating his new business?

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

Competitive markets are characterized by

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm's short­run supply curve is its marginal cost curve above

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

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

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

A profit-maximizing firm will shut down in the short run when

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

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