Exam 14: Firms in Competitive Markets

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. The firm will earn positive economic profits if the price is (i) P4. (ii) P3. (iii) P2. (iv) P1.

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 Pc, in the short run the firm will earn

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the average revenue when 4 units are sold?

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

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?

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=499, the firm's profits equal

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.

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 increases its output from 150 units to 151 units, its profit

When determining whether to shut down in the short run, a competitive firm should ignore (i) fixed costs. (ii) variable costs. (iii) sunk costs.

Firms operating in perfectly competitive markets try to maximize profits.

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the unit for $6. The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Figure 14-9 In the figure below, 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. -Refer to Figure 14-9. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $2.00?

Table 14-1 -Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners?