Exam 14: Firms in Competitive Markets

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

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 = 1,000, the firm's profits equal

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

The long-run supply curve for a competitive industry

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Which of the following industries is least likely to exhibit the characteristic of free entry?

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $6 value on reading a book.

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 average revenue is

If Bradley's Butcher Shop sells its product in a competitive market, then

When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. 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

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

Scenario 14-5 A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition. -Refer to Scenario 14-5. As a result of the increase in the demand for tomatoes, we would predict that in the short run that the

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we don't know by how much.

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning positive economic profits in the short run?