Exam 8: Firms in Perfectly Compitive Markets

-Refer to Figure 8-5. The firm's manager suggests that the firm's goal should be to maximise average profit. If the firm does this, what is the amount of profit that it will earn?

The price of a seller's product in perfect competition is determined by

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

Which of the following statements is correct?

The marginal revenue curve for a perfectly competitive firm

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

Which of the following characteristics of a farmers' market make it a good example of a perfectly competitive market?

Mark Frost grows apples in a perfectly competitive market. If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be

-Refer to Figure 8-8. At the profit-maximising output level, the firm earns

Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. Table 8-5 shows the firm's cost schedule. Table 8-5 Use the table to answer the following questions. a. Complete Table 8-5 by filling in the blank cells. b. Werner is selling in a perfectly competitive market at a price of $40. What is the profit maximising or loss-minimising output? c. Calculate the firm's profit or loss. d. Should the firm continue to produce in the short run? Explain. e. If the firm's fixed costs were $30 higher, what would be the profit-maximising output level in the short run? Indicate whether the output level will increase, decrease or remain unchanged compared to your answer in b. f. Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what is the profit-maximising or loss-minimising output? g. Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer. h. Suppose the fixed cost remains at $76. What price corresponds to the shut-down point? i. Suppose the fixed cost remains at $76. What price corresponds to the break-even point?

-Refer to Figure 8-11. Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity. If the firm represented in the diagram continues to stay in business, in the long-run equilibrium

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $20. To maximise profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

Ted's Pancake Kitchen suffers a short-run loss. When should Ted decide to shut down rather than continue to produce?

-Refer to Figure 8-7. At price P₁, the firm would produce

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

-Refer to Figure 8-4. Assuming the firm is profit maximising, what is the amount of its total fixed cost?

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm

A perfectly competitive firm faces a demand curve that is

Which of the following is not true for a firm in perfect competition?

For a perfectly competitive firm, at profit maximisation