Exam 12: Firms in Perfectly Competitive Markets

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?

At the profit-maximizing level of output for a perfectly competitive firm, price equals marginal cost. Which of the following is also true?

Assume the market for organic produce sold at farmers' markets is perfectly competitive. All else equal, as more farmers choose to produce and sell organic produce at farmers' markets, what is likely to happen to the equilibrium price of the produce and profits of the organic farmers in the long run?

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as

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

Table 12-2 Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2. How many pounds of apples should Margie sell to maximize her profit?

Figure 12-20 -Refer to Figure 12-20. If the market price is P1, what is the allocatively efficient output level?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000. The prevailing market price is $48. Assuming that this firm continues to produce in the long run, what happens to output level in the long run?

Article Summary According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973. Net cash income, however, is expected to fall by 10 percent due to unsold inventories. Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively. Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013. -Refer to the Article Summary. All else equal, the increase in demand for chicken and milk exports will ________ the market prices for these exports and ________ economic profit in these markets.

Using two graphs, illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market. On the first graph, use a supply and demand graph to illustrate the positive technological change. On the second graph, use demand, ATC, MC and MR curves to illustrate the elimination of economic profit resulting from the positive technological change. Explain what is taking place in each graph.

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. If the firm does this, what is the amount of profit that it will earn?

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6. If Jason maximizes his profit he will produce the output rate indicated by point ________ and his average profit will equal ________.

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -A perfectly competitive firm will maximize its profit at the rate of output where the vertical distance between its total revenue and total cost is the largest. This is the same rate of output where

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000. The prevailing market price is $48. What will happen to the market price of wheat in the long run?

Figure 12-10 -The minimum point on the average variable cost curve is called the loss-minimizing point.

Figure 12-10 -Refer to Figure 12-10. At the profit-maximizing output level, the firm earns

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximizing quantity.

Figure 12-13 -Refer to Figure 12-13. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. If the firm represented in the diagram continues to stay in business, in the long-run equilibrium,

Figure 12-3 -If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm