Exam 7: Consumer Choice and Elasticity

Table 7-1 Table 7-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. -Refer to Table 7-1.If the market price of each camera case is $8,what is the profit-maximising quantity?

Figure 7-6 -Refer to Figure 7-6.Suppose the market price is $120.Which of the following is true?

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

At the profit-maximising level of output for a perfectly competitive firm,

Perfect competition is characterised by all of the following except

What is the relationship among the following variables for a perfectly competitive firm: the market price,average revenue and marginal revenue?

Figure 7-3 -Refer to Figure 7-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Figure 7-4 Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009,more than 25 000 apps for the iPhone 3G were available in the iTunes store,an indication that in a competitive market,

Figure 7-7 Figure 7-7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7-7.At price P₃,the firm would produce

If in the long run a firm makes zero profit,it should exit the industry.

Firms that are price takers

Assume that price is greater than average variable cost.If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54,then to maximise profits the firm should

The minimum point on the average variable cost curve is called the loss-minimising point.

Figure 7-1 -Refer to Figure 7-1.If the firm is producing 200 units,

A perfectly competitive wheat farmer in a constant-cost industry produces 1000 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?

If,for a perfectly competitive firm,price exceeds the marginal cost of production,the firm should

Figure 7-2 -Refer to Figure 7-2.Why is the total revenue curve a ray from the origin?

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.