Exam 12: Firms in Perfectly Competitive Markets

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would produce

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 figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens to its profit-maximizing output level?

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

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?

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Which of the following is not an assumption of perfectly competitive markets?

In long-run perfectly competitive equilibrium,which of the following is false?

Perfect competition is characterized by all of the following except

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

Table 12-1 Table 12-1 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 12-1.If the market price of each camera case is $8 and the firm maximizes profit,what is the amount of the firm's profit or loss?

Figure 12-8 -Refer to Figure 12-8.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

In the short run,a firm that is operating at a loss has two options.These options are

Use a graph to show the demand,AVC,ATC,MC,and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.

Figure 12-11 -Refer to Figure 12-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,the firm represented in the diagram

The market demand curve for a perfectly competitive industry is the horizontal summation of each individual firm's demand curve.

A constant cost,perfectly competitive market is in long-run equilibrium.At present,there are 1,000 firms each producing 400 units of output.The price of the good is $60.Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64.In the new long-run equilibrium,how will the average total cost of producing the good compare to what it was before the price of the good rose?