Exam 12: Firms in Perfectly Competitive Markets

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 $15.To maximize 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).

If a firm shuts down in the short run it will

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

In August 2008,Ethan Nicholas developed the iShoot application for the apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market

A firm will make a profit when

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The price of each good is $10.Calculate the firm's short-run profit or loss.

A constant-cost industry is an industry in which

In the short run,if a firm shuts down its maximum loss equals the amount of its fixed cost.

If a firm shuts down it

When plasma television sets were first introduced prices were high and few firms were in the market.Later,economic profits attracted new firms and the price of plasma televisions fell.This example illustrates

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 P₂,the firm would produce

A wheat farmer and a firm in a perfectly competitive market are similar in that

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?

In the long run,a perfectly competitive market will

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

Figure 12-15 -Refer to Figure 12-15.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium?

In perfect competition

Figure 12-10 -Refer to Figure 12-10.The firm's short-run supply curve is its

Figure 12-18 -Use the figure above to answer the following questions. a.How can you determine that the figure represents a graph of a perfectly competitive firm? Be specific; indicate which curve gives you the information and how you use this information to arrive at your conclusion. b.What is the market price? c.What is the profit-maximizing output? d.What is total revenue at the profit-maximizing output? e.What is the total cost at the profit-maximizing output? f.What is the profit or loss at the profit-maximizing output? g.What is the firm's total fixed cost? h.What is the total variable cost? i.Identify the firm's short-run supply curve. j.Is the industry in a long-run equilibrium? k.If it is not in long-run equilibrium,what will happen in this industry to restore long-run equilibrium? l.In long-run equilibrium,what is the firm's profit maximizing quantity?

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?