Exam 11: Costs and Profit Maximization Under Competition

Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000, and became a street food vendor. She used $8,000 out of her savings account that paid a 4% annual interest rate to buy a street cart to sell food. In her first year of operations, she spent $10,000 on food and supplies (napkins, cups, plates, etc.) and earned total revenue of $45,000. Marcie's accounting profit is ______ and economic profit is ______.

If Tom sells 500 sandwiches for $7 and has an average cost of $5, what is his profit?

Firms in a perfectly competitive industry maximize profits by:

In the small town of Wellsville, there is only one grocery store. Given that everyone needs food, we would expect that this grocery store:

Which of the following statements is TRUE? Economists normally assume that the goal of the firm is to: I. sell as much of their product as possible. II. set the price of their product as high as possible. III. maximize profit.

Why can't marginal cost decrease forever?

Profit can be shown graphically by depicting a firm's costs and revenues, and it is determined mathematically by calculating the:

Explain why a profit-maximizing firm in a competitive market would increase output until price is equal to marginal cost?

Which of the following best describes a competitive industry?

Which of the following statements are TRUE? A firm's entry/exit decision is about: I. whether profits are positive or negative now. II. whether the stream of future profits is positive or negative. III. government regulations.

More potential sellers ______ the elasticity of ______ firm-level demand.

A market becomes more competitive as the product becomes ______ homogeneous and there are ______ potential sellers.

In the long run, demand is ______ the short run.

A firm's profit-maximizing quantity does not depend on its fixed costs.

When competitive firms do not have influence over the price of their product, all of the following are true EXCEPT which condition?

To maximize profit, firms should keep producing as long as marginal revenue is:

A competitive firm maximizes profits at the point where P = MC = AC.

With fluctuating prices in an industry, firms are likely to:

Use the following to answer questions: Figure: Maximizing Profit -The change in total cost from producing the eighth unit of output is ______, and the change in total revenue from producing the seventh unit of output is ______.

A baker wants to establish a pie factory. The cost of leasing the factory is $1,000 per day. The profit maximizing quantity of pies is 1,000 pies a day. Each pie sells for $3 and costs only $2.10 to make. Which of the following is a correct conclusion based on this data?