Exam 12: Firms in Perfectly Competitive Markets

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Assume the market for cage-free eggs is perfectly competitive.All else equal,as more farmers choose to produce and sell cage-free eggs,what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

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.

What is the difference between "shutting down temporarily" and "exiting the industry"?

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

In perfect competition

Figure 12-15 -Refer to Figure 12-15.Assume that the medical screening industry is perfectly competitive and that some firms are making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.Which of the diagrams in the figure best describes what happens in the industry?

In a decreasing-cost industry,the entry of new firms lowers average cost at each level of output.

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.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Which of the following is not a characteristic of a perfectly competitive market structure?

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

Both buyers and sellers are price takers in a perfectly competitive market because

The long-run supply curve for a perfectly competitive,constant-cost industry

Quantity Total Cost Average Total Cost Marginal Cost 0 \ 10.00 ---- ---- 1 15.00 \ 15.00 \ 5.00 2 17.50 8.75 2.50 3 22.50 7.50 5.00 4 30.00 7.50 7.50 5 40.00 8.00 10.00 6 52.50 8.75 12.50 7 67.50 9.64 15.00 8 85.00 10.63 17.50 9 105.00 11.67 20.00 Arnie sells basketballs in a perfectly competitive market.Table 12-3 summarizes Arnie's output per day (Q),total cost (TC),average total cost (ATC)and marginal cost (MC). -Refer to Table 12-3.What price (P)will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 12-5.What is the minimum price the firm requires to produce output?