Exam 12: Firms in Perfectly Competitive Markets

Article Summary According to the Department of Agriculture,net farm income will fall from $91.1 billion in 2014 to $58.3 billion in 2015,a 36 percent drop and the largest percentage decline since 1983.Falling prices on corn and soybeans are responsible for a portion of the decline in income,as are lower prices for dairy products,hogs,and chickens.The USDA is,however,predicting lower production costs due to falling prices for energy,seed,fertilizer,and pesticides. -Refer to the Article Summary.All else equal,the lower production costs should help offset some of the falling income and

For a perfectly competitive firm,at profit maximization

Figure 12-10 -Refer to Figure 12-10.At the profit-maximizing output level,the firm earns

Under what conditions should a competitive firm shut down in the short run?

Assume that the medical screening industry is perfectly competitive.Consider a typical firm that is 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.How will this affect a typical firm that remains in the industry?

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows: Output per Day Total Cost 0 \ 20 1 32 2 37 3 48 4 61 5 75 6 92 7 113 8 136 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).

Quantity Average Fixed Cost Average Variable Cost Marginal Cost 20 \ 40 \ 18 \ 18 40 20 14 10 60 13.1 16 20 80 10 22 40 100 8 30 62 120 6.61 40 90 Table 12-4 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45 the firm will produce

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

What is meant by the term "long-run competitive equilibrium?

Being a price taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

How are sunk costs and fixed costs related?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Apples (pounds) Market Price per Pound Total Revenue (TR) Average Revenue (AR) Marginal Revenue (MR) 0 \ 3 \ 0 ---- -\@cdots-- 100 150 200 250 300 350 400 Table 12-2 lists the various pounds (lbs. )of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

What is allocative efficiency?

If a firm shuts down in the short run it will

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its