Exam 12: Firms in Perfectly Competitive Markets

Quantity Total Cost (dollars) Variable Cost (dollars) 0 \ 1,000 \ 0 100 1,360 360 200 1,560 560 300 1,960 960 400 2,760 1,760 500 4,000 3,000 600 5,800 4,800 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.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?

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

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

The demand curve for an individual seller's product in perfect competition is

Figure 12-12 -Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48,the number of firms and the industry's output will decrease in the long run.

If,as a perfectly competitive industry expands,it can supply larger quantities at the same long-run market price,it is

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 in the industry as it transitions to a long-run equilibrium?

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.

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Which of the following is not true for a firm in perfect competition?

Why are individual buyers and sellers in perfect competition called price takers?

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

A firm will make a profit when

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

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P3,the firm would produce

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