Exam 14: Firms in Competitive Markets

Scenario 14-5 A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition. -Refer to Scenario 14-5. If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market, the

Firms that operate in perfectly competitive markets try to

When new firms have an incentive to enter a competitive market, their entry will

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the price is

Mr. Rogers sells colored pencils. The colored-pencil industry is competitive. Mr. Rogers hires a business consultant to analyze his company's financial records. The consultant recommends that Mr. Rogers increase his production. The consultant must have concluded that Mr. Roger's

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners?

A profit-maximizing firm will shut down in the short run when

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

For a firm, marginal revenue minus marginal cost is equal to

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Which of the following statements best reflects a price-taking firm?

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm's marginal cost is $5, it should

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

A corporation has been steadily losing money on one of its product lines, plastic flamingo lawn ornaments. The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago. The firm is now considering an offer to buy that factory for $15 million. Which of the following statements about the decision to sell or not to sell is correct?

Table 14-15 -Refer to Table 14-15. What is the lowest price at which this firm would operate in the short run?

In the long run, when price is greater than average total cost, some firms in a competitive market will choose to enter the market.

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect