Exam 14: Firms in Competitive Markets

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $5.15.

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price falls from P3 to P1, the firm finds that it

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the total revenue from selling 4 units?

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. The firm will exit the market for any price on the line segment

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's profits equal

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pc, in the short run the firm will earn

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the marginal revenue of the 4th unit?

In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=500, the firm's profits equal

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $6 value on reading a book.

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

In order to maximize profits in the short run, a firm should produce where

In a competitive market with identical firms,