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Exam 14: Firms in Competitive Markets

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Question 231

True/False

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In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

A) True
B) False

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Question 232

Multiple Choice

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Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

A) more firms will enter the market.
B) some firms will exit from the market.
C) the equilibrium price per unit will rise.
D) average total costs will fall.

E) None of the above
F) B) and C)

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Question 233

Multiple Choice

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In a competitive market, the actions of any single buyer or seller will

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 Pa, in the short run the firm will earn

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?

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

We can measure the profits earned by a firm in a competitive industry as

Which of the following statements is correct?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

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 total costs equal

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of production will the firm maximize profit?

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Which of the following is a characteristic of a competitive market?

Scenario 14-1. A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23. -Refer to Scenario 14-1. Calculate the firm's fixed cost at 200 units of output.

A sunk cost is one that

Figure 14-10 In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms. -Refer to Figure 14-10. If there are 700 identical firms in this market, what is the value of Q2?

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?