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Exam 12: Perfect Competition and the Supply Curve

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Question 71

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Consider a perfectly competitive firm in the short run.Assume that it is sustaining economic losses but continues to produce.At the profit-maximizing (loss-minimizing) output, all of the following statements are correct except: A.marginal cost is less than average total cost. B.marginal cost is equal to marginal revenue. C.price is equal to marginal cost. D.marginal cost is less than average variable cost.

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marginal c...

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Question 72

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If a perfectly competitive firm is producing a quantity where P < MC, then profit: A.is maximized. B.can be increased by decreasing the price. C.can be increased by increasing production. D.can be increased by decreasing production.

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Question 73

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A perfectly competitive firm will incur an economic loss but will continue producing output in the short run if the price is: A.less than marginal cost. B.greater than average fixed cost and less than average variable cost. C.greater than average total cost. D.greater than average variable cost but less than average total cost.

In long-run equilibrium in a perfectly competitive market, all firms will be operating at the same level of marginal cost.

Sam is one of many potato growers who sell potatoes to a large food-processing plant.The price of a bushel of potatoes is $4, and Sam sells 100 bushels at that price.He has $250 of fixed cost.Sam figures if he produces one more bushel of potatoes, his total variable costs will increase from $175 to $180.Should Sam produce any more potatoes at $4? Explain.Will he earn a positive economic profit? Show how you came to your answer.

Figure: The Perfectly Competitive Firm (Figure: The Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm.The firm faces demand curve d, has the cost curves shown, and maximizes profit.In a long-run equilibrium, this firm will produce units of output and sell its output at a price of _. A.100; $1.00 B.250; $1.90 C.300; $2.00 D.400; $3.00

(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns.During the summer Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry made up of 100 identical firms.The table shows his variable costs for lawn-mowing and the number of lawns mowed.Alex's fixed cost is $1,000 for the mower.His variable costs include fuel, his time, and mower parts.If the price for mowing a lawn is $40, how many lawns will Alex mow? A.0 B.20 C.30 D.40

Which of the following is true? A.Profit per unit is price minus AVC. B.Total economic profit is per-unit profit times quantity. C.If price is less than ATC, the firm will shut down in the short run. D.If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output.

(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns.During the summer Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry made up of 100 identical firms.The table shows his variable costs for lawn-mowing and the number of lawns mowed.Alex's fixed cost is $1,000 for the mower.His variable costs include fuel, his time, and mower parts.Which of the following is a point on Alex's short-run supply curve? A.P = $5; Q = 10. B.P = $10; Q = 100. C.P = $60; Q = 40. D.P = $20; Q = 300.

The assumptions of perfect competition imply that: A.individuals in the market determine the market price. B.firms in the market accept the market price as given. C.there will be no new competition due to natural monopolies. D.the price will be decreasing yearly.

(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns.During the summer Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry made up of 100 identical firms.The table shows his variable costs for lawn-mowing and the number of lawns mowed.Alex's fixed cost is $1,000 for the mower.His variable costs include fuel, his time, and mower parts.If the price for mowing a lawn is $70, how much is Alex's profit at the profit-maximizing output? A.$3,500 B.-$300 C.$700 D.$1,700

The shut-down point in the short run is: A.the point at which economic profit is zero. B.the minimum point of AVC. C.the intersection of the MC and ATC curves. D.the minimum point of AFC.

(Table: Soybean Cost) Look at the table Soybean Cost.The costs of production of a perfectly competitive soybean farmer are given in the table.What is the break-even price for this farmer? A.$13.00 B.$13.50 C.$14.00 D.$14.50

The break-even price for a perfectly competitive firm is equal to: A.the minimum value of average variable cost. B.the marginal revenue, provided that marginal revenue is equal to marginal cost. C.the average fixed cost at the output level at which the firm is producing. D.the minimum value of average total cost.

The addition to the total revenue from selling one more unit of the good is: A.market price. B.average profit. C.marginal cost. D.marginal revenue.

Figure: The Profit Maximizing Firm (Figure: The Profit Maximizing Firm) Look at the figure The Profit Maximizing Firm.The figure shows cost curves for a firm operating in a perfectly competitive market.If the market price is P₄: A.firms will leave the industry and the price will fall in the long run. B.there will be economic profits and firms will enter the industry in the long run. C.the market supply curve will shift to the left and price will fall in the long run. D.the firm will produce q4.

Figure: A Perfectly Competitive Firm in the Short Run (Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run.The firm's total economic profit at its most profitable level of output is: A.0GHB. B.EFJS. C.EGHS. D.FGLK.

Figure: Short-Run Costs (Figure: Short-Run Costs) Look at the figure Short-Run Costs.At the given price, the most profitable level of output occurs at quantity:

Zoe's Bakery operates in a perfectly competitive industry.When the market price of iced cupcakes is $5, the profit-maximizing output level is 150 cupcakes.Her average total cost is $4, and her average variable cost is $3.Zoe's marginal cost is , and her short-run profits are: A.$5; $150 B.$5; $300 C.$1; $150 D.$1; $300

In the short run, if AVC < P < ATC, a perfectly competitive firm: A.produces output and earns an economic profit. B.produces output and incurs an economic loss. C.does not produce output and earns an economic profit. D.does not produce output and earns zero economic profit.