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Exam 13: Firms in Competitive Markets

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Question 91

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Figure 13-9 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 13-9.If there are 600 identical firms in this market,what is the value of Q1?

A) 6,000
B) 12,000
C) 60,000
D) 120,000

E) A) and D)
F) None of the above

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Question 92

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A profit-maximizing firm in a competitive market is currently producing 200 units of output.It has average revenue of $9 and average total cost of $7.It follows that the firm's

A) average total cost curve intersects the marginal cost curve at an output level of less than 200 units.
B) average variable cost curve intersects the marginal cost curve at an output level of less than 200 units.
C) profit is $400.
D) All of the above are correct.

E) B) and D)
F) B) and C)

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Question 93

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Profit-maximizing firms enter a competitive market when existing firms in that market have

Which of the following represents the firm's short-run condition for shutting down?

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.If the market price is $5.00,the firm will earn

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

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

Figure 13-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-6.When market price is P3,a profit-maximizing firm's total costs

If a firm notices that its average revenue equals the current market price,that firm must be participating in a competitive market.

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.If the market price rises above $6.30,the firm will earn

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost but greater than the firm's average fixed cost.

When new entrants into a competitive market have higher costs than existing firms,

A competitive market will typically experience entry and exit until accounting profits are zero.

Suppose a competitive market is comprised of firms that face identical cost curves.The firms experience an increase in demand that results in positive profits for the firms.Which of the following events are then most likely to occur? (i) New firms will enter the market. (ii) In the short run,price will rise; in the long run,price will rise further. (iii) In the long run,all firms will be producing at their efficient scale.

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

When firms in a competitive market have different costs,it is likely that

Scenario 13-4 As part of an estate settlement Mary received $1 million.She decided to use the money to purchase a small business in Anywhere,USA.Her business operates in a perfectly competitive industry.If Mary would have invested the $1 million in a risk-free bond fund she could have earned $100,000 each year.She also quit her job with Lucky.Com Inc.to devote all of her time to her new business.Her salary at Lucky.Com Inc.was $75,000 per year. -Refer to Scenario 13-4.What are Mary's opportunity costs of operating her new business?

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