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Exam 13: Perfect Competition

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Question 81

Multiple Choice

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Suppose there are 1,000 firms in a perfectly competitive market and each maximizes profit at 25 units of output when market price is $1.00 per unit. One of the points on the market supply curve must be at:

A) Price = $25 and Quantity supplied = 125.
B) Price = $25 and Quantity supplied = 24,000.
C) Price = $1 and Quantity supplied = 125.
D) Price = $1 and Quantity supplied = 25,000.

E) A) and B)
F) A) and C)

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Question 82

Multiple Choice

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Refer to the graph shown. If the firm increases output from 50 to 60, total revenue will increase:

A) more than total cost, and so profit will increase.
B) more than total cost, and so profit will decrease.
C) less than total cost, and so profit will increase.
D) less than total cost, and so profit will decrease.

E) A) and D)
F) B) and D)

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Question 83

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Refer to the following graphs. Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should:

How does a market supply curve relate to a firm's supply curve?

In a perfectly competitive market, economic forces are controlled by government policy makers.

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand decreases from D₀ to D₁, in the long run:

If the long-run market supply curve is perfectly elastic, a fall in demand will cause the final equilibrium to be at:

Total profit is maximized at the output level at which the:

Refer to the graph shown. What distance represents average profits?

In the short run when the number of firms in the market is fixed, the market supply curve is just the horizontal sum of all the firms' marginal cost curves.

Marginal revenue is equal to:

Consider the following table of numbers,which represents demand and cost conditions for a competitive firm.The price of the product this firm produces is $50. $\begin{array} { | c | c | c | c | c | c | c | c | } \hline \text { Q } & \text { TFC } & \text { MC } & \text { TVC } & \text { TC } & \text { TR } & \text { MR } & \text { Total Profit } \\\hline 0 & 30 & 0 & & & & & \\\hline 1 & & 20 & & & & & \\\hline 2 & & 30 & & & & & \\\hline 3 & & 40 & & & & & \\\hline 4 & & 50 & & & & & \\\hline 5 & & 60 & & & & & \\\hline 6 & & 70 & & & & & \\\hline\end{array}$ (a)Fill in the missing values. (b)What level of output should the firm produces? Why? (c)What do you predict will happen to the number of firms in the industry? Why? (d)What do you predict will happen to supply and the market price? (e)At which price must the firm shut down?

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Barriers to entry:

Explain how the long-run market supply curve for a perfectly competitive industry depends upon factor prices.

Demonstrate graphically and explain verbally a perfectly competitive firms' long run equilibrium situation (be sure to show the long-run average total cost curve,short-run average total cost curve,marginal curve,and marginal revenue curve).

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals the minimum of:

How would an economist determine graphically the output and profit of a perfect competitor?