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Exam 14: Firms in Competitive Markets

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Question 81

True/False

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If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

A) True
B) False

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Question 82

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When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

A) explicit costs.
B) implicit costs.
C) sunk costs.
D) opportunity costs.

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

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Question 83

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Table 14-2 The table represents a demand curve faced by a firm in a competitive market. ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollarsper unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} \\\hline 5 & 0 \\\hline 5 & 1 \\\hline 5 & 2 \\\hline 5 & 3 \\\hline 5 & 4 \\\hline 5 & 5 \\\hline\end{array}$ -Refer to Table 14-2. This firm maximizes total revenue by producing

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 $10, what is the firm's short-run economic profit?

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production.

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Scenario 14-4 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 14-4. Compare the firm's profit or loss at 200 units of output with its profit or loss if it were to shut down.

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed might not?

A firm lacks market power if it cannot influence __________.

In a shopping mall in a large city, the Rudolph the Reindeer store sells only merchandise for the Christmas holiday season. Most of the store's revenue and profit are attributable to the months of October, November, and December. However, the store is open throughout the year. If the owner of the store is rational, what criterion does he or she use in deciding to keep the store open year-round?

The marginal firm in a competitive market will earn zero economic profit in the long run.

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

The expression "Let bygones be bygones" is associated with what type of cost?

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.

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

What does it mean for a buyer or seller to be a price taker?

Robin owns a horse stable and riding academy and gives riding lessons for children at "pony camp." His business operates in a competitive industry. Robin gives riding lessons to 20 children per month. His monthly total revenue is $4,000. The marginal cost of pony camp is $250 per child. In order to maximize profits, Robin should