question
In a perfectly competitive industry, in the long-run equilibrium
answer
the typical firm earns zero profit.
question
Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
If the market price is $30, the firm's profit maximizing output level is
If the market price is $30, the firm's profit maximizing output level is
answer
180
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Producing where marginal revenue equals marginal cost is equivalent to producing where
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total profit is maximized.
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Perfect competition is characterized by all of the following except
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heavy advertising by individual sellers.
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If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
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$25
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Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?
If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?
answer
$3,960
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If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm
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should shut down.
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For a firm in a perfectly competitive market, price is
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equal to both average revenue and marginal revenue.
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Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?
answer
(P x Q) - TC
question
Jason, a high-school student mows lawns for families in his neighborhood. The going rate is $12 for each lawn-mowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price?
answer
If Jason raises his price, he would lose all his customers.
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Which of the following is the best example of a perfectly competitive firm?
answer
a corn farmer in Illinois
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Refer to the diagram to the right. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.
answer
P3cbP1
question
Refer to the diagram to the right which shows cost and demand curves facing a typical firm in a constant-cost perfectly competitive industry.
If the market price is $20, what is the amount of the firm's profit?
If the market price is $20, what is the amount of the firm's profit?
answer
$6,750
question
Total revenue at the profit-maximizing level of output is
answer
$6,000.
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A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
answer
Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.
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If a typical firm in a perfectly competitive industry is earning profits, then
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new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease.
question
Refer to the diagram which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
If the market price is $30, should the firm represented in the diagram continue to stay open?
If the market price is $30, should the firm represented in the diagram continue to stay open?
answer
Yes, because it is covering part of its fixed cost.
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Which of the following statements is correct?
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Economic profit takes into account all costs involved in producing a product.
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Refer to the diagram to the right. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long run equilibrium,
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there will be more firms in the industry and total industry output increases.
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The firm's short-run supply curve is its
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marginal cost curve from b and above.
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Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if
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his Peanut Shoppe's total revenue exceeds his variable cost.
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If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm
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added more to total revenue than it added to total costs.
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Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
What is the amount of its total fixed cost?
What is the amount of its total fixed cost?
answer
$2,520
question
Refer to the diagram which shows cost and demand curves facing a profit-maximizing perfectly competitive firm. If the firm chose to produce at price P1, the firm would
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lose an amount equal to its fixed costs.
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At the profit-maximizing output level, the firm earns
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a profit of $2,700.
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What is productive efficiency?
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a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
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The total cost at the profit-maximizing output level equals
answer
$3,300.
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Both individual buyers and sellers in perfect competition
answer
have to take the market price as a given.
question
Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
If the market price is $30 and the firm is producing output, what is the amount of the firm's profit or loss?
If the market price is $30 and the firm is producing output, what is the amount of the firm's profit or loss?
answer
loss of $1,080
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Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?
answer
The market demand curve is downward sloping; the firm's demand curve is a horizontal line.
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An individual seller in perfect competition will not sell at a price lower than the market price because
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the seller can sell any quantity she wants at the prevailing market price.
question
If the market price is $25, the average revenue of selling five units is
answer
$25.
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