ECON 0110: Firms in Competitive Markets
30 Cards in this Set
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Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?
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$80
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Refer to Table 14-14. When Bob produces and sells the profit-maximizing quantity, how much profit does he earn?
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$4
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If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should
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increase its output.
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Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should
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continue to operate in the short run but shut down in the long run.
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Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and cos…
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continue flying until the lease expires and then drop the run
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Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
Refer to Scenario 14-2. At Q = 999, the firm's total costs equal
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$24,980.
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Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
Refer to Scenario 14-2. At Q = 999, the firm's profits equal
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$4,990.
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Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20
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$5,983
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Competitive firms that earn a loss in the short run should
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shut down if P < AVC.
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Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?
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Pd
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Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that
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it can earn a positive profit by increasing production to Q4
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Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn
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positive profits.
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Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area
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At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.
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Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:
Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs
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can be represented by the area P3 × Q2.
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Figure 14-7
Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to
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$6,180, and its profit amounts to $25,750.
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If a firm operating in a competitive industry shuts down in the short run, it can avoid paying
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variable costs.
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When total revenue is less than variable costs, a firm in a competitive market will
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shut down
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In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if
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price is less than average total cost
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When economists refer to a production cost that has already been committed and cannot be recovered, they use the term
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sunk cost
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Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run
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some firms will exit from the market
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Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 ea…
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-$25,000
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Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price is determined by
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the minimum point on the firms' average total cost curve
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When firms in a competitive market have different costs, it is likely that
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some firms will earn positive economic profits in the long run.
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Figure 14-14
Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2. Which of the following could explain this observation?
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An increase in market demand from D0 to D1
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Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to
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remain unchanged
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If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
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double
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Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
QuantityTotal Revenue0$01$132$263$394$52
Refer to Table 14-3. For this firm, the marginal revenue is
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$13.
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Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
Refer to Table 14-6. What is the total revenue from selling 7 units?
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$840
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Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
Refer to Table 14-6. What is the total revenue from selling 4 units?
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$480
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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
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$12.
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ECON 0110: Monopoly