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Exam 14: Firms in Competitive Markets

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Question 21

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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

A) downward sloping.
B) upward sloping.
C) horizontal.
D) vertical.

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

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Question 22

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When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

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At 45 units of outpu...

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Question 23

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A key characteristic of a competitive market is that

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

When it produces and sells 80 units of output, a competitive firm's average total cost is $25 and its profit is $480. What is the firm's total revenue if it sells 85 units of output?

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Total Revenue } \\\text { (Dollars) }\end{array} \\\hline 13 & 91 \\\hline 15 & 105 \\\hline 17 & 119 \\\hline 19 & 133 \\\hline 21 & 147 \\\hline\end{array}$ -Refer to Table 14-3. For this firm, the average revenue when 17 units are produced and sold is

Scenario 14-2 The information below applies to a competitive firm that sells its output for $45 per unit. • When the firm produces and sells 120 units of output, its average total cost is $23.5. • When the firm produces and sells 121 units of output, its average total cost is $23.65. -Refer to Scenario 14-2. Suppose the firm is producing 120 units of output and its fixed cost is $950. Then its variable cost amounts to

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. If the market price is $5, the firm will earn

If Buddy's Build A Bear Shop sells its product in a competitive market, then

​Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit.

Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons.

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Table 14-1 ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} \\\hline 5 & 0 \\\hline 5 & 2 \\\hline 5 & 4 \\\hline 5 & 6 \\\hline 5 & 8 \\\hline 5 & 10 \\\hline 5 & 12 \\\hline 5 & 14 \\\hline 5 & 16 \\\hline 5 & 18 \\\hline\end{array}$ -Refer to Table 14-1. Over which range of output is average revenue equal to price?

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?