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Exam 14: Firms in Competitive Markets

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Question 41

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If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

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Because a normal rate of return on their...

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Question 42

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In calculating accounting profit, accountants normally do not include:

A) explicit costs of production
B) opportunity costs that do not involve an outflow of money
C) long-run costs
D) sunk costs

E) A) and D)
F) A) and C)

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Question 43

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Profit-maximising producers in a competitive market in general, produce output at a point where:

The Wheeler Wheat Farm has a long-term lease on 5000 acres of land in New South Wales. The annual lease payment is $250 000. Prior to planting in the spring of 2001, the Wheeler Farm accountant predicted that the Farm would have $135 000 left after paying all of its costs except the annual lease payment. In this case, the Wheeler Wheat Farm should:

Table 14-2 The market for Whizzly Jigs consists of many identical firms, each with the cost structure below. Suppose the current market price is $2. -Refer to Table 14-2. Suppose the current market price is $2. What is the output of each individual firm?

Regardless of the time horizon considered, firms in a competitive market will never earn positive economic profit.

The long run supply curve for a perfectly competitive firm is the segment of the marginal cost curve that lies above the average total cost curve.

A firm's short-run supply curve is part of which of the following curves?

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward-sloping.

Table 14-1 This table shows the revenue and costs of a parrot farmer. -Refer to Table 14-1. Average revenue will be equal to marginal cost when the harvest is equal to:

If a firm in a competitive market increases production and its marginal revenue remains greater than its marginal cost, raising production will:

When business managers of firms in a competitive market observe falling profits, they are likely to infer that the market is characterised by:

If a firm in a competitive market sells 25 per cent less, then its total revenue will fall by 25 per cent.

In a competitive market, the actions of any single buyer or seller will have a negligible impact on the market price.

The production decisions of perfectly competitive firms follow the principle of economics that states that rational people:

Table 14-2 The market for Whizzly Jigs consists of many identical firms, each with the cost structure below. Suppose the current market price is $2. -Refer to Table 14-2. With free entry and exit, what will be the long run price of Whizzly Jigs?

There are 500 profit-maximising firms in a competitive market. When market price is $10 per unit, each firm produces exactly 20 units of output. What are the total quantity supplied to the market, the total revenue, average revenue and marginal revenue of each firm?

New firms will enter the market when profit-maximising firms in competitive markets are earning profits.

The long-run supply curve in a competitive market must be more inelastic than the short-run supply curve.

In a competitive market, marginal revenue will only sometimes equal average revenue.