Question 1

When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

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Question 2

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

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The answer of 
-Acme is a perfectly competitive firm. It...

Question 3

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

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Question 4

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

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Question 5

-The above figure illustrates a perfectly competitive wheat farmer.
a) What will be the firm's profit-maximizing price and output?
b) When the farmer produces 25,000 bushels of wheat, the difference between the firm's average total cost and the price is at its maximum. Explain why this amount of wheat either is or is not the profit-maximizing quantity.

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-The above figure illustrates a perfectly competitive...

Question 6

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

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Question 7

-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit.
a) Find the profit maximizing level of output for this firm.
b) How much economic profit is the firm making?

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The answer of 
-The above table gives the quantity of...

Question 8

-Farmer Brown produces corn in a perfectly competitive market. Farmer Brown produces and sells 500 bushels of corn. The market supply and demand curves are illustrated in the above figure.
a) What is Farmer Brown's total revenue?
b) What is Farmer Brown's marginal revenue?

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-Farmer Brown produces corn in a perfectly...

Question 9

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

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Question 10

-The above diagram shows the cost curves for a perfectly competitive wheat farmer. At what price does the wheat farmer shut down?

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-The above diagram shows the cost curves...

Question 11

With regard to its economic profits and economic losses, how is the short run different from the long run for a perfectly competitive firm?

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Question 12

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

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The answer of 
-Jimmy grows corn. His total revenue and...

Question 13

-The above table gives Amy's total cost schedule for producing holiday wreaths. Amy is a perfect competitor and can sell each wreath for $9.
a) Complete the table by calculating Amy's total revenue and her profit or loss schedule.
b) When Amy is producing 4 wreaths, what is her total cost? What is her total revenue? What is her economic profit or economic loss?
c) What number of wreaths maximizes Amy's profit?

Accepted Answer

The answer of 
-The above table gives Amy's total cost...

Question 14

-Cory's is one of many ice cream stands in town. Cory's costs are shown in the table above.
a) If the market price of ice cream is $1.75 per cone, what is Cory's profit-maximizing quantity of cones?
b) If the market price of ice cream is $2.25 per cone, what is Cory's profit-maximizing quantity of coins?
c) If the market price of ice cream is $2.75 per cone, what is Cory's profit-maximizing quantity of coins?
d) Can you determine any points on Cory's supply curve?

Accepted Answer

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-Cory's is one of many ice cream...

Question 15

Pumpkin growing is a perfectly competitive industry. Suppose that pumpkin growers are all incurring an economic loss. What happens as time passes? What is the long-run equilibrium outcome?

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The answer of Pumpkin growing is a perfectly competitive industry....

Question 16

-John keeps beehives and sells 100 quarts of honey per month. The honey market is perfectly competitive, and the price of a quart of honey is $10. John has an average variable cost of $5 and an average fixed cost of $3. At 100 quarts per month, John's marginal cost is $10.
a) Is John maximizing his profit? If not, what should John do?
b) Calculate John's total revenue, total cost, and total economic profit or economic loss when he produces 100 quarts of honey.

Accepted Answer

The answer of 
-John keeps beehives and sells 100 quarts...

Question 17

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $14.20. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

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The answer of 
-Acme is a perfectly competitive firm. It...

Question 18

Pete is a perfectly competitive rose grower. The above table gives quantities and the price for which Pete can sell his roses.
a) What is Pete's total revenue if he sells 1 dozen roses? 2 dozen roses? 3 dozen roses? 4 dozen roses?
b) What is the marginal revenue of the 2nd dozen roses sold? Of the 3rd dozen? Of the 4th dozen?

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The answer of Pete is a perfectly competitive rose grower....

Question 19

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Accepted Answer

The answer of 
-Acme is a perfectly competitive firm. It...

Question 20

-The above table shows the total cost schedule for a perfectly competitive firm. The market price is $250 per unit. Complete the table.

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The answer of 
-The above table shows the total cost...

Quiz 12: Perfect Competition

When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit. a) Find the profit maximizing level of output for this firm. b) How much economic profit is the firm making?

-Farmer Brown produces corn in a perfectly competitive market. Farmer Brown produces and sells 500 bushels of corn. The market supply and demand curves are illustrated in the above figure. a) What is Farmer Brown's total revenue? b) What is Farmer Brown's marginal revenue?

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer. At what price does the wheat farmer shut down?

With regard to its economic profits and economic losses, how is the short run different from the long run for a perfectly competitive firm?

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

Pumpkin growing is a perfectly competitive industry. Suppose that pumpkin growers are all incurring an economic loss. What happens as time passes? What is the long-run equilibrium outcome?

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $14.20. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

-The above table shows the total cost schedule for a perfectly competitive firm. The market price is $250 per unit. Complete the table.