Question 1

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Accepted Answer

In the long-run equilibrium, price is equal to both long-run average cost and long-run marginal cost. Thus, option B is a characteristic of long-run equilibrium for a perfectly competitive firm. Economic profit is zero in the long-run equilibrium, making option C a characteristic, and the firm produces the output level at which long-run average cost is at its minimum, making option D a characteristic. However, price being greater than long-run average cost is not a characteristic of long-run equilibrium for a perfectly competitive firm. Therefore, option A is NOT a characteristic.

Question 2

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.What do you expect to happen in the long-run?

Accepted Answer

D

Question 3

Below,the graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply.  If the firm's demand and marginal revenue curves were drawn in the left-hand graph,what would be the elasticity of demand?

Accepted Answer

D

Question 4

In a perfectly competitive industry the market price is $25.A firm is currently producing 10,000 units of output; average total cost is $28,marginal cost is $20,and average variable cost is $20.The firm should

Accepted Answer

Since the marginal cost ($20) is less than the market price ($25), producing an additional unit increases profit by $5. This indicates that increasing production will improve the firm's situation.

Question 5

Firm A and firm B both have total revenues of $200,000 and total costs of $250,000; firm A has total fixed costs of $40,000,while firm B has total fixed costs of $70,000.Which of the following statements are true in the short run?

Accepted Answer

In the short run, a firm should continue to operate if its total revenue covers its variable costs. Since both firms have total revenues of $200,000 and total costs of $250,000, they are both incurring losses. Firm A's variable costs are $210,000 ($250,000 - $40,000), and Firm B's variable costs are $180,000 ($250,000 - $70,000). Firm A should shut down because its revenue does not cover its variable costs, while Firm B should continue to operate because its revenue covers its variable costs.

Question 6

The graph below shows demand and marginal cost for a perfectly competitive firm.If the firm is producing 300 units of output,decreasing output by one unit would ______ the firm's profit by $______.

Accepted Answer

The answer of The graph below shows demand and marginal...

Question 7

In a perfectly competitive market

Accepted Answer

In a perfectly competitive market, firms are price takers and cannot influence the market price, so they do not need to lower prices to attract more customers. The additional revenue from selling one more unit (marginal revenue) is equal to the price, not less. Demand facing an individual firm is perfectly elastic, not the industry.

Question 8

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.What is the maximum amount of profit the firm can earn?

Accepted Answer

The answer of Below,the graph on the left shows the...

Question 9

Which of the following is NOT a condition of a perfect competition:

Accepted Answer

In a perfect competition, industry sales are assumed to be infinite, not small. This is because there are no barriers to entry and exit, so firms can enter or leave the market as they please. This means that the total output of the industry can increase or decrease, depending on the number of firms operating in the market.

Question 10

The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply.  What is the marginal revenue for the FIRM from selling the 250th unit of output?

Accepted Answer

The answer of The graph on the left shows the...

Question 11

The total cost schedule for a competitive firm is given by: $$\begin{array} { c c } 
\text { Output } & \text { Tatal Cost } \
\hline 0 & \$ 10 \
1 & 60 \
2 & 80 \
3 & 110 \
4 & 165 \
5 & 245 \
\hline
\end{array}$$ If market price is $60,how many units of output will the firm produce?

Accepted Answer

The answer of The total cost schedule for a competitive...

Question 12

The graph below on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply.  What output should the firm produce?

Accepted Answer

The answer of The graph below on the left shows...

Question 13

A competitive firm will maximize profit by producing the level of output at which

Accepted Answer

A competitive firm maximizes profit where marginal cost equals marginal revenue, which is when the last unit of output adds the same amount to total revenue as to total cost (A). This is also the point where total revenue exceeds total cost by the largest amount (C).

Question 14

The graph below shows demand and marginal cost for a perfectly competitive firm.If the firm is producing 100 units of output,increasing output by one unit would ______ the firm's profit by $______.

Accepted Answer

The answer of The graph below shows demand and marginal...

Question 15

In order to minimize losses in the short run,a perfectly competitive firm should shut down if

Accepted Answer

In the short run, a perfectly competitive firm should shut down if total revenue is less than total variable cost. This is because in the short run, fixed costs cannot be avoided and must still be paid even if the firm shuts down. Therefore, the firm should only continue operating if it is able to cover its variable costs, which are typically the costs of producing each unit of output. If total revenue is less than total variable cost, then the firm is not even earning enough revenue to cover its production costs and it would be better off shutting down and minimizing its losses.

Question 16

Total cost schedule for a competitive firm: $$\begin{array} { c c } 
\text { Output } & \text { Tatal Cost } \
\hline 0 & \$ 10 \
1 & 60 \
2 & 80 \
3 & 110 \
4 & 165 \
5 & 245 \
\hline
\end{array}$$ If market price is $60,what is the maximum profit the firm can earn?

Accepted Answer

The firm maximizes profit where marginal cost equals market price. At output 3, total cost is $110, and revenue is $180 (3*$60), giving a profit of $70. At output 4, total cost is $165, and revenue is $240 (4*$60), giving a profit of $75, which is the maximum.

Question 17

When total fixed costs increase,

Accepted Answer

When total fixed costs increase, economic profit decreases because fixed costs are subtracted from total revenue to calculate profit.

Question 18

Total cost schedule for a competitive firm: $$\begin{array} { c c } 
\text { Output } & \text { Tatal Cost } \
\hline 0 & \$ 10 \
1 & 60 \
2 & 80 \
3 & 110 \
4 & 165 \
5 & 245 \
\hline
\end{array}$$ If market price is $30,how many units of output will the firm produce?

Accepted Answer

The firm will shut down because the market price is below the minimum average variable cost.

Question 19

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.In order to maximize profit,how much output should the firm produce?

Accepted Answer

To maximize profit, the firm should produce where marginal cost (MC) equals marginal revenue (MR), which is at point A in the graph on the right. At this point, the firm would produce 50 units and charge a price of $20 per unit. This is the point where the firm's short run supply curve intersects with the market demand curve. Producing any less than 50 units would result in lost profit, while producing any more than 50 units would result in decreasing profit due to higher marginal costs. Therefore, the best choice is to produce 50 units.

Question 20

For a price-taking firm,marginal revenue

Accepted Answer

For a price-taking firm, marginal revenue is equal to price at any level of output (Option C) and is the addition to total revenue from producing one more unit of output (Option A). Marginal revenue does not decrease as the firm produces more output, as the firm has no market power to affect the market price (Option B); therefore, options A and C are the correct choices, and the best answer is E, "both a and c."

Quiz 11: Managerial Decisions in Competitive Markets

Which of the following is NOT a characteristic of long-run equilibrium for a perfectly competitive firm?

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.What do you expect to happen in the long-run?

In a perfectly competitive industry the market price is $25.A firm is currently producing 10,000 units of output; average total cost is $28,marginal cost is $20,and average variable cost is $20.The firm should

Firm A and firm B both have total revenues of $200,000 and total costs of $250,000; firm A has total fixed costs of $40,000,while firm B has total fixed costs of $70,000.Which of the following statements are true in the short run?

The graph below shows demand and marginal cost for a perfectly competitive firm.If the firm is producing 300 units of output,decreasing output by one unit would the firm's profit by $.

In a perfectly competitive market

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.What is the maximum amount of profit the firm can earn?

Which of the following is NOT a condition of a perfect competition:

The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply. What is the marginal revenue for the FIRM from selling the 250th unit of output?

The total cost schedule for a competitive firm is given by: $\begin{array} { c c } \text { Output } & \text { Tatal Cost } \\\hline 0 & \$ 10 \\1 & 60 \\2 & 80 \\3 & 110 \\4 & 165 \\5 & 245 \\\hline\end{array}$ If market price is $60,how many units of output will the firm produce?

The graph below on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry.The graph on the right shows current industry demand and supply. What output should the firm produce?

A competitive firm will maximize profit by producing the level of output at which

The graph below shows demand and marginal cost for a perfectly competitive firm.If the firm is producing 100 units of output,increasing output by one unit would the firm's profit by $.

In order to minimize losses in the short run,a perfectly competitive firm should shut down if

Total cost schedule for a competitive firm: $\begin{array} { c c } \text { Output } & \text { Tatal Cost } \\\hline 0 & \$ 10 \\1 & 60 \\2 & 80 \\3 & 110 \\4 & 165 \\5 & 245 \\\hline\end{array}$ If market price is $60,what is the maximum profit the firm can earn?

When total fixed costs increase,

Total cost schedule for a competitive firm: $\begin{array} { c c } \text { Output } & \text { Tatal Cost } \\\hline 0 & \$ 10 \\1 & 60 \\2 & 80 \\3 & 110 \\4 & 165 \\5 & 245 \\\hline\end{array}$ If market price is $30,how many units of output will the firm produce?

Below,the graph on the left shows the short-run cost curves for a firm in a perfectly competitive market,and the graph on the right shows the current market conditions in this industry.In order to maximize profit,how much output should the firm produce?

For a price-taking firm,marginal revenue