Question 1

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. The short-run supply curve for this perfectly competitive firm is its

Accepted Answer

In the short run, a profit-maximizing firm in a perfectly competitive industry will produce as long as its price is greater than or equal to its AVC. This means that the firm's supply curve will be its marginal cost curve above its AVC. In the given diagram, the AVC curve is at and above $1.50, and the marginal cost curve is at and above $1.50 as well. Therefore, the short-run supply curve for this firm is its marginal cost curve at and above $1.50. Thus, the correct answer is E.

Question 2

The supply curve for a perfectly competitive industry is the horizontal summation of the individual firmsʹ

Accepted Answer

The answer of The supply curve for a perfectly competitive...

Question 3

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-A perfectly competitive firm facing a price of $4.00 is currently producing an output level where average variable cost is $2.00, average total cost is $4.00, and marginal cost is $3.00. In order to maximize profits, this firm should

Accepted Answer

The firm is currently producing at a point where MC = $3.00 and ATC = $4.00, which means it is earning a profit of $1.00 per unit. Since the market price is also $4.00, the firm should continue to produce and maximize profits by increasing output until MC = $4.00 (the point where ATC is at its minimum). At this production level, the firm will earn zero economic profit but will still cover all of its costs, thus remaining in business in the long run.

Question 4

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. If the current market price is $6, the profit-maximizing output for this firm is

Accepted Answer

The answer of Consider the following short-run cost curves for...

Question 5

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B.
  FIGURE 9-4
-Refer to Figure 9-4. If both Firms A and B are producing a level of output such that the slope of the TC curve is equal to the slope of the TR curve,

Accepted Answer

The answer of Consider the total cost and revenue curves...

Question 6

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Consider a perfectly competitive firm that is producing a level of output such that price equals average total cost and average total cost is less than marginal cost. In order to maximize its profits, the firm should

Accepted Answer

The answer of Consider the following short-run cost curves for...

Question 7

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B.
  FIGURE 9-4
-Refer to Figure 9-4. Given its total cost and revenue curves, Firm B should

Accepted Answer

The profit maximizing output level for a perfectly competitive firm is where marginal revenue equals marginal cost. In this case, the slope of the TR curve is equal to the slope of the MR curve, and so maximizing profits requires Firm B to produce where the slope of the TC curve equals the slope of the TR curve. This occurs at an output level of 6, where TC = $30 and TR = $36, resulting in profits of $6. Choosing any other output level would result in lower profits or losses. Therefore, Firm B should maximize its profits by producing 6 units of output.

Question 8

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. The short-run supply curve for the industry in which this firm operates is

Accepted Answer

The answer of Consider the following short-run cost curves for...

Question 9

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. If the market price is $2, the firm will

Accepted Answer

At a market price of $2, the firm's average variable cost is $2.50, which is greater than the market price, meaning that the firm is making a loss on each unit it produces. However, the firm's average total cost is only $3, which is less than the market price, so the firm can still cover some of its fixed costs. Therefore, the best option for the firm is to continue operating in the short run and suffer a loss that is less than its fixed cost. Producing zero output would result in a loss equal to its fixed cost, while producing any positive amount of output would result in a smaller loss, with the lowest possible loss occurring at the output level where marginal cost equals marginal revenue. However, none of the options D or E are possible as both choices recommend producing output at a loss that is greater than total fixed cost or total variable cost, respectively.

Question 10

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps.  TABLE 9-1
-Refer to Table 9-1. Suppose this firm is producing 2000 mousetraps and average variable cost is $5.50. What level of economic profit is this firm earning?

Accepted Answer

The answer of Consider the price and quantity data below...

Question 11

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. If the price is $6 and the firm is producing at its profit-maximizing output, then total costs for the firm are

Accepted Answer

The answer of Consider the following short-run cost curves for...

Question 12

Consider the following cost curves for two perfectly competitive firms, A and B.
  FIGURE 9-3
-Refer to Figure 9-3. If Firm B is producing at output level q2, and selling its output at p0, then Firm B should

Accepted Answer

The answer of Consider the following cost curves for two...

Question 13

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B.
  FIGURE 9-4
-The short-run supply curve for a perfectly competitive firm is

Accepted Answer

In the short-run, a perfectly competitive firm will produce at the quantity where marginal cost (MC) equals marginal revenue (MR) and where MC is rising. This occurs at the intersection of the MC curve and the rising portion of the average variable cost (AVC) curve. The short-run supply curve for the perfectly competitive firm is therefore the portion of the MC curve above the AVC curve. Choice D is the only one that matches this description.

Question 14

A perfectly competitive firm is currently producing an output level where price is $10.00, average variable cost is $6.00, average total cost is $10.00, and marginal cost is $8.00. In order to maximize profits, this firm should

Accepted Answer

This firm is currently producing at a point where price is equal to average total cost (ATC). Therefore, it is earning zero economic profit. To maximize profit, the firm should produce at a point where marginal cost (MC) equals price. In this case, the marginal cost is less than the price. This suggests that the firm can increase its profit by increasing its output. As such, the firm should increase its output until MC equals price, which in this case would mean increasing its output. Therefore, the correct choice is C.

Question 15

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps.  TABLE 9-1
-Refer to Table 9-1. Suppose this firm is producing 1500 mousetraps and its average total cost is $5.10 per unit. The firm will be

Accepted Answer

To determine the profit or loss, we need to calculate the total revenue and total cost. Total revenue can be calculated by multiplying the price by the quantity:

$3.00 * 1500 = $4500

Total cost can be calculated by multiplying the average total cost by the quantity:

$5.10 * 1500 = $7650

Since total cost is greater than total revenue, the firm is experiencing a loss of:

$7650 - $4500 = $3150

This means the firm is losing $2.10 per unit ($3150 / 1500). Therefore, the answer is E, suffering losses of $150.

Question 16

Consider a firm in a perfectly competitive industry. The shut-down point is the price at which the firm can just cover its

Accepted Answer

The answer of Consider a firm in a perfectly competitive...

Question 17

Consider the following cost curves for two perfectly competitive firms, A and B.
  FIGURE 9-3
-Refer to Figure 9-3. Firms A and B are in the same industry. Choose the statement that best describes the situation facing the two firms.

Accepted Answer

The answer of Consider the following cost curves for two...

Question 18

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps.  TABLE 9-1
-Refer to Table 9-1. Suppose this firm is producing 1250 mousetraps and its average total cost is $4 per unit. The firm will be

Accepted Answer

The answer of Consider the price and quantity data below...

Question 19

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B.
  FIGURE 9-4
-Refer to Figure 9-4. Given its total cost and revenue curves, Firm A should

Accepted Answer

The answer of Consider the total cost and revenue curves...

Question 20

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
  FIGURE 9-2
-Refer to Figure 9-2. If the market price is $1, the firm will produce units of output in the short run.

Accepted Answer

At a market price of $1, the firm will not produce any units of output because the price is below the firm's minimum average variable cost. The firm would incur losses if it produced any output at this price.

Quiz 9: Competitive Markets

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. The short-run supply curve for this perfectly competitive firm is its

The supply curve for a perfectly competitive industry is the horizontal summation of the individual firmsʹ

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. If the current market price is $6, the profit-maximizing output for this firm is

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B. FIGURE 9-4 -Refer to Figure 9-4. If both Firms A and B are producing a level of output such that the slope of the TC curve is equal to the slope of the TR curve,

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B. FIGURE 9-4 -Refer to Figure 9-4. Given its total cost and revenue curves, Firm B should

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. The short-run supply curve for the industry in which this firm operates is

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. If the market price is $2, the firm will

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. TABLE 9-1 -Refer to Table 9-1. Suppose this firm is producing 2000 mousetraps and average variable cost is $5.50. What level of economic profit is this firm earning?

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. If the price is $6 and the firm is producing at its profit-maximizing output, then total costs for the firm are

Consider the following cost curves for two perfectly competitive firms, A and B. FIGURE 9-3 -Refer to Figure 9-3. If Firm B is producing at output level q2, and selling its output at p0, then Firm B should

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B. FIGURE 9-4 -The short-run supply curve for a perfectly competitive firm is

A perfectly competitive firm is currently producing an output level where price is $10.00, average variable cost is $6.00, average total cost is $10.00, and marginal cost is $8.00. In order to maximize profits, this firm should

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. TABLE 9-1 -Refer to Table 9-1. Suppose this firm is producing 1500 mousetraps and its average total cost is $5.10 per unit. The firm will be

Consider a firm in a perfectly competitive industry. The shut-down point is the price at which the firm can just cover its

Consider the following cost curves for two perfectly competitive firms, A and B. FIGURE 9-3 -Refer to Figure 9-3. Firms A and B are in the same industry. Choose the statement that best describes the situation facing the two firms.

Consider the price and quantity data below for a perfectly competitive firm producing mousetraps. TABLE 9-1 -Refer to Table 9-1. Suppose this firm is producing 1250 mousetraps and its average total cost is $4 per unit. The firm will be

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B. FIGURE 9-4 -Refer to Figure 9-4. Given its total cost and revenue curves, Firm A should

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2. If the market price is $1, the firm will produce units of output in the short run.