Question 1

A firm in a competitive market has the following cost structure:  If the market price is $8,how many units of output should the firm produce to maximize profit?

Accepted Answer

The answer of A firm in a competitive market has...

Question 2

A profit-maximizing firm in a competitive market is currently producing 200 units of output.It has average revenue of $9 and average total cost of $7.It follows that the firm's

Accepted Answer

Since the firm is in a competitive market, it takes the price as given, which is equal to the average revenue of $9. The firm is maximizing profit where marginal revenue (MR) equals marginal cost (MC). Also, since the average total cost (ATC) is less than the price, the firm is making a profit.

Given ATC = $7, we can assume that the firm's MC is also $7 at 200 units of output. Therefore, we can conclude that:
A) Average total cost curve intersects the marginal cost curve at an output level of less than 200 units - This is false, because the MC curve intersects the ATC curve at the minimum point of the ATC curve. Since the ATC curve is upward sloping, the minimum point is at the lowest output level. Therefore, the MC curve must intersect the ATC curve at an output level greater than 200 units.
B) Average variable cost curve intersects the marginal cost curve at an output level of less than 200 units - This may or may not be true, depending on the shape of the AVC curve. If the AVC curve is U-shaped, then the MC curve will intersect it at an output level less than 200 units. However, we don't have any information about the shape of the AVC curve, so we can't make this conclusion.
C) Profit is $400 - This is true. Profit equals (price - ATC) multiplied by output. Using the given information, we have:

Profit = ($9 - $7) x 200 = $400

D) All of the above are correct - This is false, because we have already shown that (A) is incorrect.

Question 3

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

If a firm is operating in the short run at a price above its average total cost of production, it will be earning profits. However, in the long run, new firms will enter the market in search of the high profits being earned by the existing firm. This increased competition will lead to an increase in supply, which will push the market price down. As a result, the existing firm will no longer be able to charge a price above its average total cost of production, and its profits will fall. Therefore, all of the above options are correct.

Question 4

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $125,000.Because of this information,in the short run,the Brookside Racquet Club should

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Question 5

Mrs.Smith operates a business in a competitive market.The current market price is $8.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Accepted Answer

Mrs. Smith should continue to operate in both the short run and long run because she is able to cover her variable costs and make a profit in the short run. Additionally, even though she is not covering her fixed costs in the short run, she has the potential to do so in the long run by adjusting her production level and improving efficiency.

Question 6

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

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Question 7

Susan quit her job as a teacher,which paid her $36,000 per year,in order to start her own catering business.She spent $12,000 of her savings,which had been earning 10 percent interest per year,on equipment for her business.She also borrowed $12,000 from her bank at 10 percent interest,which she also spent on equipment.For the past several months she has spent $1,000 per month on ingredients and other variable costs.Also for the past several months she has earned $4,500 in monthly revenue.

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The answer of Susan quit her job as a teacher,which...

Question 8

A firm in a competitive market has the following cost structure:  If the market price is $16,this firm will

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The answer of A firm in a competitive market has...

Question 9

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

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The answer of For any given price,a firm in a...

Question 10

Consider a competitive market with 50 identical firms.Suppose the market demand is given by the equation Q^D = 200 - 10P and the market supply is given by the equation Q^S = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market. How many units should a firm in this market produce to maximize profit?

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The answer of Consider a competitive market with 50 identical...

Question 11

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Accepted Answer

Mrs. Smith's average total cost is greater than the market price, which means that she is not covering her total costs and is making a loss. Therefore, she should shut down in the short run. In the long run, if she continues to make losses, she should also shut down permanently.

Question 12

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

If the firm is operating at a price above its average total cost of production in the short run, it is earning economic profits. This will attract new firms to enter the market in search of these profits, which will increase competition and eventually drive down the market price. Therefore, in the long run, the firm should expect new firms to enter the market, making choice A the correct answer. The other choices (B and C) are incorrect as they assume that the market price or the firm's profits will increase, which is not likely to happen in the long run due to increased competition.

Question 13

Mrs.Smith operates a business in a competitive market.The current market price is $8.10.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

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The answer of Mrs.Smith operates a business in a competitive...

Question 14

If a profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost,it should

Accepted Answer

If the price is greater than the marginal cost, it means the firm can increase its profit by producing more output. Therefore, the firm should increase its output to the level where marginal cost equals price.

Question 15

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,the Brookside Racquet Club should

Accepted Answer

In the short run, it would be more expensive for the Brookside Racquet Club to shut down since they would still have to pay their fixed costs. Therefore, it is best for them to stay open and continue to generate some revenue to cover their fixed costs. Though the club is not making an economic profit, it is still covering its variable costs and contributing towards covering its fixed costs.

Question 16

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

The answer of A profit-maximizing firm in a competitive market...

Question 17

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Accepted Answer

In a competitive market, a firm aims to maximize its profit. By comparing marginal revenue and marginal cost, the firm can determine the level of production that will generate the highest possible profit. If marginal revenue is greater than marginal cost, then the firm should increase production to maximize profit. If marginal cost is greater than marginal revenue, then the firm should decrease production to maximize profit. Therefore, the objective of a firm in a competitive market is to maximize its profit by adjusting its production level in response to changes in marginal revenue and marginal cost.

Question 18

A firm in a competitive market has the following cost structure:  If the firm's fixed cost of production is $3,and the market price is $10,how many units should the firm produce to maximize profit?

Accepted Answer

The answer of A firm in a competitive market has...

Question 19

When price is greater than marginal cost for a firm in a competitive market,

Accepted Answer

When price is greater than marginal cost, it means that the firm can increase its profit by producing more. This is because the additional units produced will have a lower marginal cost than the price received for selling them, resulting in additional profit. Therefore, there are opportunities to increase profit by increasing production.

Question 20

Profit-maximizing firms enter a competitive market when existing firms in that market have

Accepted Answer

A profit-maximizing firm will only enter a competitive market if its average total costs are lower than the market price. If the market price is lower than the average total cost, the firm would suffer losses in the long run.

Quiz 13: Firms in Competitive Markets

A firm in a competitive market has the following cost structure: If the market price is $8,how many units of output should the firm produce to maximize profit?

A profit-maximizing firm in a competitive market is currently producing 200 units of output.It has average revenue of $9 and average total cost of $7.It follows that the firm's

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $125,000.Because of this information,in the short run,the Brookside Racquet Club should

Mrs.Smith operates a business in a competitive market.The current market price is $8.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

A firm in a competitive market has the following cost structure: If the market price is $16,this firm will

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Mrs.Smith operates a business in a competitive market.The current market price is $8.10.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

If a profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost,it should

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,the Brookside Racquet Club should

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3,and the market price is $10,how many units should the firm produce to maximize profit?

When price is greater than marginal cost for a firm in a competitive market,

Profit-maximizing firms enter a competitive market when existing firms in that market have