Micro Econ Test 3
Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $60 comma 000 a year, and he pays workers $110 comma 000 in wages. In return, he produces 150 comma 000 baskets of peaches per year, which sell for $3.00 each. Suppose the interest rate on savings is 5 percent and that the farmer could otherwise have earned $35 comma 000 as a shoe salesman. What is the farmer's economic profit?
What is the farmer's economic profit? The peach farmer earns economic profit of $ 195,000. What is the farmer's accounting profit? The peach farmer earns accounting profit of $ 280000
Refer to the diagram to the right which shows short run cost and demand curves for a monopolistically competitive firm in the market for designer watches. Should the firm represented in the diagram continue to stay in business despite its losses?
Yes, its total revenue covers its variable cost.
Suppose a monopolisticaly competitive firm sells a particular brand of jeans. The quantities of jeans sold per day at various prices are shown in the table below. Fill in total revenue and marginal revenue in the table below.
Calculate total revenue. Calculate marginal revenue by Subtracting total revenue column. the difference between the total revenue 1= 100 Total revenue 2 = 180 - Marginal revenue would be 80. The marginal revenue curve for this firm is below its demand curve.
The figure on the left represents the cost structure for a perfectly competitive wheat farmer with her average total cost (ATC) curve and marginal cost (MC) curvedashthis firm's cost curves are representative of most firms in the market. The figure on the right represents the market for wheat.
Characterize profits for the firms in this industry. Firms in this market are currently experiencing losses . What will be the market price at the long-run competitive equilibrium? The long-run equilibrium price will be $ 5. (Enter your response as an integer.) In long-run, firms will exit the market until the marginal firm is earning zero economic profit
Assume the market for apples is perfectly competitive
Graph - A STRAIGHT LINE
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. The table to the right shows the firm's demand and cost schedules. What is the marginal profit from producing and selling the 5th case?
5 55 275 130 answer 20
Farmer Jones grows oranges in Florida. Suppose the market for oranges is perfectly competitive and that the market price for a crate of oranges is $17 per crate. Fill in total revenue, average revenue, and marginal revenue in the table below.
All average revenue and marginal revenue will be 17$. Total revenue can be calculated 17x2=34, 17x3=51. ect
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. The table to the right shows the firm's demand and cost schedules. What is likely to happen to the product's price in the long run?
It will fall.
Suppose the market for cotton is perfectly competitive and that input prices decrease as the industry expands. Characterize the industry's long-run supply curve. The cotton industry's long-run supply curve will be
downward sloping because the long-run average cost of production will be decreasing.
What conditions make a market perfectly competitive? A market is perfectly competitive if
it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market.
Refer to the diagram to the right which shows cost and demand curves facing a profit-maximizing perfectly competitive firm. At price P1, the firm would
lose an amount equal to its fixed costs.
What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be
many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
The figure to the right represents the cost structure for a perfectly competitive firm with its average total cost (ATC) curve, average variable (AVC) curve, and marginal cost (MC) curve. Suppose the market price is $8.00 per unit. Will firms enter or exit the industry in the long run? If market price is $8.00, then firms will exit the market in the long run. What effect will firms exiting have on the market price? When firms exit,
market supply will decrease, increasing price.
What determines entry and exit of firms in a perfectly competitive industry in the long run? In a perfectly competitive industry in the long run,
new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.
Suppose Abercrombie & Fitch sells clothing in a monopolistically competitive LOADING... market and that a farmer sells oranges in a perfectly competitive market.
oranges straight across and demand curve sloping down
Suppose the figure to the right represents the market for a particular brand of shampoo, such as L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive. What is the firm's profit-maximizing price and quantity? The monopolistically competitive firm's profit-maximizing quantity is 10 thousand bottles of shampoo, and its profit-maximizing price is $ 2.00 per bottle.
quantity where MR =MC follow the graph up from that point to the demand curve and list the price.
Does the market system result in allocative efficiency? In the long run, perfect competition
results in allocative efficiency because firms produce where price equals marginal cost.
Does the market system result in productive efficiency? In the long run, perfect competition
results in productive efficiency because firms enter and exit until they break even where price equals minimum average cost.
The figure to the right represents the cost structure for a perfectly competitive wheat farmer with her average total cost (ATC) curve and marginal cost (MC) curve. At what market price will the wheat farmer break even? The wheat farmer will break even at a price of $ 4 per bushel. If the market price for wheat were indeed $4 per bushel, should the wheat farmer exit the industry in the long run? In the long run, the wheat farmer
should continue to produce wheat because breaking even is as high a return as she could earn elsewhere.
The figure to the right represents the cost structure for a perfectly competitive firm with its average total cost (ATC) curve, average variable (AVC) curve, and marginal cost (MC) curve. Fixed costs are $50.00. Suppose the market price is $13.00 per unit. Characterize the firm's profit. If the firm produces output, then it will experience losses . Should the firm instead shut down in the short run? In the short run, the firm should
shut down because price is less than average variable cost.
Suppose a local McDonald's hamburger restaurant raises the price of its cheeseburgers from $2.00 to $2.50. What will happen to the quantity of McDonald's cheeseburgers demanded? If McDonald's raises the price of it's cheeseburgers, then
some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because they may prefer McDonald's cheeseburgers to cheeseburgers at other fast minus food restaurants.
What is the supply curve for a perfectly competitive firm in the short run? The supply curve for a firm in a perfectly competitive market in the short run is
that firm's marginal cost curve for prices at or above average variable cost.
Refer to the diagram to the right. The marginal revenue from selling the additional unit Qb instead of Qa equals
the area (H-E).
Suppose the market for fast-food value meals is monopolistically competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive firm's value meals. How will this figure change as the market moves toward long-run equilibrium? In the long run,
the demand curve will shift to the right and become more inelastic because the firms are currently experiencing losses.
How should firms in perfectly competitive markets decide how much to produce? Perfectly competitive firms should produce the quantity where
the difference between total revenue and total cost is as large as possible.
In perfect competition
the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.
Assume the market for oranges is perfectly competitive. If the demand for oranges increases, will the market supply additional oranges? If the demand for oranges increases, then the market
will supply additional oranges because producers seek the highest return on their investments.
Refer to the table to the right. What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?
Output effect = $6.00; Price effect = minus$1.50
Which of the following is an expression of profit for a perfectly competitive firm? Profit for a perfectly competitive firm can be expressed as
Profit=(P-ATC) x Q, where P is price, Q is output, and ATC is average total cost.
