Chapter 10: Pure Competition in the short run

Refer to the above graph. At what price will the firm make an economic profit?

$10

The demand curve faced by a purely competitive firm:

Is the same as its marginal revenue curve

A firm should continue to operate even at a loss in the short run if

It can cover its variable costs and some of its fixed costs

Given the above graph, the competitive firm's supply curve is the:

MC curve above G

Consider the purely competitive firm pictured above. The firm is earning:

Normal profits since its price just covers ATC

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if:

Total revenue is less than total variable cost

Refer to the above graph. At the profit-maximizing level of output, the firm earns profits given by the area:

ABGH

In pure competition, the demand for the product if a single firm is perfectly

Elastic because many other firms produce the same product

In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is:

Equal to the price

Let us suppose Harry's, a local supplier of chili and pizza, has the following revenue and cost structure:

Harry's should stay open in the short run because fixed costs are covered by total revenue

The wage rate increases in a purely competitive industry. This change will result in a(n):

Increase in the marginal cost curve for a firm in the industry

Refer to the above graph. It shows short-run cost curves for a competitive firm. At what minimum price would the firm be willing to product some output in the short run?

P3

Which idea is inconsistent with pure competition?

Product Differentiation

A purely competitive firm will be willing to produce even at a loss in the short run, as long as:

The loss is smaller than its total variable costs

In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is:

Upward-sloping

To maximize your financial well-being, you should:

continue operating in the short run

A purely competitive firm can be identified by the fact that:

its average revenue equals its marginal revenue

A profit-maximizing firm in the short run will expand output

As long as marginal revenue is greater than marginal cost

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below:

Average Variable cost

Which of necessarily true for a purely competitive from in short0run equilibrium?

Marginal revenue minus marginal cost equals zero

Which is a feature of a purely competitive market?

Products are standardized or homogeneous

Refer to the above graph. Which of the output levels is the profit-maximizing output level for this firm?

Q3

Which of the following is true for a purely competitive firm in short-run equilibrium?

The firms marginal revenue is equal to its marginal cost

Given the diagram above, which level of output should the entrepreneur choose?

X3 since any increase in output will reduce profits

Refer to the above graph. The firm will earn maximum total profits if it produces and sells quantity

0c

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the twelfth pound would be:

$3

A purely competitive firm currently producing 20 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be:

$360

Refer to the above table. The market price of the product in the short run is:

$40

Refer to the above graph. This pure competitive firm will not produce unless price is at least:

$5

Refer to the above graph. At what price will the firm make just a normal profit?

$7

In pure competition, price is determined where the industry:

Demand and supply curve intersect

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Down of the individual firms MC curve, causing the market supply curve to shift to the right

Price is taken to be a "given" by an individual firm selling in a purely competitive market because:

Each seller supplies a negligible fraction of total market.