AP ECON Maximizing Profit

Alice, Bud, and Celia can produce rubber bands in a perfectly competitive market. If they enter the market, the minimum average total cost for a bundle of rubber bands, for the three of them is $2, $3, and $4, respectively. If the market price is $2.10 per bundle, then

only Alice will enter the market

Cynthia is an Oklahoma wheat farmer. The demand for her wheat is

perfectly elastic

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

price is at least equal to the minimum average variable cost

Suppose a perfectly competitive firm is in long-run equilibrium with a price of $12. Then there is a permanent increase in demand. As a result, in the short run the market price _____ and in the long run the number of firms ____ and the price is ____ the price was in the short run.

rises; increases; lower than

The above figure shows a perfectly competitive firm. If the market price is $20 per unit, the firm

will stay open to produce and will earn a normal profit

The above figure shows a perfectly competitive firm. If the market price is $15 per unit, the firm

will stay open to produce and will incur an economic loss

If the market price is $50 per unit for a good produced in a perfectly competitive market and the firm's average total cost is $52, then the firm

has an economic loss of $2 per unit

Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260. In order to maximize her profit, she should produce the additional candle

if the market price for a candle is $12

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business

if the total revenue exceeds the total variable cost

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers, exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

increase

Mark owns a cattle ranch near Hugo, Oklahoma. Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost. In order to maximize his profit, Mark should

increase his output

Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter

is maximizing his profit and is earning an economic profit

A perfectly competitive firm's short-run supply curve is

its marginal cost curve above the AVC curve

If firms in a perfectly competitive market are earning an economic profit, then

new firms enter the market an the equilibrium profit of the initial firms decreases.

Jennifer's Bakery Shop produces baked goods in a perfectly competitive market. If Jennifer decides to produce her 100th batch of cookies, the marginal cost is $120. She can sell this batch of cookies at a market price of $110. To maximize her profit, Jennifer should

not produce this additional batch

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's economic profit?

$150

Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. At this price, how many lawns will Bill mow per week?

40

if it does not shut down, a perfectly competitive firm produce where marginal cost is equal to marginal revenue

always to maximize profit

Elsie is a perfectly competitive dairy farmer. If the market price of milk falls to $1.20 a gallon from $1.40 a gallon, Elsie

can sell as much milk as she wants at $1.20 a gallon

When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will

decrease

A perfectly competitive market is in equilibrium and then demand decreases. The decrease in demand means the market price will _____ and eventually there will be _______.

fall; exit by existing firms

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

greater than the average total cost of producing sugar

For a perfectly competitive syrup producer whose average total cost curve does not change, an economic profit could turn into an economic loss if the

market demand for syrup decreases

The firm's over-riding objective is to

maximize economic profit

suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that produce. The new long-run equilibrium will have

more firms in the market

The above figure illustrates a perfectly competitive firm. If the market price is $10 a unit, to maximize its profit (or minimize its loss) the firm should

shut down

When new firms enter the perfectly competitive Miami bagel market, the market

supply curve shifts rightward

If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then

the existing firms' economic profit decreases

The price charged by a perfectly competitive firm is

the same as the market price

If a struggling perfectly competitive furniture store in Detroit shuts down, it incurs an economic loss equal to its

total fixed cost