HPU ECO2030 Principals of Microeconomics - Homework 6

A purely competitive seller is

a "price taker."

If the demand curve faced by a single profit-maximizing firm is downward-sloping, the firm cannot be

a purely competitive firm.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce

0 units at a loss of $150.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit (i.e. zero economic profit), each must have a total cost of

20,000

The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is

3

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $35, it will produce

6 units at a loss of $90.

Which of the following is true under conditions of pure competition?

No single firm can influence the market price by changing its production level.

Which of the following is a feature of a purely competitive market?

Products are standardized or homogeneous.

Which of the following is not a necessary characteristic of a purely competitive industry?

The industry or market demand is highly elastic.

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should

add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost.

For a purely competitive seller, price equals

all of these.

Refer to the diagram for a purely competitive producer. If product price is P 3,

economic profits will be zero.

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

elastic because many other firms produce the same product.

In the provided diagram, at the profit-maximizing output, total profit is

fgab.

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation

is making an economic profit of $40.

In the provided diagram, the profit-maximizing output

is n.

A perfectly elastic demand curve for a perfectly competitive producer implies that the firm

is selling a differentiated (heterogeneous) product.

Profit-maximizing firms (e.g. in a perfectly competitive industry) will determine the profit-maximizing (or loss-minimizing) output by equating

marginal revenue and marginal cost.

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices

between P2 and P3.

When a firm is maximizing profit, it will necessarily be

maximizing the difference between total revenue and total cost.

If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should

not change its output.

The demand schedule or curve confronted by a single purely competitive firm is

perfectly elastic.

Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is

the bcd segment and above on the MC curve.

Refer to the diagram for a purely competitive producer. If product price is P4,

the firm will make a loss by producing output.

Economists use the term imperfect competition to describe

those markets that are not purely competitive.

The Marginal Revenue (MR) = Marginal Cost (MC) rule applies

to firms in all types of industries.

Firms seek to maximize

total economic profit.

A firm reaches a break-even point (normal profit position) where

total revenue and total cost are equal.

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

total variable costs.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

will also be $5.

If the market demand for the product increases, in the short run a purely competitive firm

will earn higher profits or experience smaller losses as a result of the change in the market.

Suppose you find that the price of your product is less than minimum AVC. You should

close down because, by producing, your losses will exceed your total fixed costs.

Marginal revenue is the

change in total revenue associated with the sale of one more unit of output.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. We can infer that, at zero output, this firm's total fixed, total variable, and total costs are

$150, zero, and $150, respectively.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ________ and total cost is ________.

$20; $70

The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be

$3 and $18,000, respectively.

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 12th pound of pork would be

$3.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have an average total cost of

$3.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit, each must have a marginal cost of

$3.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. At the equilibrium price, each of the 100 firms in this industry will produce

600,000 units of output.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $68.10, it will produce

8 units at an economic profit of $130.72.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce

9 units at an economic profit of $281.97.

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

All firms produce a standardized and homogeneous product.

In a purely competitive industry, each firm

Can easily enter or exit the industry

Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is

P2

Which of the following is an important characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output.

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

produce because the resulting loss is less than its TFC.

The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output, total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should

produce zero units of output.

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the

profit-maximizing rule.

An industry comprising a very large number of sellers producing a standardized product is known as

pure competition.