PrQ12: Practice Quiz - Ch. 12: Perfect Competition and the Supply Curve

Antonio sells cell phone cases in a perfectly competitive market. If Antonio sells 40 cell phone cases at a price of $40 per unit, his marginal revenue is:

$40.

(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit. Given a market price of $3, the firm's total revenue per day is:

$900.

(Figure: Revenues, Costs, and Profits for Avocado Producers III) Use Figure: Revenues, Costs, and Profits for Avocado Producers III. The market for avocados is perfectly competitive. If the market price of a bushel of avocados is $14, in the short run, the farmer's profit-maximizing output is _____ bushels.

4

(Table: Blueberry Farm) Use Table: Blueberry Farm. Henry and Ophelia own one of 100 farms in the perfectly competitive blueberry industry. If the price of blueberries is $5 per pound, in the short run, the industry will supply _____ pounds. Table: Blueberry FarmQuantity of Blueberries (in pounds)Total Cost0$217211313416521628738

500

(Table: Output and Cost Curves for Buckwheat Farm) Use Table: Output and Cost Curves for Buckwheat Farm. If the market price of a bushel of buckwheat is $17, how many bushels will the farmer produce to maximize short-run profit? Table: Output and Cost Curves for Buckwheat FarmQAFCAVCATCMC110017117172501666153331548134251439125201434136171431147141630268131830309111931351010223241119243348128273556

6

(Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run) Use Figure: Profit-Maximization for Fabulous Finn's Flower Firm in the Short Run. Which statement is TRUE?

AFC is represented by the vertical distance between curve N and curve O at any level of output.

Nikos' lawn-mowing service is a profit-maximizing, competitive firm. If Nikos mows ten lawns per day at a price of $27 per lawn and has a total cost of $280, of which $30 is a fixed cost, what should Nikos do in the long run?

Leave the industry, since he is not covering his fixed costs

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

P = ATC.

(Figure: Big Tree Organic Farms in the Short Run) Use Figure: Big Tree Organic Farms in the Short Run. Big Tree Organic is a perfectly competitive organic farm in Turlock, California. The minimum price that the farm must receive to produce in the short run is:

P.

(Figure: Joshua's Lawn Mowing Business) Use Figure: Joshua's Lawn Mowing Business. If Joshua's lawn mowing firm's MR curve is MR2, then the firm's optimal output is _____ units of output, and its economic profit will be _____.

Q2; negative

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

can be increased by decreasing production.

(Figure: The Marginal Decision Rule for Apple Farmers) Use Figure: The Marginal Decision Rule for Apple Farmers. Given the market price P1, B is the _____ curve.

demand

If the long-run market supply curve for a perfectly competitive market is upward sloping, then this industry exhibits _____ costs.

increasing

In the short run, fixed cost:

is constant.

For a firm producing at a quantity of output below the profit-maximizing quantity of output, an increase in output adds:

more to total revenue than to total cost.

For the Texas beef industry to be considered perfectly competitive, ranchers in Texas must have _____ on prices, and beef must be a _____ product.

no noticeable effect; standardized

Jennifer's Sunglass Hut operates in a perfectly competitive industry and has standard cost curves. The variable costs at Jennifer's Sunglass Hut decrease, so all the cost curves (except fixed cost) shift downward. The demand for Jennifer's sunglasses does not change, nor does the firm shut down. To maximize profits after the variable cost decrease, Jennifer's Sunglass Hut will _____ its price and _____ its level of production.

not change; increase

Generally, when preferences for a good rise, demand for the good rises. If a perfectly competitive market starts in long-run equilibrium, holding all else constant, this will result in a higher market price, which will lead to _____ in the industry and _____ the market. This causes price to _____.

positive economic profits; attracts new firms into; fall

Perfectly competitive industries are characterized by:

standardized goods.

In perfect competition:

total revenue is found by multiplying the market price by the firm's quantity of output.