Econ Exam 3 - CH 12

Refer to Figure 12-5. What is the minimum price the firm requires to produce output?

$5

Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit?

$6,750

Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is

180

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. If the market price of each camera case is $8, what is the profit-maximizing quantity?

400 units

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. What is the fixed cost of production?

$1,000

Refer to Figure 12-4. What is the amount of its total fixed cost?

$2,520

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. If the market price of each camera case is $8, what is the firm's total revenue?

$3,200

Refer to Figure 12-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

$3,960

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Each firm is too small to affect the market price

In long-run perfectly competitive equilibrium, which of the following is false?

Firms earn economic profit

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximizing output level?

It will remain the same.

Assume that after a banner year in U.S. farm exports in 2011, farmers are expected to break even in 2012. This means that at the quantity being produced in 2012,

MR=ATC

For a perfectly competitive firm, which of the following is not true at profit maximization?

Market price is greater than marginal cost

Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?

Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.

Refer to Figure 12-8. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Panel B (supply increases, demand stays same)

Refer to Figure 12-5. The firm's manager suggests that the firm's goal should be to maximize average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal?

Q = 1,100 units, average profit =$6

Refer to Figure 12-6. At price P2, the firm would produce

Q2 units

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

The firm will not sell any output

Which of the following is not a characteristic of a perfectly competitive market structure?

There are restrictions on exit of firms.

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?

Yes, it should continue to produce because it is minimizing its loss.

What is productive efficiency?

a situation in which resources are allocated such that goods can be produced at their lowest possible average cost

A perfectly competitive firm earns a profit when price is

above minimum average total cost

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

allocative efficiency

Assume that the tuna fishing industry is perfectly competitive. Which of the following best characterizes the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

an increasing-cost industry

Both individual buyers and sellers in perfect competition

have to take the market price as given

Perfect competition is characterized by all of the following except

heavy advertising by individual sellers.

The demand curve for an individual seller's product in perfect competition is

horizontal

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

increase its output

If a perfectly competitive firm's price is above its average total cost, the firm

is earning a profit

Refer to Figure 12-1. If the firm is producing 200 units,

it should increase its output to maximize profit

Refer to Figure 12-9. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. If the firm represented in the diagram continues to stay in business, in the long-run equilibrium,

it will expand its output to Q2 and face a price of P2

If a firm shuts down in the short run,

its loss equals its fixed cost.

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The price of each good is $10. Calculate the firm's short-run profit or loss

loss of 6,000

Refer to Figure 12-6. At price P4, the firm would

make a profit

Without government subsidization, the conversion of farmland in the United Kingdom from conventional to organic production will generally cause a farmer's

marginal cost and average total cost to increase.

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then

new firms are attracted to the industry

If a typical firm in a perfectly competitive industry is earning profits, then

new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

nothing at all; the firm shuts down.

Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 12-1. If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss?

profit of $440

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms.

In the long run, a perfectly competitive market will

supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve.

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units. By April 2009, more than 25,000 apps for the iPhone 3G were available in the iTunes store, an indication that in a competitive market

the ease at which a new firm can enter a competitive market is high.

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

the minimum efficient scale

Refer to Figure 12-9. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. In the long-run equilibrium,

there will be fewer firms in the industry and total industry output decreases.

Which of the following is the best example of a perfectly competitive industry?

wheat production

Refer to Figure 12-6. At price P1, the firm would produce

zero units