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