Chapter 15 Perfect Competition FINAL ECON 2302

The profit- maximizing output for this firm is

200 units Profit maximized when the vertical distance between the total revenue curve and the total cost curve is maximized.

If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel, what price and quantity combination is a point on the market supply curve for rice?

$2 and 200 bushels

The figure above shows the cost curves and marginal revenue curve for perfectly competitive firm Based of the figure above, what is the price of a can?

$3.00 per can

The firm in the figure above has a total revenue equal to

$3.00 x 7

The profit-maximizing quantity of output is

ROW D A firm will maximize profit at a quantity where marginal revenue is qual to marginal cost.

a perfectly competitive firm should shut down in the short-run if price falls below the minimum of

average variable costs

The price for the shutdown point is

between $0 and $2.99

for a perfectly competitive firm. If the market price is $15

economic profits will be zero When the market price is $15, the profit-maximizing output is 31 units. At that point price is equal to ATC, and profits will be zero.

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

The figure above above shows a firm's marginal revenue and marginal cost curves Based on the figure above, the price of a can is $8; if the price increased to $12, then the firm would

increase the amount of cans it produces

If new firms enter a perfectly competitive industry, the market supply

increases

The firm in the figure above is _____ that is equal to _____

incurring an economic loss; ($5.14-$3.00) x 7

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

incurs an economic loss of $2 per unit

If a perfectly competitive firm finds that the price exceeds its ATC, then the firm

is making an economic profit

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 os $2, and the marginal cost is $2, then Peter

is maximizing his profit and is making an economic profit

Based on the figure above, if the firm produces 7 cans per day, the firm _______________ maximizing its profit and is __________________.

is; incurring an economic loss

Based on the figure above, if the firm produces 10 cans per day, the firm ____________ maximizing its profit and is __________________.

is; making an economic profit

In the short run, a perfectly competitive firm ______________ make an economic profit and ___________ incur an economic loss.

might; might

In the short run, a perfectly competitive firm _______________ make an economic profit and ______________ incur an economic loss.

might; might

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

more firms in the market

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 firms total cost?

$1,000

a perfectly competitive form is producing 50 units of output, which it sells at the market price of $23 per unit. The firm's average total cost is $20. What is the firm's total revenue?

$1,150

for a perfectly competitive firm. This firm should shut down at any price below

$10 A firm should shut down only if the losses from continuing production exceed fixed costs. This happens when total revenue is less than total variable cost or price is less than average variable cost.

Use the figure above to answer this question. If the firm is maximizing profit, it will produce __________ units and make an economic profit of ________________.

1,200; $3,600

If the firm produces ___________ units, total cost will equal ______________.

1,200; $8,400

The figure above shows a firm's total revenue and total cost curves. Based on the figure above, when the firm maximizes its profit, it produces _____________ cans per day

10

To maximize its profit, the firm in the figure above produces ________________ cans per day and ___________________.

10 cans; earns an economic profit of $29

A perfectly competitive form should expand output when

price/ profit > Marginal Cost If an extra unit brings in more revenue than it costs to produce, it is adding to total profit. Total profits must increase in this case. Hence a competitive firm should expand the rate of production whenever price exceeds MC.

Each firm in a perfectly competitive industry

produces a good that is identical to that of the other firms

a perfectly competitive firm

sells a product that has perfect substitutes

Suppose that marginal revenue for a perfectly competitive form is $20. When the firm produces 10 units, its marginal cost is $20, its average total cost is $22 and its average variable cost is $17. Then to maximize its profit in the short run, the firm

should stay open and incur an economic loss of $20

Refer to the data figure, the shape of the total revenue curve indicates that the price of this good

stays the same as output rises The straight line total revenue curve has a constant slope of $10. That indicates that the price is always $10 even when output rises

Th firm in the figure above has a total cost equal to

$5.10 x 10

The firm in the figure above has a total cost equal to

$5.14 x 7

The figure above shows some of a firm's cost curves and its marginal revenue curve. Based on the figure above, what is the price of a can?

$8.00 per can

The firm in the figure above has a total revenue equal to

$8.00 x 10

A quantity level B

Marginal revenue is greater than marginal cost, so the firm should expand production Profit maximization occurs where marginal revenue equals cost. At quantity B, marginal revenue is greater than marginal cost, which tells the firm that it should expand production.

Use the figure above to answer this question. We know the figure shows _______________ market because the ___________.

a perfectly competitive, marginal revenue curve is horizontal

For a perfectly competitive firm. If the market price is $10

an economic loss will occur When the market price is $10, the profit-maximizing output is 25 units. At that point price is less than ATC, and economic losses will be incurred.

One requirement for an industry to be perfectly competitive is that in the industry there

are many firms for whom the efficient scale of production is small

In the short run, a perfectly competitive firm

can possibly make an economic profit or possibly incur an economic loss

If a perfectly competitive seller is maximizing profit and its making zero economic profit, which of the following will this seller do?

continue at the current output, making zero economic profit

The _______________ market is an example of _____________ type of market.

corn; a perfectly competitive

Suppose the price of a can was $5.10. In this case, to maximizing its profit , the firm illustrated in the figure above would

decrease its production and would make an economic profit

Suppose the firm's marginal cost of producing a can increases by $1 per can. Then, based on the figure above, the firm would

decrease the amount of cans it produces but not to zero cans

In the short run, a perfectly competitive firm can experience which of the following? i. an economic profit ii. an economic loss but it continues to stay open iii. an economic loss equal to its total fixed cost when it shuts down

i, ii, and iii

In part, perfect competition arises if i. each firm's minimum efficient scale is large relative to demand ii. each firm produces a good or service identical to those produced by its many competitors iii. there are significant barriers to entry

ii only

What is the difference between perfect competition and monopolistic competition?

in perfect competition, firm produces identical goods, while in monopolistic competition, firms produce slightly different goods.

Suppose the price of a can was $5.14. In this case, to maximize its .profit, the firm illustrated in the figure above would

increase its production and would make an economic profit

If Henry, a perfectly competitive lime grower is Southern California, can sell his limes at a price than his average total cost, Henry will

make an economic profit

In the long run, a firm in a perfectly competitive market will

make zero economic profit, so that its owners ear a normal profit

If a perfectly competitive form's total cost is less than the price, then the firm

makes an economic profit

The firm in the figure above is ____________ that is equal to ______________.

making an economic profit; ($8.00 - $5.10) x 10

the characteristics that describe a perfectly competitive industry include

many firms selling an identical product

A market with a large number of sellers

might be a monopolistically competitive or a perfectly competitive market

When firms in a perfectly competitive market are earning an economic profit, in the long run

new firms will enter the market

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

in which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

only perfect competition

a market in which many firms sell identical products is

only perfectly competition

in which of the following market types do all firms sell products so identical that buyers do not care from which firm they buy?

perfect competition

The market supply in the short run for the perfectly competitive industry is

the sum of the supply schedules of all firms

One requirement for an industry to be perfectly competitive is that

there are no restrictions on entry into or exit from the market