Chapter 15

Refer to Table 15-3. For this firm, the marginal revenue of the 13th unit is

$11

Refer to Figure 15-2. If the market price is $10, what is the firm's short-run economic profit?

$15

Refer to Scenario 15-2. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to

$18.00.

In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?

$2 per unit

Refer to Figure 15-2. The firm will earn zero economic profit if the market price is

$6.

Refer to Scenario 15-1 . At Q = 1,000, the firm's profits equal

. $1,000.

Refer to Scenario 15-2 . Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units?

. Yes, because the marginal revenue exceeds the marginal cost.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

. exactly triple.

Refer to Table 15-6. In order to maximize profits, the firm will produce

5 units of output because marginal revenue equals marginal cost.

Refer to Figure 15-7. Suppose a firm in a competitive market, like the one depicted in graph (a), observes market price rising from P1 to P2. Which of the following could explain this observation?

An increase in market demand from D0 to D1.

Suppose that in a competitive market the equilibrium price is $2.50. What is the marginal revenue for the last unit sold by the typical firm in this market?

Exactly $2.50

Which of the following statements regarding a competitive firm is correct?

For all firms, average revenue equals the price of the good.

Refer to Figure 15-3. Firms would be encouraged to enter this market for all prices that exceed

P4.

Refer to Figure 15-1. The firm will earn a positive economic profit in the short run if the market price is

above $13.

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

increase price in the short run but not in the long run.

The analysis of competitive firms sheds light on the decisions that lie behind the

market supply curve.

Refer to Figure 15-1. If the market price is $5, the firm will earn

negative economic profits and shut down.

Free entry means that

no legal barriers prevent a firm from entering an industry.

The accountants hired by Forever Fitness have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, Forever Fitness should

shut down because staying open would be more expensive.