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Exam 14: Firms in Competitive Markets

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Question 31

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When a firm sells 1 million coat hangers, its total revenue is $2 million. When it sells 2 million coat hangers, its total revenue is $3.5 million. Is this firm a price taker? Explain.

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No. When the firm sells 1 million coat h...

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Question 32

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Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

A) above $13.
B) less than $13 but more than $6.
C) less than $6.
D) exactly $13.

E) A) and B)
F) A) and C)

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Question 33

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For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal.

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Which of the following expressions is correct for a competitive firm?

In the long run, when price is greater than average total cost, some firms in a competitive market will choose to enter the market.

A competitive firm sells 100 units of output for $5 per unit. The firm's marginal revenue amounts to __________.

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. ​ ​ -Refer to Table 14-4. What is the marginal revenue from selling the 3rd unit?

When the process of entry and exit has ended in a competitive market, are firms' profits positive, negative, or zero?

Table 14-9 A firm in a competitive market has the following cost structure: ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Marginal Cost } \\\text { (Dollars) }\end{array} \\\hline 0 & - \cdot \\\hline 1 & 5 \\\hline 2 & 10 \\\hline 3 & 15 \\\hline 4 & 20 \\\hline 5 & 25 \\\hline\end{array}$ ​ -Refer to Table 14-9. Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation Q^D = 200 ? 10P and the market supply is given by the equation Q^S = 10P. How many units should a firm in this market produce to maximize profit?

When an individual firm in a competitive market increases its production, it is likely that the market price will fall.

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

When it produces and sells 90 units of output, a competitive firm's average total cost is $42 and its profit is $360. What is the firm's marginal revenue if it sells 100 units of output?

Scenario 14-2 The information below applies to a competitive firm that sells its output for $45 per unit. • When the firm produces and sells 120 units of output, its average total cost is $23.5. • When the firm produces and sells 121 units of output, its average total cost is $23.65. -Refer to Scenario 14-2. Suppose the firm is producing 120 units of output and its fixed cost is $950. Then its average variable cost amounts to

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Total Revenue } \\\text { (Dollars) }\end{array} \\\hline 13 & 91 \\\hline 15 & 105 \\\hline 17 & 119 \\\hline 19 & 133 \\\hline 21 & 147 \\\hline\end{array}$ -Refer to Table 14-3. For this firm, the marginal revenue of the 15th unit is

Scenario 14-2 The information below applies to a competitive firm that sells its output for $45 per unit. • When the firm produces and sells 120 units of output, its average total cost is $23.5. • When the firm produces and sells 121 units of output, its average total cost is $23.65. -Refer to Scenario 14-2. When the firm produces 120 units of output, its profit is

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.