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Exam 14: Firms in Competitive Markets

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Question 71

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The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

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Question 72

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Figure 14-5 -Refer to Figure 14-5. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve? ? ? $\begin{array} { | c | c | c | } \hline \text { Point } & \begin{array} { c } \text { Price } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} \\\hline \text { A } & 4 & 16 \\\hline \text { B } & 4 & 32 \\\hline \text { C } & 6 & 6 \\\hline \text { D } & 8 & 64 \\\hline\end{array}$

A) A only
B) A and C only
C) B only
D) B and D only

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Question 73

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Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Figure 14-7 ​ -Refer to Figure 14-7. 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?

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

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

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?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. When market price is P₇, a profit-maximizing firm's short-run profits can be represented by the area

Figure 14-6 ​ -Refer to Figure 14-6. If the figure in graph (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in graph (b) most likely reflects

A competitive market has two basic characteristics. What are those two characteristics?

The idea of "spilt milk" is associated with what type of cost?

Figure 14-4 In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms. ​ -Refer to Figure 14-4. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

Which of the following represents the firm's short-run condition for shutting down?

Firms in a competitive market are said to be price takers because there are many sellers in the market, and the goods offered by the firms are very similar if not identical.

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. ​ ​ $\begin{array} { | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollarsper unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} \\\hline 5 & 0 \\\hline 5 & 1 \\\hline 5 & 2 \\\hline 5 & 3 \\\hline 5 & 4 \\\hline 5 & 5 \\\hline\end{array}$ -Refer to Table 14-2. For this firm, the average revenue from selling 4 units is

In a certain large city there are two firms that supply concrete. The concrete sold by the first firm is indistinguishable from the concrete sold by the second firm. Is the market competitive?

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

In a competitive market, firms are unable to differentiate their product from that of other producers.

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $12 value on reading a book.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: ​ -Refer to Figure 14-2. The firm will earn zero economic profit if the market price is