Refer to Figure 14-1. If the market price is $13, the firm will earn O a. positive economic profits in the short run. Ⓒb. zero economic profits in the short run. O c. negative economic profits in the short run but remain in business. O d. negative economic profits and shut down. QIcon Kay Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: 20 18 16 14 10 MC 2 QUANTITY ATC

Refer to Figure 14-1. If the market price is $13, the firm will earn O a. positive economic profits in the short run. Ⓒb. zero economic profits in the short run. O c. negative economic profits in the short run but remain in business. O d. negative economic profits and shut down. QIcon Kay Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: 20 18 16 14 10 MC 2 QUANTITY ATC

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter12: Firms In Perfectly Competitive Markets

Section: Chapter Questions

Problem 13P

See similar textbooks

Similar questions

If new technology in a perfectly competitive market brings about a substantial reduction in costs of production, how will this affect the market?
What are the four basic assumptions of perfect competition? Explain in words what they imply for a perfectly competitive firm.
Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the firm not simply increase its profits by selling an extremely high quantity?
Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?
Briefly explain the reason for the shape of a marginal revenue curve for a perfectly competitive firm.
A market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers?
A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
What two lines on a cost curve diagram intersect at the shutdown point?
What two lines on a cost curve diagram intersect at the zero-profit point?
Firms ill a perfectly competitive market are said to be price takers that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?
The AAA Aquarium Co. sells aquariums for 20 each. Fixed costs of production are 20. The total variable costs are 20 for one aquarium, 25 for two units, 35 for the three units, 50 for four units, and 80 for five units. In the form of a table, calculate total revenue, marginal revenue, total cost, and marginal cost for each output level (one to five units). What is the Profit-maximizing quantity of output? On one diagram, sketch the total revenue and total cost curves. On another diagram, sketch the marginal revenue and marginal cost curves.
What is a price taker firm?