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- Consider the following figure for a perfectly competitive firm in the short run. Price, Costs MC ATC AVC 30 26 20 12 ------ 10 ..---- .---- 8 12 21 30 32 40 Output Suppose the industry price is $20. If the firm produces its profit-maximizing or loss-minimizing output, then it will make a equal to Loss; $420 Profit ; $240 Loss ; $180 Loss; $240Inverse Demand Equation: P = 170 - 4Qd Marginal Costs=\$10; MR = 170 - 8Qd A perfectly -competitive firm would charge a price of: a . $ 20 b. $10 . c.$100 d. 0a. Calculate profit for each quantity. How much should the firm produce to maximize profut ? b. Calculate marginal revenue and marginal cost for each quantity. Graph them. (Hint: Put the points between whole numbers. For example, the marginal cost between 2 and 3 should be graphed at ) At what quantity do these curves cross? How does this relate to your answer to part (a)? c. Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium?
- 4. The market for sugar consists of 3,500 identical, perfectly competitive firms, each with the following short-run total cost function: SRTC =1,500 + 35q². The market demand curve for sugar is Q= 11,200 -30P. What is each firm's maximum short-run profit? a. $0 b. $280 c. -$1,080 d. -$1,360 e. -$1,500Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: 10 9- 8 7. 6 اکیه 3.5 2 1- Price 1 2 3 4 MC 5 6 7 8 ATC AVC Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run? ◆a. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. b. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. ● C. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. d. Because the price is below the firm's average variable costs, the firms will shut down. 45PA PB PC 0 P D Competitive Firm MC ATC 8. With "PA," determine if this firm makes a ("positive" "negative" "zero") profit in the short run by showing the profit area geometically. 9. With "PA," the price will ("increase" "decrease" "not change") in the long run. Select the correct one. 10. In the long run, this firm eventually earns a positive" "negative" "zero") profit. Select the correct one.
- Suppose a firm in a competitive industry has the following cost curves: 10 4.5 3.5 9+ 8 7 6 3 ↑Price 2 1 2 3 4 5 MC ATC AVC + + 6 7 8 Quantity Refer to Figure 14-13. If the price is $6 in the short run, what will happen in the long run? a. Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. b. Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. C. Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. d. Because the price is below the firm's average variable costs, the firms will shut down.The diagram at the right shows the various short-run cost curves for a perfectly competitive firm. a. Based on the diagram, and the assumption that the firm is maximizing its profit, fill in the following table. The last three columns require only a "yes" or "no". Market Firm's Is Price > Is Price > Are Price ($) Output ATC? AVC? Profits Positive? $4 $5 $7 $8 $10 Price ($) $1Q $8 $7 $5 $4 135 MC 155:170190 210 Output ATC AVC6) Given that the competitve market pice is equal to P*, Should the firm shut down in the short run? Should it shut down in the long run? Explain. P P MC AVC ATC P=MR=AR=d o
- 20 MC I of d P4 ATC AVC P3 P2 a P1 Q, Q2 Q3 Output (Q) The diagram above shows cost curves for a Perfectly Competitive firm. In the short-run, its Short-Run Supply Curve is its MC curve at prices higher than: Select one: а. P4 b. P2 C. P3 d. P1 $$Perfect competition is an economic term that refers to a theoretical market structure in which all suppliers are equal and overall supply and demand are in equilibrium. Figure 23. 1 shows the price, marginal cost and average cost curves facing a perfectly competitive firm in the short run. Figure 23.1 Cost, pnce (Rand) B. R800 C. R960 20 D. R720 200 60 80 Output per day 100 MC AC What is the total revenue of the profit-maximising firm in the short run? A. R2 000 Price AVC @ KRefer to the information provided in Figure 9.2 below to answer the question(s) that follow. a. The industry b.A representative firm MC ATC AVC D, 0. 10 1213 15 Bushels of wheat Bushels of wheat Figure 9.2 Refer to Figure 9.2. If demand for wheat is D3, then in the long run O a. None of these is correct. Ob. the firm will exit the industry. new firms will enter the industry. O d. the firm will shut down. Price per bushel (S)