1. Consider the following table. Suppose that FC = $10. What is the level of output set by a competitive firm when P = $18? Q 0 1 2 3 4 5 TC 10 51 78 97 114 135 ( ) A. The firm shuts down. ( ) B. 1 unit

67. In a perfectly competitive market, industry demand is given by Q = 1000 – 20P. The typical firm’s average cost is TC = 300 + Q2 /3, and marginal cost by MC = (2/3)Q. Suppose there are 10 identical firms in the market. What is the market supply? A. 30Q B. 40Q C. 15Q D. 5Q

13 12 11 10 9 2.) Suppose that a firm in a competitive market has the following cost curves: ↑ Price 8 7. 6.36 5. 4.5 4+ 3 2+ 1 1 2 3 4 MC J ATC AVC 5 5 6 7 8 9 10 11 Quantity a.) What price should the firm shut down below? b.) What's the range of prices where the firm would earn negative profit in the short run? c.) Below what price would the firm exit? d.) What range of prices would provide the firm positive profits? e.) At what quantity is ATC minimized? f.) What is the long run equilibrium price? What does each firm earn at that price? If the price is $5 in the short run, what happens in the long run to get the price back to the long-run equilibrium?

Use the figure below to answer the following questions. Price and cost (dollars per unit) 100 90 85 80 70 55 40 0 MR₂ MC ATC La MR₁ 100 140 200 220 250 Quantity (units per week) Figure 13.2.3 Refer to Figure 13.2.3. Assume this firm faces demand curve D2. If the firm produces the efficient quantity, it makes zero economic profit. makes an economic profit. will face competition from new firms entering the industry. is in a long-run equilibrium. incurs an economic loss.