The firm is perfectly competitive is evident from its a)increasing marginal cost b)increasing total cost c)zero economic profits d)constant marginal revenue e)absence of marginal values at Q=0.

A perfectly competitive firm will be operating at its shutdown point if it operates at the minimum point on its ________ cost curve. a )     average total b )     marginal c )     total d )     average variable

Match the words from the list below to complete the following statement A price taker firm will maximise by changing output, until equals marginal cost. average cost output total revenue marginal revenue marginal cost profit

Use the values for a perfectly competitive firm below to answer the questions:  Price Quantity  Total Cost  Fixed Cost Variable Cost $10 2,000 $24,000 $8,000 $16,000 (A) Should this firm shut down in the short run? (B) Assume this firm's total costs do not change in the long run. Should this firm exit in the long run?  (C) Are your answers to (a) and (b) different? Explain in one to four sentences.

Problems: Question #6: The Phantom Farms bakery produces pumpkin pies according to the following short run cost schedules. Assume the pumpkin pie industry is perfectly competitive and that the bakery can only produce and sell whole pies. AVC = ATC = MC = Quantity (pies) TFC = total TVC = total TC = total fixed cost variable cost average average total marginal cost variable cost cost cost (i) same as (i) 1 14 18 14.0 18 14 2 same as (i) (ii) 28 12.0 14 10 3 same as (i) 38 42 12.7 (v) 14 4 same as (i) 60 (iii) 15.0 16 22 same as (i) 86 90 17.2 18 (vi) same as (i) 116 120 (iv) 20 30 Fill in the five missing cost numbers indicated in the table above. (i) (ii) (iii) (iv) (v) (vi) If the price of pumpkin pies is $22 per pie, how many pies should Phantom Farms produce in the short run? What profit or loss does the firm earn? Explain how you arrived at this answer. Illustrate Phantom Farms' choice with a graph and indicate profits or losses. 3

The demand curve facing a perfectly competitive firm is: a)the same as the market demand b)downward-sloping and less flat than the market demand curve c)downward-sloping and flatter than the market demand curve d)perfectly horizontal e)perfectly vertical