The graph below shows cost curves for a firm operating in a perfectly competitive market. 20+ Note: Blue curve = AVC Green curve = ATC Red curve = MC Black line is demand Quantity of Bags Suppose that the equilibrium price is $14.19 (black line). This firm is earning O Zero Economic Profits (Break-even point) O Profits OLosses Price of Bags

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Price (S) AB UD A) $(60-C) × 3 Quantity B) $(60-D) x 2 OC) $(60-B) × 5 OD) $(60-B) × 4 O E) $(60 - A) × 5 MC ATC Refer to the figure above, which indicates the short-run cost data for a typical firm in a perfectly competitive industry. If the price faced by a perfectly competitive firm is equal to $60, then this firm will earn profits of......if it maximizes profits. p = $60 AVC

Suppose the costs of a perfectly competitive firm are given by TC = 30 +3Q+0.5Q2 and MC= 3+Q. The supply equation of the firm is, therefore, Q = -3 + P. If the market price is $13, what is the total profit of the firm? O $20 $130 -$110 O $10

Price (dollars) 8 7 6 5 4 3 2 1 0 80 O increase; increase; increase O remain same; remain same; decrease O decrease; remain same; decrease O decrease; decrease; decrease Short-run Short-run MC AC 100 110 The graph above shows the cost curves for a firm selling in a perfectly competitive market. If the market demand falls due to a recession, the long run equilibrium price will output will ., the firm's and industry output will Output (per day) Long-run AC

What is a price taker? A price taker is O A. a firm with a downward-sloping demand curve. O B. a firm that is unable to affect the market price. Oc. a firm with a perfectly inelastic demand curve. O D. a firm that has the ability to charge price greater than marginal cost. O E. a firm that does not seek to maximize profits. When are firms likely to be price takers? A firm is likely to be a price taker when O A. it sells a differentiated product. O B. barriers to entry are substantial. OC. it has market power. O D. it represents a small fraction of the total market,. O E. firms in the industry collude.

Suppose we have a firm in a perfectly competitive market. Assume that we have the usual shaped cost curves. At a market price of $15 the profit maximizing firm produces 53 units. Something changes that causes the firm to produce a quantity of zero at a price of $15 in the short-run. Which of the changes below can explain the change in the firm's behavior? O An increase in the fixed cost and a decrease in the marginal cost. O An increase in the fixed cost. O An increase in the marginal cost. O A decrease in the market price.

2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 b) 36 32 28 24 20 16 2 8 4 0 MC 0 2 4 + 10 12 14 16 18 20 QUANTITY (Thousands of wind chimes per day) 8 market: a) In short run, at a market price of $26 per wind chime how much will firm ATC AVC 6 the market price is $26 in th quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the…

Suppose that marginal revenue for a perfectly competitive firm is $20. When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm A) should stay open and incur an economic loss of $20. B) must decrease its output to increase its profit. C) must increase its output to increase its profit. O D) should not change its production because it is already maximizing its profit and is making an economic profit. E) should shut down.

Figure shows the cost structure of a firm in a perfectly competitive market. at the market price $30, the break-even output is: Р. $30-- $25 $13 $5 O a. 1,000 O b. 450 O c. 30 O d. 800 450 MC 800 1,000 AT AV