Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 10, Problem 4RQ
To determine
Relevance of perfect competition .
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Consider the following costs for a typical perfectly competitive firm with no fixed costs (average total cost = average variable cost).
Average Total
Cost
Quantity
Marginal Cost
$24
1.
16.5
6$
12.67
3.
7.
15
11.25
12
5.
14.83
9.
a. Which of the following prices would be associated with a long-run equilibrium?
O $11.25
O $15
O $12
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Given the information in the table is this a competitive or non-competitive firm? In the short run, how many units should the firm produce to maximize its profit?
Output
Total Revenue
Marginal Cost
$0
$6
$1
2.
$12
$2
3.
$18
$3
4.
$24
$5
$30
$7
O A. non-competitive; 3
O B. non-competitive; 0
OC. competitive; 4
O D. competitive; 5
O E. competitive; 0
O F. non-competitive; 5
O G. there is not enough information to determine whether it is a competitive or non-competitive firm; 4
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If a graph of a perfectly competitive firm shows that the MR-MC point occurs where MR (which is equal to the price for perfectly competitive firms) is below AVC and ATC,
Ⓒa. the firm is earning negative profit, but will continue to produce where MR=MC in the short run.
O b. the firm is earning negative profit, and will shut down rather than produce that level of output.
O c. the firm can cover all of fixed costs but only a portion of variable costs.
O d. the firm is covering explicit, but not implicit, costs.
O e. the firm is still earning positive profit, as long as variable costs are covered.
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- Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of pens is currently $1.50, what would you expect it to be in the long run? LO11.2 a. $0.25. b. $1.00. c. $1.25. d. $1.50.arrow_forwardConsider the following data facing a perfectly competitive firm: price = $20, quantity of output produced = 600 units, average total cost = $16, average fixed cost = $12, and marginal cost = $22. This firm should O a. increase output to maximize profit. O b. not change output in the short run since profit is already maximized. O c. shut down immediately. O d. reduce output but not shut down in the short run to maximize profit. O e. raise price above $20 to maximize profit in the short run.arrow_forwardPrice and costs (dollars) 20 10 L O 10 20 MC O always. ATC MR 40 30 Quantity (per day) The figure above shows a perfectly competitive firm. In the short run, the firm will shut down only if the AVC of producing 10 units is more than $20. only if the AVC curve reaches its minimum before 10 units are produced. only if the AVC of producing 10 units is less than $20.arrow_forward
- The table below displays cost information for a firm operating in a perfectly competitive market. Fill in the missing values corresponding to the empty cells. Average Total Cost $33 Quantity Total Cost Variable Cost Marginal Cost 1 $33 $23 A $38 $15 3 $60 В 4 $54 D G $80 H 6 $88 F $16.33 A = $ type your answer.. B = $ type your answer.. C= $ type your answer. D = $ type your answer.. E = $ type your answer... F = $ type your answer. G = $ type your answer. H = $ type your answer.. Assume all firms in the market have identical costs. With free entry and exit, what will the market price be in the long run? $ type your answer.arrow_forwardTable: Total Cost and Output Table: Total Cost and Output Output Total Cost 0 1 2 3 4 $ 10 60 80 110 170 245 Use Table: Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $67.50, how much is Sergei's total revenue at the profit-maximizing output? O $270.00 O $170.00 $100.00 $67.50arrow_forwardThe figure shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces O A. 20 units of output and earns a normal profit. MC ATC 50 B. 10 units of output and incurs an economic loss. 40 O C. 10 units of output and earns a normal profit. O D. 20 units of output and incurs an economic loss. 30 MR 20 10 10 30 40 Quantity (per day) Price and costs (dollars) 20arrow_forward
- 3. Suppose the doll company American Girl has an inverse demand curve of P = 150 - 0.25Q, where Q measures the quantity of dolls per day and P is the price per doll. There production function equals Q = LO.5KO.5, they pay wages of 35 and they pay capital rates of 140. What is their daily long-run profit at the profit-maximizing output level?arrow_forwardConsider the following costs of a typical firm in a purely competitive industry. The firm has no fixed costs (average total cost = average variable cost). Average Total Cost Quantity Marginal Cost 1 $16.00 2 15.00 $14.00 13.00 9.00 4 18.75 36.00 57.00 210.00 6 123.50 370.00 a. Given only the information available, what would you expect product price to be in the long run? O $9.00 $13.00 $18.75 $14.00 b. What would you expect price to be in the short run? $12.00 $10.00 $9.00 $14.00arrow_forwardSuppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3 a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firm’s MC curve.arrow_forward
- 00 20 Price and Cost ($) (Figure: Unicycle Production Costs) If the current price is $20 in this perfectly competitive industry, we should expect'in the long run (hint: See PowerPoint slides 51 and 53): ATC MC AVC AFC 40 42 44 46 O A. the presence of an economic profit to attract new firms to the industry. O B. that there will be no change in the number of firms in the industry. O C. the presence of a normal profit. O D. the presence of an economic loss to persuade some firms to leave the industry. A Moving to another question will save this response. Question 8 of 11 MacBook Pro DD F7 F3 F4 F8 F9 F10 # $ 2 delete 5. R H C. B. | command command optionarrow_forward4. A firm in a purely competitive industry is currently producing 1,500 units per day at a total cost of $500. If the firm produced 1,000 units per day, its total cost would be $310, and if it produced 500 units per day, its total cost would be $175. a. What are the firm's ATC at these three levels of production? i. At 1,500 units per day, ATC = $. ii. At 1,000 units per day, ATC = $. III. At 500 units per day, ATC = $. b. If all firms have the same cost structure, what is the highest possible price per unit that could exist as the market price in long-run equilibrium?arrow_forwardConceptually, in the long run, which of the following statements is true about profit-maximizing firms in a perfectly competitive market structure? O a. Economic profit can be positive or negative. O b. Economic profits are positive. O c. Economic profits are zero. O d. Economic profits are negative.arrow_forward
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