Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 11, Problem 5DQ
To determine
Pure competition and the lower cost method.
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Students have asked these similar questions
Suppose 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.
Which one of the following is true for a firm under perfect competition when all firms face identical costs?
O I t can earn supernormal profits in the short run but only normal profits in the long run.
O Whether it earns normal or supernormal profits in both the short and the long run will depend on the conditions in that particular industry.
O I t can earn supernormal profits in the long run but only normal profits in the short run.
O It can earn only normal profits in both the short and the long run.
O t can earn supernormal profits in both the short and the long run.
In the table below, the firm;
Output Total Revenue Total Cost
$0
$30
$60
$90
$120
$150
$180
$25
$49
$69
$91
$117
$147
$180
O a. cannot be in a perfectly competitive industry, because its short-run economic profits
are greater than zero.
O b. must be in a perfectly competitive industry, because its marginal cost curve
eventually rises.
O c. cannot be in a perfectly competitive industry, because its long-run economic profits
are greater than zero
O d. must be in a perfectly competitive industry, because its marginal revenue is constant.
123 456
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- The following figure shows the revenue and cost curves for a firm X. RM 10 a. b. C. 7 6 LO 5 4 3.5 0 20 25 30 MC 40 AVC AC AR=MR Units If a firm X achieves productivity efficiency, what will be the total revenuel generated At what price will a firm stop operating? Please explain. If the market price is RM4.00, what is the total profit or total loss.arrow_forwardConsider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 80 72 64 56 co o 32 + 16 8 0 0 4 MC 0 ATC AVC 8 12 16 20 24 28 QUANTITY (Thousands of pounds) 32 38, 72 36 40 Ⓒarrow_forward6. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. (?) 80 72 64 56 ATC 48 40 32 24 18 AVC 8 MC O 12 15 18 21 24 27 30 QUANTITY (Thousands of tons) COSTS (Dollars per ton) 3.arrow_forward
- Suppose that the monthly market demand schedule for Frisbees is: Price $8 $7 $6 $5 $4 $3 $2 $1 Quantity Demanded 100 200 400 800 1,600 3,200 6,000 15,000 Suppose further that the marginal and average costs of Frisbee production for every competitive firm are Rate of Output 10 20 30 40 50 60 Marginal Cost $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 Average Cost $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 Finally, assume that the equilibrium market price is $5 per Frisbee. (a) How many Frisbees are being sold in equilibrium? (b) How many (identical) firms are initially producing Frisbees? (c) How much profit is the typical firm making? (d) In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price down to average total cost, thereby…arrow_forwardThe table below describes a firm that sells output in a perfectly competitive market. Note the second column describes total costs. O $8 O $12 O $6 Output O $4 0 1 2 3 4 5 Which of the following market prices would cause the firm's profit-maximizing output level to be equal to 5? 6 Total Cost (in dollars) $3 $9 $14 $18 $23 $30 $40 4arrow_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
- Stuff, Incorporated is a firm with a total revenue of $1,000, marginal cost of $5, and average variable cost of $4. Both the output and input markets are perfectly competitive and Stuff, Inc. is in long run equilibrium. Stuff, Inc.'s output and total fixed costs must be equal to which of the following? O Output 200; Fixed Cost $200 O Output 200; Fixed Cost $400 O Output 200; Fixed Cost $800 O Output 250; Fixed Cost $800 O Output 250; Fixed Cost $400arrow_forwardCH $1.50 $1.25 $0.75 150 9 In the above figure, assume that So represents the industry supply curve and Do represents the demand curve in a perfectly competitive market. What can be said about the demand curve that an individual firm faces? O An individual firm will face a downward sloping demand curve starting at $1.25. O An individual firm will tace a horizontal demand curve at $1.25. O An individual firm will face a vertical demand curve at 250. O An individual firm will face the demand curve indicated by Do 4arrow_forwardCosts of production for each competitive firm is given by: C(q) = 1 + q2. Market demand is Qd = 200 - 5p. What is the number of firms in the long-run equilibrium? O 110 O 150 O 190 210arrow_forward
- Consider the perfectly competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. 18, 80 80 72 64 56 ATC 48 40 32 24 16 AVC 8 + MC O 3 12 15 18 21 24 27 30 QUANTITY OF OUTPUT (Thousands of pounds) COSTS (Dollars per pound)arrow_forwardAssume that the market for car washing is perfectly competitive. If a single firm washes 27 cars per week, and there are 100 identical firms in the market, how many cars are getting washed weekly? O a. 5400 O b. 2700 O c. it is impossible to say anything about the market output based on information about single firms. O d. 3240 O e. less than 2700 because demand slopes down.arrow_forward4. Various measures of cost Suppose the imaginary company of Roobek is a small, Jackson-based American apparel manufacturer specializing in athleisure. The following table presents the brand's total cost of production at several different quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost (Pairs) (Dollars) (Dollars) 0 1 2 3 4 LO 5 6 120 200 240 285 340 425 540 Fixed Cost Variable Cost (Dollars) (Dollars) Average Variable Cost (Dollars per pair) Average Total Cost (Dollars per pair)arrow_forward
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