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Exam 13: Firms in Competitive Markets

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Question 261

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Robin owns a horse stables and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $200 per child. In order to maximize profits, Robin should

A) give riding lessons to more than 20 children per month.
B) give riding lessons to fewer than 20 children per month.
C) continue to give riding lessons to 20 children per month.
D) We do not have enough information to answer the question.

E) All of the above
F) A) and B)

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Question 262

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In the long run, a firm will exit a competitive industry if

A) total revenue exceeds total cost.
B) the price exceeds average total cost.
C) average total cost exceeds the price.
D) Both a and b are correct.

E) A) and B)
F) None of the above

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Question 263

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If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

Firms operating in competitive markets produce output levels where marginal revenue equals

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning positive economic profits in the short run?

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Which of the following represents the firm's long-run condition for exiting a market?

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the unit for $6. The firm should produce more than 100 units in order to maximize its profits or minimize its losses).

Which of the following is a characteristic of a competitive market?

If firms are competitive and profit maximizing, the price of a good equals the

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price is determined by

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is

In the long-run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. Which level of production in the table has the lowest average variable cost?

When existing firms in a competitive market are profitable, an incentive exists for

Table 14-12 -Refer to Table 14-12. What is the marginal cost of the 8th unit?