Microeconomics Study Set 46

Business

Quiz 8 :

Supply in a Competitive Market

Quiz 8 :

Supply in a Competitive Market

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(Figure: Profit-Maximizing Output Level I) Total revenue is maximized at a quantity of ____. img
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C

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(Figure: Revenues and Output I) The total revenue curve for a perfectly competitive firm is represented by curve: img
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B

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Suppose that the long-run total cost curve for each firm is given by TC = 500Q - 20Q2 + Q3, where Q is the quantity of the product. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, the firm would need to solve the following equation for Q:
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B

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(Figure: Firm I) At the profit maximizing quantity, the firm's average total cost is $____. img
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If the long-run total cost curve for each firm is given by TC = 60Q - 70Q2 + 4Q3, in the long run, the marginal cost is:
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Suppose that the perfectly competitive market for granola bars is made up of identical firms with long-run total cost functions given by TC(Q) =8Q3-40Q2 + 200Q. Assume that these cost functions are independent of the number of firms in the market and that firms may enter or exit the market freely. Market demand is QD = 8,000 - 3.5P, where price is in cents. In the long-run equilibrium, each firm produces a quantity of ____ bars.
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(Figure: Price and Quantity III) If the market price is $6, this perfectly competitive firm will earn profits of: img
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In a perfectly competitive industry, the long-run equilibrium price is $12. If a technological innovation lowers production costs, the long-run equilibrium price will:
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Suppose that the market for painting services is perfectly competitive. Painting companies are identical; their long-run cost functions are given by img . Market demand is img ) The long-run equilibrium quantity in this industry is ____.
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Suppose that a firm is earning a 12% return on capital in a perfectly competitive industry, and the market return outside the industry is 9.5%. Which of the following statements is (are) TRUE?
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A firm's short-run total cost is TC = 10,100 + 7,700Q - 100Q2 + Q3/3, and its marginal cost is MC = 7,700 - 200Q + Q2. What is the firm's shutdown price?
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Suppose that the market for painting services is perfectly competitive. Painting companies are identical; their long-run cost functions are given by img . Market demand is img ) The long-run equilibrium price in this industry is $____.
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Suppose that the market for gourmet deli sandwiches is perfectly competitive and that the supply of workers in this industry is upward-sloping, so that wages increase as industry output increases. Delis in this market face the following total cost: img where Q is the number of sandwiches and W is the daily wage paid to workers. The wage, which depends on total industry output, equals img , where N is the number of firms. Market demand is img ) In the long-run equilibrium, the market price is $ ____.
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In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _____ the market, shifting the industry's short-run supply curve _____.
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(Figure: Firm I) At the profit maximizing quantity, the firm's total revenue is $____. img
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A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 - 10Q + 0.1Q2 and long-run marginal cost of LMC = 800 - 20Q + 0.3Q2. In long-run equilibrium, the market price is $____.
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(Figure; Price and Quantity VII) If this firm operates, it earns a profit of _____, but if it shuts down, it earns a profit of _____. img
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(Figure: Price and Quantity IX) What could have caused the supply and average variable cost curves to shift outward? img
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Economists assume that firms maximize:
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Which of the following statements is (are) TRUE? I. Free entry to a perfectly competitive industry results in the industry's firms earning zero economic profit in the long run, except for the most efficient producers, who may earn economic rent. II. In a perfectly competitive market, long-run equilibrium is characterized by LMC < P < LATC. III. If a competitive industry is in long-run equilibrium, a decrease in demand causes firms to earn negative profit because the market price will fall below average total cost.
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