Liberty University ECON 213 InQuizitive chapter 9 complete solutions correct answers updated

Liberty University ECON 213 InQuizitive chapter 9 complete solutions correct answers updated

Chapter 9: Firms in a Competitive Market

Select the quantity on the graph that will maximize the profits for the perfectly competitive producing firm.

Which of the following conditions hold for a firm maximizing its profits?

Fill in the blanks to complete the statement about competitive markets.

Competitive markets have many –, firms with – products, – for firms, and firms that are price –.

Fill in the blanks to complete the passage about profits and losses in a perfectly competitive retail market in the long run.

When – firms are making a profit, this is a signal to other firms to enter the market. The result is increased –, which leads to a reduction in price and therefore a reduction in profit. In long-run equilibrium, – profit is zero; there is no signal to enter and no signal to –.

Relative to other market structures, perfectly competitive markets have which of the following properties?

Order the following U.S. markets from least competitive to most competitive.

Standard profit-maximizing theory leaves room for cases where it is both possible and reasonable for a firm to operate at a loss over the long run.

An ice-cream street vendor operates out of a small truck. He considers replacing the truck with a larger one but decides not to.

Apply the appropriate label to each cost.

Complete the statement about positively sloped long-run market supply curves.

In the simplest kind of case, the long-run market supply curve is perfectly –. However, more realistically it may slope –, if increasing the – leads to increased production costs, due to shortages in either material or –.

A firm regulates its production so that marginal cost (MC) matches marginal revenue (MR). Drag each descriptive phrase into the appropriate region of the figure.

Of the four quantities shown, choose the one that leads to a normal profit or break-even point.

Identify the characteristics of markets with perfect competition.

Firms produce differentiated products.

There is a large number of firms.

Firms produce very similar products.

Firms have no price control.

Firms are very small relative to the market.

There are significant barriers to entry and exit to the market.

Firms have significant price control.

Drag the labels into place in the figure for a market leaving, and then returning to, equilibrium as firms exit after a decrease in demand.

Click on the three points, two in Figure (a) and one in Figure (b), that represent a market in the middle of adjusting to a decrease in market demand.

Fill in the blanks to complete the passage about short-run operating loss.

In the short run, a firm should operate when it is losing money, so long as the firm’s – is above –. In this situation, continued operation enables a firm to cover all of its –and some of its – with any remaining revenue.

In this particular market, there has been a short-run decrease in demand. As a result, a number of firms have left the market, which causes supply to fall and prices to rise once again to long-run market equilibrium. Drag the labels into place in the figure for an individual firm that is returning to equilibrium price after a short-run fall in demand.

Which descriptions apply to market equilibrium?

Firms in the market have no incentive to exit.

No “exit” or “enter” signals are being sent.

Firms outside the market have no incentive to enter.

Accounting profit is zero.

Economic profit is zero.

On the left is the correct way for a perfectly competitive market to add two individual firms’ supply curves to obtain a market supply curve. Why is the method on the right incorrect?

Use the figure to calculate the maximum possible profit for the firm whose marginal revenue (MR), marginal cost (MC), and average total cost (ATC) are functions of production quantity Q as shown.

Consider a fish vendor in a competitive market. This fish vendor is able to sell his fish at a higher price than his competitors and affect the market price of fish.

Fill in the blanks to complete the passage about the figure.

In the short run, some costs are fixed and the rest are variable. A firm will continue production only so long as it can cover at least its – costs. Therefore, no units will be supplied except where marginal revenue – average variable cost. Where that condition is met, the (short-run) supply curve – the marginal cost curve, because marginal cost equals marginal revenue.

In a perfectly competitive market, the long-run market supply curve tends to be horizontal or nearly so. What is another way to state this fact?

Place in order the events that take place in the long run, in a perfectly competitive market, when quantity supplied is greater than quantity demanded.

A manufacturer of consumer electronics anticipates that due to a temporary spike in production cost, it will operate at a slight loss for three quarters (nine months) before returning to profitability. Nonetheless, the firm plans to keep production levels at the point where MR = MC. Why?

Shifts in policy are possible only during periods of profitability.

A different production level would involve the same variable costs.

Decisions are based on profit or loss in the long run, not the short run.

The same policy that maximizes profits will minimize losses.

Which statements are true in the long run for a company operating with negative economic profit and positive accounting profit?

Match each concept to a corresponding example.

total revenue minus fixed and variable costs associated with plant operations

cost of fuel to run a factory workspace heating system during the winter

total revenue minus all costs, including opportunity costs

lost income due to investing in machinery retooling rather than materials to produce more units

The long-run supply curve for a single firm, S_LR, is vertical below the dashed line and coincides with the MC curve above the dashed line. What does this mean?

When the price is above the dashed line, the firm should exit the industry.

When the price is above the dashed line, the firm is able to cover both fixed and variable costs. Below the dashed line, the firm is able to cover all variable costs but not all fixed costs.

When the price is below the dashed line, the firm still produces at a quantity where price equals marginal cost.

Firms will supply goods when the price is above minimum average total cost. A firm will shut down production if price is below average total cost.

Consider a firm in the short run which chooses to remain open while it is losing money. To reflect this situation, order the following values from lowest to highest:

Which information would be enough to determine a firm’s profit, given that Q = 10,000 units?

Please select the segment that functions as the individual firm’s short-run supply curve.

Calculate the economic profit of the tree-trimming firm whose explicit and implicit expenses are shown. Ms. Tree has a total revenue of $98,000.

During a short-run period where market supply is adjusting to decreased market demand, individual firms that choose to remain in the market will operate at a loss because price, and therefore marginal revenue, is less than average total cost.