Consider a perfectly competitive market for shirts. The following graph shows the daily cost...
Question:
Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. In the short run, at a market price of $18 per shirt, the firm will choose to produce _____ shirts per day. What is the firms economic profit or loss? Complete the following table.
 |
| Price | Quantity | Total Revenue | Fixed Cost | Variable Cost | Profits |
|---|---|---|---|---|---|
| 6.00 | 108,000 | ||||
| 12.00 | 108,000 | ||||
| 18.00 | 108,000 |
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firms fixed cost is $108,000 per day. In other words, if it shuts down, the firm would suffer losses of $108,000 per day until its fixed costs end (such as the expiration of a building lease).
The firms shutdown price--that is, the price below which it is optimal for the firm to shut down--Is _____ per shirt?
Perfect Competition:
Perfect competition is a market situation where the number of consumers and producers are numerous or well informed to the extent that there are no possibilities for a monopoly and the price of the good or service is beyond the control of the producers and consumers.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerAt a market price of $18 the firm will produce 36,000 shirts because this is where price equals marginal cost. At a price of $6 the quantity produced...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Perfect Competition: Definition, Characteristics & Examples
from
Chapter 3 / Lesson 62
276K
Learn the definition, characteristics, and benefits of perfect competition. Review real-life examples of perfect competition between different companies.
Related to this Question
- Consider a perfectly competitive market for bushels of wheat. The graph below shows the cost curves for a typical firm in the industry. At a price of 70 cents, the firm will: A. Shut down in the
- Assume the competitive market shown below faces a short run price of $10. Using the graph below, identify the following: Profit-maximizing output: In the long run, the price falls to $7.50. Why does
- The graph below shows a competitive market. Pick a market price from the list below where the firm should stay in business in the short-run, but exit the industry in the long-run. a. $0 b. $100 c. $200 d. $300 e. $400 f. $500 g. None of the above h. Impos
- Consider a perfect competitive market. Analyze in detail using graphical tools what would happen to the number of firms and firm profitability in short run and long run if demand for product falls and
- Draw the relevant curves and the areas within them that show the following: a. A perfectly competitive firm that earns profits b. A perfectly competitive firm that incurs losses but that will continue operating in the short run c. A perfectly competitive
- Find depict the short-run and long-run equilibria of a firm under perfect competition market using suitable diagrams.
- The graphs depict a purely competitive market in the short run. The left hand panel depicts the market conditions faced by a typical "representative" firm, while the right-hand panel depicts the market as a whole. 1. Which of the following statements is
- Graphically represent a competitive market that generates a price such that the typical firm in this market is making a profit (should have two diagrams side-by-side, one representing the typical firm
- Consider a competitive market where firms have U-shaped cost curves. Which of the following is true? A. The long run market supply curve for a constant cost industry is upward sloping, and the short run supply curve of each firm is upward sloping. B. The
- Using a fully labeled diagram, show the output that a price leading firm would produce if it sought to maximize short-run profit in rivalry with a "competitive fringe" (smaller firms involved in the m
- The graphs are graphical representations of a short-run situation faced by a perfectly competitive firm. Is this a good market for this firm to be in? Explain.
- Draw the relevant curves and the areas within them that show the following: a. A perfectly competitive firm that earns profits b. A perfectly competitive firm that incurs losses but that will continue operating in the short run c. A perfectly competiti
- A company operates in a perfectly competitive market, selling each unit of output for a price of $40 and paying the market wage of $520 per day for each worker it hires. The following table shows the
- Refer to the diagrams above. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams depicts what happens to it in the industry as
- Draw a graph, showing a firm in long run monopolistically competitive equilibrium. Label everything clearly. Can a firm under monopolistic competition make economic profits in the long run? Why or why not? Explain.
- Refer to the graph above a. In perfect competition the price of the good must exceed ? for the firm to earn positive economic profits? b. What is the shutdown price for the firm?
- Consider the model of monopolistic competition. If the firm has standard U-shaped cost curves and earns zero economic profit in the long-run, which of the following is true in the long run? A) Price is greater than average total cost. B) Price is greater
- In a competitive market, when does a firm decide to shut down in the short run? Use a graph to illustrate.
- Consider the model of monopolistic competition. If the firm has standard U-shaped cost curves and earns positive economic profit in the short run, which of the following is true in the short run? A) Price is greater than average total cost. B) Price is gr
- How would you draw a firm graph from a perfectly competitive constant cost market in the short run where there are economic losses?
- Suppose there are 200 identical firms in a perfect competitive industry. Moreover, assume that each firm has the following short run cost function: C(q) = 0.5q^{2} + 5q + 20. a) Compute the short-run supply curve for a single firm, expressing q as a fun
- The graph below shows a competitive market. If the market price is $4, what is the Profit-maximizing pi_Max quantity? a. 1 b. 2 c. 3 d. 4 e. 5 f. 6 g. 7 h. 8 i. 9 j. 10 k. 11 l. 12 m. None of the above n. Impossible to know
- Consider a firm in a perfectly competitive industry with the following cost structure: VC (Q) = 10 Q2 + 50 Q, FC = 4000 and MC (Q) = 50 + 20 Q. If the market price is Pm = 450, in the short-run this f
- Explain in a perfectly competitive market how a firm can make an excess profit, incur a loss, and even shut down in the short run. (Draw graphs)
- Consider a perfectly competitive market with identical firms with the following cost function: C(q) = 0.1q^2 + 1000 The marker demand is Q_D = 1000 - p The supple function for an individual firm in the market can be written: a.\; q_s = 0.2q\\ b.\; q_s = 5
- A firm in a competitive market has the following cost structure. The market price is $4. If this is a representative firm in the competitive market, what will happen to the market price in the long-run? | Output | Total Cost | 0 | $5 | 1 | 10 | 2 | 12
- Draw a graph of a market for a firm in a perfectly competitive industry. Indicate the short-run profit-maximizing quantity and the profits for the firm. Explain with equations.
- Refer to the following normal form game of price competition. | |Firm B - Low Price|Firm B - High Price |Firm A - Low Price|0,0|50, -10 |Firm A - High Price|-10, 50|25,25 If this game is played once, then a) Firm A will charge a lower price and Firm B wil
- Consider a firm operating with the following: Price = 10, MR = 10, MC = 10, ATC = 10. This firm is a. Making an economic profit of 10. b. An example of monopolistic competition. c. Going to go out of business in the long run. d. A monopolist for a prod
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 + 8q + 2q^2. Further, the market demand curve is given by: p = 72 - 2q. In the long run the equilibrium each firm that remains in the market will produce: A.
- Analysis of Competitive Markets: Suppose the book-printing industry is competitive and begins in a long-run equilibrium. a. Draw graphs that illustrate the market and a representative firm in the ini
- The following table shows the cost data and demand schedule for a typical firm producing board games in a monopolistically competitive market in the short run. Under monopolistic competition, a typica
- Consider a perfectly competitive industry. Each (identical) firm has the following total cost function C(q) = 16 + 4q^2. The market demand facing the industry is Qd(p) = 500 - 10p, where p is the market price. What is the number of firms in the industry
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 + 8q + 2q^2. Further, the market demand curve is given by: p = 72 - 2q. In the long run equilibrium profit for each firm equals: A. 0. B. 32. C. 64. D. 1024.
- Consider a firm operating with the following: price = 10, MR = 10, MC = 10, ATC = 10. This firm is a. making an economic profit of 10. b. an example of monopolistic competition. c. going to go out of business in the long run. d. a monopolist for a pro
- Consider a perfectly competitive industry. Each (identical) firm has the following total cost function C(q) = 16 + 4q^2. The market demand facing the industry is Qd(p) = 500 - 10p, where p is the market price. What is the long-run equilibrium market pri
- The graph below shows a competitive market. If the market price is $4, what is the $8 Profit-maximizing quantity? a. 1 b. 2 c. 3 d. 4 e. 5 f. 6 g. 7 h. 8 i. 9 j. 10 k. 11 l. 12 m. None of the above n. Impossible to know
- Graphically show a perfectly competitive market and a representative firm. Show the firm earning positive economic profit. Can this situation be maintained in the long run? Explain in words and show t
- Draw a diagram depicting a firm that is making a profit in a monopolistically competitive market. Now show what happens to this firm as new firms enter the industry.
- Show, with graphs, why a monopoly may operate in the upward or downward sloping section of its long term average cost curve but a competitive firm operates only in the upward sloping section.
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. Suppose firms in this competitive industry market face a price of 60. In the short run, which of the following is true. A) Firms make a positiv
- Assuming identical long-run cost curves, draw two graphs, and indicate the price and output that result in the long run under monopolistic competition and perfect competition. Evaluate the differences between these two market structures.
- Draw and describe an industry's graph and a single firm's graph in a perfectly competitive market. The graphs must show a positive economic profit for a single firm. (draw the two graphs side by side.)
- Suppose all of the firms, in a competitive market, have the following cost-function C(Q) = Q(squared) + B, where B is some constant. a. What is the long run competitive equilibrium price, p*? b. If ma
- Consider a firm operating with the following: price = 10, MR = 10, MC = 10, ATC = 10. This firm is: a. making an economic profit of 10. b. an example of monopolistic competition. c. going to go out of business in the long run. d. a monopolist for a pr
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 81 + 4q + q^2. At what price will a firm exit the market in the long run? A. 2. B. 4. C. 9. D. 22. E. More information is required to answer this question.
- Consider firms operating in perfectly competitive or monopolistically competitive output markets. In a long-run equilibrium in such a market, the firm will be operating on an isoprofit curve corresponding to: A. a positive level of economic profits. B.
- Draw a graph that shows how advertising affects a firm's ATC curve. Explain how advertising can lead to lower prices in monopolistically competitive industry.
- Draw a graph that shows how advertising affects a firm's ATC curve. Explain how advertising can lead to lower prices in a monopolistically competitive industry.
- Consider a perfectly competitive industry. Each (identical) firm has the following total cost function C(q) = 16 + 4q^2. The market demand facing the industry is Qd(p) = 500 - 10p, where p is the market price. What is the long-run equilibrium individ
- Consider a perfectly competitive industry. Each (identical) firm has the following total cost function C(q) = 16 + 4q^2. The market demand facing the industry is Qd(p) = 500 - 10p, where p is the market price. What is the long-run equilibrium individual
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. In the short run the price at which a firm shuts down is: a. 2. b. 4. c. 5. d. 10. e. Additional information about market demand is required to
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. In the short run, the price at which a firm shuts down is A) 2 B) 4 C) 5 D) 10 E) Additional information about market demand is required to ans
- A firm in a competitive market has the following cost structure: |Output |Total Cost |0| $5 |1 |$10 |2 |$12 |3| $15 |4 |$24 |5 |$40 This firm will shut down: a. If the price falls below $3.33 and exit if it falls below $5, b. If the price falls below $5 a
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 + 8q + 2q^2. Further, the market demand curve is given by: p = 72 - 2q. In the long run the equilibrium price equals: A. 2. B. 4. C. 8. D. 40. E. More inform
- Draw a diagram depicting a firm that is making a profit in a monopolistically competitive market.
- In a perfectly competitive market, assume every firm faces the same short run total cost curve: TC= 2 q^2 + 10 q + 200. The market demand curve is: Qd = 800 - 8 P. Given perfect competition, if this industry is in long run equilibrium: 1) Find the level o
- Compare a perfectly competitive market with a monopolistically competitive market. The markup the firm charges in a monopolistically competitive market is _____ the markup charged by a firm in a perfectly competitive market. The firm's excess capacity in
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 128 + 8q + 2q^2. Further, the market demand curve is given by: p = 72 - 2q. In the long run the number of firms in the market equals: A. 2. B. 4. C. 8. D. 40. E.
- Discuss with appropriate diagrams. a) In a competitive market, what rule determines the profit-maximizing level of output? b) What is the relationship between a firm's supply curve and its marginal co
- Consider a Stackelberg game of price competition between two firms. As in Problem 1, firm 1 is the leader and firm 2 is the follower. Both firms have marginal costs of 0 and sell differentiated produc
- Consider a firm in a perfectly competitive industry with the following cost structure: VC (Q) = 10 Q^2 + 50 Q, FC = 4500 and MC (Q) = 50 + 20 Q. If the market price is Pm = 450, in the short-run this
- Draw the relevant curve and the area within it that shows a perfectly competitive firm that incurs losses but that will continue operating in the short run.
- Kati's Kites is a profit-maximizing firm in a competitive market. a) Draw a graph of Kati's firm next to a graph for the competitive market, assuming the market is in long-run equilibrium. b) Now as
- You own a firm and operate in a perfectly competitive market. Your total costs in the short run are given by: TC = q^2/200 + 10q + 6. What is your shut down price?
- The equilibrium price is $22 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 200 units of output. At 200 units, ATC is $23, and AVC is $18. The best policy for this firm is to _____ in the short run. Also, this firm earns _
- A perfectly competitive firm should shut down whenever the market price is lower than the minimum point on the AVC curve.
- A long-run supply curve that is flatter than a short-run supply curve results from which of the following: a. Firms can enter and exit a market more easily in the long run than in the short run, b. Long-run supply curves are sometimes downward sloping, c.
- Consider a perfectly competitive industry. Each (identical) firm has the following total cost function C(q) = 16 + 4q2. The market demand facing the industry is Q(p) = 500 - 10p, where p is the market price. a. What is the long-run equilibrium individual
- Which of the following statements is not a characteristic of a perfectly competitive firm? a. Perfectly competitive firms view each other as fierce rivals. b. Firms are price-takers. c. All firms produce a homogeneous product. d. Perfectly competitive mar
- The government imposes a fixed fee per year on each firm operating in a competitive market. What happens to output, the optimal scale of a firm, and price if there is free entry into the market? Show the effects on the firm and industry diagrams.
- The graph shows the relevant curves for a natural monopoly. Assume that in regulating this monopoly, policy makers have directed the firm to follow a marginal cost pricing rule (aka a regulated socia
- A competitive firm has the following cost function: TC= 0.7Q^2 + 6Q + 15 The firm believes the market price for their product will be $12 with probability 0.57. Otherwise, they believe the market pri
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. Further, the market demand curve is given by: P = 100 - Q. In the long run the number of firms in the market equals: a. 10 b. 50 c. 100 d. 200
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. Further, the market demand curve is given by: P = 100 - Q. In the long run, the number of firms in the market equals A) 10 B) 50 C) 100 D
- For a perfectly competitive market draw the supply and demand curves for the market and draw the MC, ATC and demand curve for a firm within the market. You should draw two separate graphs next to one
- Consider the following table of costs facing a firm in a competitive market: <style type="text/css"> .tg {border-collapse:collapse;border-spacing:0;} .tg td{font-family:Arial, sans-serif;font-size:
- Assume a firm: (i) is a monopsonist in hiring labour (ii) is selling its product as a monopolist, and (iii) faces no union Portray this market graphically. Correctly label all relevant curves, show th
- In the long run, how do price and output compare for a perfectly competitive firm and a firm with the same cost curves in a monopolistically competitive environment?
- Refer to the following figure showing the reaction functions of oligopoly firms A and B. If firm B expects firm A will run 2 ads, then firm B should run___ ads in order to maximize its own profit. a.
- Statement 1: Society's total surplus is maximized in perfectly competitive markets. Statement 2: In the long run, only perfectly competitive firms operate at the minimum of the average cost (AC) curv
- Refer to the accompanying table. A firm participating in a competitive market with these costs would always shut down if the price is: a. $6. b. $4. c. either $6 or $8. d. $2. e. $8.
- Assume a constant cost industry. Assume it is a competitive market and that the market is in along-run equilibrium. Graph this. a.) Show what happens in both the short run and the long run if the gov
- If the market price is above the perfectly competitive firm's average total cost curve, we expect that in the long run: A. the industry contracts as firms exit the market. B. the industry expands as firms exit the market. C. the industry contracts as firm
- Assume this firm is operating in a perfectly competitive market facing a market price of $60. Further, assume that this firm will make the optimal choice given the conditions it faces. 5) What is the
- Draw the graph for monopolistic competition in the long run (0 economic profits) and then label all relevant points.
- Draw and scan a cost curve, and using those costs, show on your graph, using a horizontal demand curve, of where the output with a firm in perfect competition (not imperfect competition) will be placed. (Under this Perfect Competitive situation, remember
- GRAPH the long-run profit of a monopolistically competitive firm.
- Refer to the graph shown. If hamburger dinners are produced by a pure monopoly firm that maximizes profit, the monopoly firm will a. earn $100 per day b. just cover its opportunity cost c. go out o
- Assume that the market is perfectly competitive and that the market is in an equilibrium where typical companies are earning zero economic profits. Draw a perfect competition market diagram for the sugar market, with a demand and supply diagram on the le
- Explain the concepts of the short-run and long-run in the context of a competitive market with multiple firms. Explain using appropriate graphs.
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. Suppose firms in this competitive market face a price of 30. In the short run, which of the following is true. A) Firms make a positive
- Assume that all firms in a competitive industry have cost curves given by the following: \\ TC = 100 +10q +4q^2 \\ Suppose firms in this competitive market face a price of 60. In the short run, which of the following is true. \\ A. Firms make a positive
- MONOPOLISTIC COMPETITION a) Draw a graph showing a monopolistically competitive firm in a long-run equilibrium. What are its profits? b) Suppose instead that a monopolistically competitive firm sell
- Which of the following is not true about the short-run market supply curve? a) It is upward sloping. b) It is a smooth curve when there are only a few firms in the market. c) It is the horizontal summation of the individual firms' short-run supply curves.
- Using diagrams, explain short-run and long-run profits and losses in a perfectly competitive market.
- Briefly explain relationship between market price and a firm's profitability in a perfectly competitive market. How are the zero profit point and the shutdown point for a firm operating in a perfectly
- Consider the following three statements about perfect competition: I. In the long run, firms enter or exit a perfectly competitive industry in search of higher profits. II. Every firm in long-run equilibrium will be exactly the right size to deliver the
- Draw a picture of long-run equilibrium in a perfectly competitive market. You should show a picture of the market as well as an individual firm. Be sure to label everything and explain what indicates that the market is in long-run equilibrium. Next, suppo
- Assume that all firms in a competitive industry have cost curves given by the following: TC = 100 + 10q + 4q^2. Suppose firms in this competitive market face a price of 30. In the short run, which of the following is true. (a) Firms make a positive profit
Explore our homework questions and answers library
Browse
by subject