Chapter 13 Walter asked Tyler the accountant and Greg the economist

subject Type Homework Help
subject Pages 9
subject Words 2600
subject Authors N. Gregory Mankiw

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Firms in Competitive Markets 3627
64.
If some resources used in the production of a good are only available in limited quantities, then the
long run market
supply curve will be perfectly elastic.
a.
True
b.
False
65.
Describe the difference between average revenue and marginal revenue. Why are both of these
revenue measures
important to a profit-maximizing firm?
66.
List and describe the characteristics of a perfectly competitive market.
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67.
Why would a firm in a perfectly competitive market always choose to set its price equal to the
current market price? If a firm set its price below the current market price, what effect would
this have on the market?
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Firms in Competitive Markets 3629
68.
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.
69.
Explain how a firm in a competitive market identifies the profit-maximizing level of production.
When should the firm
raise production, and when should the firm lower production?
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70.
News reports from the western United States occasionally report incidents of cattle ranchers
slaughtering a large
number of newborn calves and burying them in mass graves rather than
transporting them to markets. Assuming that
this is rational behavior by profit-maximizing "firms,"
explain what economic factors may influence such behavior.
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71.
Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive
market where firms are
experiencing economic losses. Identify costs, revenue, and the economic
losses on your graph. Using your graph,
determine whether an individual firm will shut down in
the short run, or choose to remain in the market. Explain your
answer.
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72.
At its current level of production a profit-maximizing firm in a competitive market receives $12.50
for each unit it
produces and faces an average total cost of $10. At the market price of $12.50 per
unit, the firm's marginal cost
curve crosses the marginal revenue curve at an output level of 1,000
units. What is the firm's current profit? What is
likely to occur in this market and why?
73.
Give two reasons why the long-run industry supply curve may slope upward. Use an example to
demonstrate your
reasons.
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74.
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?
Problems
1.
Describe the difference between average revenue and marginal revenue. Why are both of these
revenue measures
important to a profit-maximizing firm?
2.
List and describe the characteristics of a perfectly competitive market.
page-pf8
3.
Why would a firm in a perfectly competitive market always choose to set its price equal to the
current market price? If a firm set its price below the current market price, what effect would this
have on the market?
page-pf9
4.
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.
page-pfa
5.
Explain how a firm in a competitive market identifies the profit-maximizing level of production.
When should the firm
raise production, and when should the firm lower production?
6.
News reports from the western United States occasionally report incidents of cattle ranchers
slaughtering a large
number of newborn calves and burying them in mass graves rather than
transporting them to markets. Assuming that
this is rational behavior by profit-maximizing "firms,"
explain what economic factors may influence such behavior.
page-pfb
Firms in Competitive Markets 3637
7.
Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market
where firms are
experiencing economic losses. Identify costs, revenue, and the economic losses on
your graph. Using your graph,
determine whether an individual firm will shut down in the short run,
or choose to remain in the market. Explain your
answer.
page-pfc
8.
At its current level of production a profit-maximizing firm in a competitive market receives $12.50
for each unit it
produces and faces an average total cost of $10. At the market price of $12.50 per
unit, the firm's marginal cost
curve crosses the marginal revenue curve at an output level of 1,000
units. What is the firm's current profit? What is
likely to occur in this market and why?
9.
Give two reasons why the long-run industry supply curve may slope upward. Use an example to
demonstrate your
reasons.
page-pfd
10.
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?

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