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Economics: Principles, Problems, and Policies

Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn

Chapter 10

Pure Competition in the Short Run - all with Video Answers

Educators


Chapter Questions

07:22

Problem 1

Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is:
a. A horizontal line at 2 cents per paper clip.
b. A vertical line at 2 cents per paper clip.
c. The same as the market demand curve for paper clips.
d. Always higher than the firm's MC curve.

Jonathan Tapiwa
Jonathan Tapiwa
Numerade Educator
05:00

Problem 2

Use the demand schedule below to determine total revenue and marginal revenue for each possible level of sales:
a. What can you conclude about the structure of the industry in which this firm is operating? Explain.
b. Graph the demand, total-revenue, and marginal-revenue curves for this firm.
c. Why do the demand and marginal-revenue curves coincide?
d. "Marginal revenue is the change in total revenue associated with additional units of output." Fxplain verbally and graphically, using the data in the table.
$$\begin{array}{cccc}
\begin{array}{c}
\text { Product } \\
\text { Price }
\end{array} & \begin{array}{c}
\text { Quantity } \\
\text { Demanded }
\end{array} & \begin{array}{c}
\text { Total } \\
\text { Revenue }
\end{array} & \begin{array}{c}
\text { Marginal } \\
\text { Revenue }
\end{array} \\
\hline \$ 2 & 0 & \$ \\
2 & 1 & \\
2 & 2 & \\
2 & 3 & \\
2 & 4 & \\
2 & 5 & \\
\hline
\end{array}$$

Brandon Miskanic
Brandon Miskanic
Numerade Educator
03:23

Problem 3

A purely competitive firm whose goal is to maximize profit will choose to produce the amount of output at which:
a. TR and TC are equal.
b. TR exceeds TC by as much as possible.
c. TC exceeds TR by as much as possible.
d. none of the above.

YJ
Yohan Jeong
Numerade Educator
02:02

Problem 4

If it is possible for a perfectly competitive firm to do better financially by producing rather than shutting down, then it should produce the amount of output at which:
a. $\mathrm{MR}<\mathrm{MC}$
b. $M R=M C$
c. $\mathrm{MR}>\mathrm{MC}$
d. none of the above.

Prashant Bana
Prashant Bana
Numerade Educator
06:58

Problem 5

A perfectly competitive firm that makes car batteries has a fixed cost of $\$ 10,000$ per month. The market price at which it can sell its output is $\$ 100$ per battery. The firm's minimum AVC is $\$ 105$ per battery. The firm is currently producing 500 batteries a month (the output level at which MR $=M C) .$ This firm is making a _____ and should _____ production.
a. profit; increase
b. profit; shut down
c. loss; increase
d. loss; shut down

Daniel Denton
Daniel Denton
Numerade Educator
02:02

Problem 6

Consider a profit-maximizing firm in a competitive industry. For each of the following situations, indicate whether the firm should shut down production or produce where $\mathrm{MR}=\mathrm{MC} .$
a. $P<$ minimum AVC.
b. $P>$ minimum ATC.
c. Minimum AVC $<P<$ minimum ATC.

Prashant Bana
Prashant Bana
Numerade Educator