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Use the figure below to answer the following questions.

Refer to Figure 11.2.2, which shows a perfectly competitive firm's economic profit and loss. The firm is incurring a loss at

Suppose that in a perfectly competitive industry, the market price of the product is $12. Firm A is producing the output level at which average total cost equals marginal cost, both of which are $10. To maximize its profits, Firm A should

expand its output.

leave its output unchanged.

❌

increase its advertising.

change the price of the product.

reduce its output.

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Which one of the following is NOT one of the key decisions a perfectly competitive firm has to make?

if the decision is to stay in the industry, whether to produce or temporarily shut down

❌

whether to exit or enter the industry

❌

after the decision is made to produce a certain amount of output, what price to charge for the product

✅

if the decision is to produce, how much to produce.

❌

whether to stay in the industry or leave it

❌

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The figure represents the short-run production decision of a perfectly competitive firm. Firms are making an economic

profit, and some firms will leave the industry, causing the industry supply curve to decrease.

loss, and some firms will enter the industry, causing the industry supply curve to increase.

loss, but since they are covering average variable cost, no one will exit the industry in the long run.

profit, and some firms will enter the industry, causing the industry supply curve to increase.

loss, shut down temporarily and continues to incur a loss equal to total fixed cost.

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In a perfectly competitive industry, the market price is $8. An individual firm is producing the output at which MC = $8. AVC at that output is $10. What should the firm do to maximize its short-run profits?

shut down

100%

leave output unchanged

insufficient information to answer

expand output

contract output

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Which of the following production decisions is a profit-maximizing firm in a competitive market most likely to take when price falls below the minimum of average variable cost?

The firm will stop production as soon as it is able to pay its sunk costs.

The firm will immediately stop production to minimize its losses.

100%

The firm will continue to produce to attempt to pay fixed costs.

none of the above

The firm will continue to produce in the short run but will likely exit the market in the long run.

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Use the table below to answer the following questions.

Table 11.2.3

Refer to Table 11.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. The average fixed cost of producing the 4th balloon is

Use the table below to answer the following questions.

Table 11.1.1

Refer to Table 11.1.1 which gives the demand schedule for a perfectly competitive firm. If the firm sells 5 units of output, total revenue is

Use the figure below to answer the following question.

Figure 11.3.5

Refer to Figure 11.3.5, which shows the cost curves and the marginal revenue curve for a perfectly competitive firm. To maximize profit, the firm produces ________ units of output and the price is ________ a unit.

Assume a firm is producing 800 units of output and that it sells each unit for $6. Its average total cost is $4. What is its profit?

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