Exam 8: Profit Maximization and Competitive Supply

Consider the following statements when answering this question: I. If the cost of producing each unit of output falls $5, then the short-run market price falls $5. II) If the cost of producing each unit of output falls $5, then the long-run market price falls $5.

Figure 8.6.1 -Refer to Figure 8.6.1 above. At price levels P₂ and P₃, the output levels on the industry supply curve equal:

Under what conditions will a firm's long-run producer surplus exceed their economic rents?

Spacely Sprockets' short-run cost curve is: where q is the number of Sprockets produced and K is the number of robot hours Spacely hires. Currently, Spacely hires 10 robot hours per period. The short-run marginal cost curve is: If Spacely receives $250 for every sprocket he produces, what is his profit maximizing output level? Calculate Spacely's profits.

The table below lists the short-run costs for One Guy's Pizza. If One Guy's can sell all the output they produce for $12 per unit, how much should One Guy's produce to maximize profits? Does One Guy's Pizza earn an economic profit in the short-run?

What happens in a perfectly competitive industry when economic profit is greater than zero?

What do cooperative firms do if they make a profit?

Marginal profit is equal to

Assume the market for tortillas is perfectly competitive. The market supply and demand curves for tortillas are given as follows: Supply curve: P = .000002Q Demand curve: P = 11 - .00002Q The short run marginal cost curve for a typical tortilla factory is: MC = .1 + .0009Q a. Determine the equilibrium price for tortillas. b. Determine the profit maximizing short run equilibrium level of output for a tortilla factory. c. At the level of output determined above, is the factory making a profit, breaking-even, or making a loss? Explain your answer. d. Assuming that all of the tortilla factories are identical, how many tortilla factories are producing tortillas?

Figure 8.4.2 -Refer to Figure 8.4.2 above. If the farm produces 14 sacks of coffee when market price is $380,

In a constant-cost industry, an increase in demand will be followed by:

Figure 8.4.3 -Refer to Figure 8.4.3 above. When the firm produces the loss-minimizing level of output, it can recover:

A perfectly competitive hardware manufacturer has total revenue of $85 million, total variable costs of $45 million, and fixed costs of $10 million. What is the firm's producer surplus?

Figure 8.7.3 -Refer to Figure 8.7.3 above. If the firm expects $80 to be the long-run price, how many units of output will it plan to produce in the long run?

Table 8.1 -Refer to Table 8.1. That the firm is perfectly competitive is evident from its:

Economic rents are typically counted as:

If a competitive firm's marginal cost curve is U-shaped, then:

A firm maximizes profit by operating at the level of output where:

Ronny's Pizza House operates in the perfectly competitive local pizza market. If the price of pizza cheese increases (ceteris paribus), what is the expected impact on Ronny's profit-maximizing output decision?

When the TR and TC curves have the same slope,