Exam 8: Profit Maximization and Competitive Supply

Use the following statements to answer this question: I.Under perfect competition,an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input)also shifts the average variable cost curve upward. II.Under perfect competition.,an upward shift in the marginal cost curve (perhaps due to a higher price for a variable input)reduces firm output but may increase firm profits.

Figure 8.2 -Refer to Figure 8.2.As the competitive industry,not just the firm in question,moves toward long-run equilibrium,how much profit will the firm earn?

Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1 -Refer to Figure 8.1.At the profit-maximizing level of output,total revenue is

Higher input prices result in

Bette's Breakfast,a perfectly competitive eatery,sells its "Breakfast Special" (the only item on the menu)for $5.00.The costs of waiters,cooks,power,food etc.average out to $3.95 per meal; the costs of the lease,insurance and other such expenses average out to $1.25 per meal.Bette should

Imposition of an output tax on all firms in a competitive industry will result in

Figure 8.2 -Refer to Figure 8.2.As the competitive industry,not just the firm in question,moves toward long-run equilibrium,what will the price be?

The demand curve and long-run supply curve for carpet cleaning in the local market are: Q_D = 1,000 - 10P and Q_S = 640 + 2P.The long-run cost function for a carpet cleaning business is: C(q)= 3q².The long-run marginal cost function is: MC(q)= 6q.If the carpet cleaning business is competitive,calculate the optimal output for each firm.How many firms are in the local market? Is the carpet cleaning industry an increasing,constant,or decreasing cost industry?

A decreasing-cost industry has a downward-sloping

Economic rents are typically counted as:

When the TR and TC curves have the same slope,

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.

Figure 8.2 -Refer to Figure 8.2.How much profit will the firm earn if price stays at $80?

The demand curve facing a perfectly competitive firm is

At the profit-maximizing level of output,marginal profit

In the local cotton market,there are 1,000 producers that have identical short-run cost functions.They are: C(q)= 0.025q² + 200,where q is the number of bales produced each period.The short-run marginal cost function for each producer is: MC(q)= 0.05q.If the local cotton market is perfectly competitive,what is each cotton producer's short-run supply curve? Derive the local market supply curve of cotton.

If a competitive firm has a U-shaped marginal cost curve then

Firms often use patent rights as a:

The long-run supply curve in a constant-cost industry is linear and

Which of the following events does NOT occur when market demand shifts leftward in an increasing-cost industry?