Perfect Market Quiz

1) A perfectly competitive firm has total revenue and total cost curves given by:

 

                        TR = 100Q

                        TC = 5,000 + 2Q + 0.2 Q2

 

a.   Find the profit-maximizing output for this firm.

b.   What profit does the firm make?

• The profit-maximizing output is 200 units, and the profit made is 8000.
• The profit-maximizing output is 245 units, and the profit made is 7000.
• The profit-maximizing output is 300 units, and the profit made is 5000.
• The profit-maximizing output is 150 units, and the profit made is 6000.

What effect would an increase in fixed costs have on a perfectly competitive company in the short run?

• Increase in shutdown point

• Decrease in shutdown point

• No effect on shutdown point

• Increase in profit margin

How does a decrease in variable costs impact the production decision of a perfectly competitive company?

• Encourages shutdown

• Encourages production

• No impact on production decision

• Increases competition in the market

What role does market demand play in the short-run decision-making of a perfectly competitive company?

• Determines the shutdown point

• Has no impact on decision-making

• Increases fixed costs

• Leads to monopoly in the market

In the short run, which of the following would indicate that a perfectly competitive firm is producing an output for which it is receiving a normal profit?

• The firm is incurring a loss
• Total cost exceeds total revenue
• Total revenue equals total cost
• Total revenue exceeds total cost

What impact does a decrease in demand have on a perfectly competitive company in the short run?

• Encourages shutdown

• Encourages production

• No impact on production decision

• Increases competition in the market

How does an increase in variable costs affect the profit margin of a perfectly competitive company?

• Increases profit margin

• Decreases profit margin

• No impact on profit margin

• Leads to monopoly in the market

What role does total revenue play in determining the output level of a perfectly competitive firm in the short run?

• Determines the shutdown point

• Has no impact on decision-making

• Increases fixed costs

• Leads to monopoly in the market