AP Microeconomics Unit 4 Test

Firms in the model of perfect competition will:

increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost

Zoe's Bakery operates in a perfectly competitive industry. Suppose that when the market price is $5, the profit-maximizing output level of pastries is 150 units, with average total cost of $4, and average variable cost of $3. From this, we know Zoe's marginal cost is _________, and her short-run profits are _________.

$5; $150

(Figure 58-1: Marginal Revenue, Costs, and Profits) In the figure, if market price increases to $20, marginal revenue ______ and profit-maximizing output _______.

increases; increases

(Figure 58-1: Marginal Revenue, Costs, and Profits) In the figure, if market price decreases to $16, marginal revenue ______ and profit-maximizing output _______.

decreases; decreases

The slope of the total revenue curve is:

constant under perfect competition

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

P>ATC

(Table 58-1: Soybean Cost) The costs of production of a perfectly competitive soybean farmer are given in the table. if the market price of a bushel of soybeans is $15, how many bushels will the farmer produce to maximize short-run profit?

5

(Table 58-3: Total Cost for a Perfectly Competitive Firm) The firm will produce at a profit in the short run if the price is:

$4.50

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

Marginal cost equals price.

(Table 59-1: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. If the current price per cleared lot is $14, how many lots should Alexa clear?

0

During the summer, Alex runs a mowing service, and lawn mowing is a perfectly competitive industry. His only fixed cost is $1,000 for the mower, His variable costs include fuel and mower parts. He calculates the variable costs per lawn as shown in the table. What is Alex's break-even price?

$50

The short-run supply curve for a perfectly competitive firm is its:

Marginal cost curve above its average variable cost curve.

(figure 59-3: Profit Maximizing) The figure shows cost curves for a firm operating in a perfectly competitive market, Curve M must cross Curves N and O:

At their minimum points.

(Figure 59-5: Perfectly Competitive Firm) The figure shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The price that would cause the firm to break even is:

$1.90

The table lists three supply points for an individual, perfectly competitive firm operating in the short run. If the industry is composed of 120 identical firms, which of the following will be a point on the short-run industry supply curve?

Price=$10, Quantity=4,800