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Same as before, these problem sets contain concepts from the modules

Economics

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Same as before, these problem sets contain concepts from the modules. You can work with other students to do these problem sets...in fact I encourage it. And, I will be putting together groups later on. But each student needs to submit their own answers online  by the due date and they need to be in your own words. 

This is a chance to earn more points (up to 20). Effort matters. You may still get a high score on this problem set even if every answer is not exactly correct as long as you are close and show that you really tried. 

And, please reach out for help. Come to Zoom office hours or email me any time. My goal is to work with you on these. 

Click the following link to download the problem set for this module. If you would like to access this material in a different format please let me know and I am more than happy to help provide the material in another way:

• Perfect Competition Problem Set

  Perfect Competition Problem Set[1]

   

   

   

  1. Suppose that the price of Oranges is $4. In addition, suppose that the firm's total costs are $32 and that the firm currently sells 110 Oranges.

  Given this information, what is this firm's total revenue?

   

  Use the following information to answer questions 2 through 5:

  The table below shows data for the production of avocados for an individual firm operating in a perfectly competitive market.

  Quantity of avocados	Total Revenue	Total Costs
  0	0	10
  10	60	30
  20	120	40
  30	180	60
  40	240	90
  50	300	130
  60	360	180
  70	420	240
  80	480	310

  2. Given this data, complete the table:

  Quantity of avocados	Marginal Revenue (MR)	Marginal Costs (MC)	Profit
  0	-	-
  10
  20
  30
  40
  50
  60
  70
  80

   

  3. At what quantity does this firm maximize its profit?

  NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!

   

   

   

  4. What is marginal revenue at the profit maximizing quantity?

  NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!

   

   

   

  5. What is marginal cost at the profit maximizing quantity?

  NOTE: If there are two quantities with the same level of profits, pick the larger of the two quantities!

   

   

   

  6. The graph below shows cost curves for a firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $21. This firm is earning

• Profits
• Zero Economic Profits (Break-even point)
• Losses

•  

   

   

  7. The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $12. What will happen in this market in the long run?

• New firms will enter.
• No new entry/no exit.
• Existing firms will exit.

•  

   

   

  8.  The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $12. What will this firm do in the short run?

• Produce.
• Exit.
• Shut down.

•  

   

   

  9. The graph below shows cost curves for a firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $16.56. This firm is earning

• Profits
• Zero Economic Profits (Break-even point)
• Losses

•  

   

   

   

  10. The graph below shows cost curves for a firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $6.56. This firm is earning

• Profits
• Zero Economic Profits (Break-even point)
• Losses

•  

   

   

  11. The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC).

   

  

   

  Suppose that the equilibrium price is $2. What will this firm do in the short run?

• Produce.
• Exit.
• Shut down.

•  

   

   

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  [1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.