AP Microeconomics Prd 3 A a Define Using Graphs As Appropriate the Characteristics of Perfectly Competitive Markets and Efficiency B Explain Using Questions

Analyze competitive markets and firms as price takers, choose output where marginal revenue equals marginal cost, and evaluate efficiency.

Exam points

identify homogeneous products, many firms, free entry and price-taking as competitive conditions
draw linked market-and-firm graphs and transfer the market price to horizontal d = MR = AR
choose firm output where rising MC equals market price and adjust quantity after a price change
calculate or shade economic profit and loss using the gap between price and ATC at Q*
identify the short-run supply curve as MC above AVC and apply the shutdown threshold

[Maximum number: 3]

Deskward is a typical profit-maximizing firm that produces and sells wooden desks in a constant-cost, perfectly competitive market that is in long-run equilibrium.

(a)

Draw correctly labeled side-by-side graphs for the wooden desk market and for Deskward and show each of the following.

[ 3 ]

(i)

Deskward's profit-maximizing price and quantity, labeled $\mathrm{P}_{\mathrm{F}}$ and $\mathrm{Q}_{\mathrm{F}}$ , respectively

[ 2 ]

Draw a correctly labeled graph for Deskward that shows the firm's horizontal demand and marginal revenue ( $\mathrm{d}=\mathrm{MR}$ ) curve extended from the market equilibrium price ( $\mathrm{P}_{\mathrm{M}}$ ) and label the firm's price as $\mathrm{P}_{\mathrm{F}}$ . Figure for Answer to Question (i) — AP Microeconomics

The firm's graph must show a rising marginal cost (MC) curve, and show the firm's profit-maximizing quantity, labeled $\mathrm{Q}_{\mathrm{F}}$ , where $\mathrm{MR}=\mathrm{MC}$ . Figure for Answer to Question (i) — AP Microeconomics

(ii)

Deskward's average total cost curve consistent with long-run equilibrium, labeled ATC

[ 1 ]

The firm's graph must show the average total cost (ATC) curve tangent to the firm's $\mathrm{d}=\mathrm{MR}$ curve at $\mathrm{Q}_{\mathrm{F}}$ and show the MC curve passing through the minimum point of the ATC curve. Figure for Answer to Question (ii) — AP Microeconomics

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AP Microeconomics Prd 3 A a Define Using Graphs As Appropriate the Characteristics of Perfectly Competitive Markets and Efficiency B Explain Using Questions question 1

Question (a)

Question (i)

Question (ii)