1. What are the three general rules for the profit maximization for a competitive market?

2. In a competitive market, when does a firm decide to shut down in the short run? Use a graph to illustrate.

3.When does a competitive firm decide to exit a market completely?Explain. Use graphs to illustrate.

4.

The table provides data on a market demand schedule(top two rows) and a firm,s average and marginal cost schedule (bottom four rows)

price P$ 24 20 16 12 8

Quantity 3,000 4,000 5,000 6,000 7,000

Firm,s output 1 2 3 4 5

MC$ 11.OO 11.13 12.00 13.63 16.00

ATC$ 13.50 12.25 12.00 12.19 12.70

AVC$ 11.25 11.13 11.25 11.63 11.25

Questions

1.What is the firm,s shutdown point?

2.If there are 1,000 identical firms what about the market price and quantity ?

3.With 1,000 firms, will firms enter or exit?

4.What is the long run equilibrium price, quantity and number of firms?