Question 1

Firms that operate in perfectly competitive markets try to

Accepted Answer

A)   maximize revenues.
B)   maximize profits.
C)   equate marginal revenue with average total cost.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 2

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.To maximize its profit,the firm should

Accepted Answer

A)   increase its output.
B)   continue to produce 1,000 units.
C)   decrease its output but continue to produce.
D)   shut down.E) A) and B)
F) B) and C)

Question 3

Who is a price taker in a competitive market?

Accepted Answer

A)   buyers only
B)   sellers only
C)   both buyers and sellers
D)   neither buyers nor sellersE) None of the above
F) A) and B)

Question 4

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

Accepted Answer

A)   P7 * Q5.
B)   P7 * Q3.
C)   (P7 - P5)  * Q3.
D)   We are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph.E) A) and B)
F) B) and C)

Question 5

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A)   cable television
B)   satellite radio
C)   mineral mining
D)   t-shirt silkscreeningE) All of the above
F) A) and C)

Question 6

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 7

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1.At Q = 1,000,the firm's profits equal

Accepted Answer

A)   $-200.
B)   $1,000.
C)   $3,000.
D)   $4,000.E) B) and D)
F) B) and C)

Question 8

Table 14-15
 
-Refer to Table 14-15.What is the lowest price at which this firm would operate in the short run?

Accepted Answer

A)   $3.
B)   $4.
C)   $5.
D)   $6.E) A) and B)
F) A) and C)

Question 9

Table 14-12
Bill's Birdhouses
 
-Refer to Table 14-12.What is the marginal cost of the 5th unit?

Accepted Answer

A)   $55
B)   $60
C)   $68
D)   $80E) B) and C)
F) None of the above

Question 10

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)   earning small but positive economic profits.
B)   facing the prospect of future losses.
C)   operating at the efficient scale.
D)   that work together to raise market prices.E) A) and B)
F) A) and C)

Question 11

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 12

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A)   fixed cost.
B)   variable cost.
C)   total cost.
D)   revenue.E) B) and C)
F) A) and D)

Question 13

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A)   the position of the marginal cost curve determines the price for which the firm should sell its product.
B)   among the various cost curves, the marginal cost curve is the only one that slopes upward.
C)   the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
D)   the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.E) C) and D)
F) A) and B)

Question 14

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1.At Q = 999,the firm's total costs equal

Accepted Answer

A)   $10,985.
B)   $10,990.
C)   $10,995.
D)   $10,999.E) B) and C)
F) A) and B)

Question 15

Which of the following statements is correct?

Accepted Answer

A)   For all firms, marginal revenue equals the price of the good.
B)   Only for competitive firms does average revenue equal the price of the good.
C)   Marginal revenue can be calculated as total revenue divided by the quantity sold.
D)   Only for competitive firms does average revenue equal marginal revenue.E) All of the above
F) None of the above

Question 16

When a profit-maximizing firm is earning profits,those profits can be identified by

Accepted Answer

A)   P * Q.
B)   (MC - AV
C)   * Q.
C)   (P - AT
C)   * Q.
D)   (P - AV
C)   * Q.E) A) and C)
F) A) and B)

Question 17

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
 
-Refer to Figure 14-1.The firm's short-run supply curve is its marginal cost curve above

Accepted Answer

A)   $1.
B)   $3.
C)   $4.50.
D)   $6.30.E) C) and D)
F) B) and C)

Question 18

In the long run,a firm will exit a competitive industry if

Accepted Answer

A)   total revenue exceeds total cost.
B)   the price exceeds average total cost.
C)   average total cost exceeds the price.
D)   Both a and b are correct.E) B) and C)
F) None of the above

Question 19

Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct?
(i) Marginal revenue equals $5.
(ii) Average revenue equals $5.
(iii) Price equals $5.

Accepted Answer

A)   (i)  only
B)   (iii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) A) and C)
F) A) and D)

Question 20

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.At Q = 999,the firm's total costs equal

Accepted Answer

A)   $24,970.
B)   $24,975.
C)   $24,980.
D)   $25,025.E) B) and C)
F) All of the above

Exam 14: Firms in Competitive Markets.

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

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When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

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Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1.At Q = 999,the firm's total costs equal

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When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

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Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct? (i) Marginal revenue equals $5. (ii) Average revenue equals $5. (iii) Price equals $5.

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Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm's short-run supply curve is its marginal cost curve above

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Which of the following statements is correct?

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Which of the following industries is most likely to exhibit the characteristic of free entry?

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Firms that operate in perfectly competitive markets try to

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Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1.At Q = 1,000,the firm's profits equal

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In the long run,a firm will exit a competitive industry if

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When a profit-maximizing firm is earning profits,those profits can be identified by

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Who is a price taker in a competitive market?

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Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

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Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2.To maximize its profit,the firm should

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A competitive market will typically experience entry and exit until accounting profits are zero.

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Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the marginal cost of the 5th unit?

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Table 14-15 -Refer to Table 14-15.What is the lowest price at which this firm would operate in the short run?

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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2.At Q = 999,the firm's total costs equal

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