Question 1

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

A)  new firms to enter the market.
B)  the market price to fall.
C)  its profits to fall.
D)  All of the above are correct.E) A) and C)
F) None of the above

Question 2

Figure 14-14

-Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Accepted Answer

A)  Points A,B,and C represent both short-run and long-run equilibria.
B)  Points A,B,C,and D represent short-run equilibria.
C)  Points A and B represent long-run equilibria.
D)  Points A and C represent long-run equilibria.E) All of the above
F) A) and D)

Question 3

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

Accepted Answer

A)  nuclear power
B)  municipal water and sewer
C)  dairy farming
D)  airport securityE) C) and D)
F) All of the above

Question 4

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

Accepted Answer

A) True 
 B)False

Question 5

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Accepted Answer

A)  $-1,600.
B)  $1,600.
C)  $3,200.
D)  $8,000.E) B) and C)
F) A) and C)

Question 6

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Accepted Answer

A)  rise.
B)  remain unchanged at the minimum of average total cost.
C)  fall.
D)  remain unchanged at the minimum of marginal cost.E) A) and D)
F) A) and C)

Question 7

Because there are many sellers in a competitive market,individual firms are unable to maximize profits.

Accepted Answer

A) True 
 B)False

Question 8

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:   Price  Quantity  Total  Cost 503515528531254175523\begin{array} { | l | l | l | } \hline 	ext { Price } & 	ext { Quantity } & \begin{array} { l } 	ext { Total } \	ext { Cost }\end{array} \\hline 5 & 0 & 3 \\hline 5 & 1 & 5 \\hline 5 & 2 & 8 \\hline 5 & 3 & 12 \\hline 5 & 4 & 17 \\hline 5 & 5 & 23 \\hline\end{array} Price 555555​ Quantity 012345​ Total  Cost ​358121723​​ 
-Refer to Table 14-11.In order to maximize profits,the firm should stop producing after it makes the

Accepted Answer

A)  first unit.
B)  second unit.
C)  fourth unit.
D)  fifth unit. E) C) and D)
F) B) and C)

Question 9

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Accepted Answer

A)  is negative.
B)  is at least zero.
C)  is also zero.
D)  could be positive,negative or zero.E) A) and B)
F) None of the above

Question 10

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:

-Refer to Figure 14-2.If the market price is P1,in the short run the firm will earn

Accepted Answer

A)  positive economic profits.
B)  negative economic profits but will try to remain open.
C)  negative economic profits and will shut down.
D)  zero economic profits.E) A) and B)
F) None of the above

Question 11

Comparing marginal revenue to marginal cost
(i) reveals the contribution of the last unit of production to total profit.
(ii) is helpful in making profit-maximizing production decisions.
(iii) tells a firm whether its fixed costs are too high.

Accepted Answer

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

Question 12

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

A)  average revenue is greater than average total cost.
B)  average revenue is equal to marginal cost.
C)  marginal cost is greater than average total cost.
D)  price is above or below marginal cost.E) B) and D)
F) B) and C)

Question 13

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 P2,a profit-maximizing firm's losses can be represented by the area

Accepted Answer

A)  (P4 - P2)  * Q2.
B)  (P2 - P1)  * (Q2-Q1) .
C)  At a market price of P2,the firm earns profits,not losses.
D)  At a market price of P2 the firm has losses,but the reference points in the figure don't identify the losses.E) C) and D)
F) B) and D)

Question 14

Which of the following statements regarding a competitive firm is correct?

Accepted Answer

A)  Because demand is downward sloping,if a firm increases its level of output,the firm will have to charge a lower price to sell the additional output.
B)  If a firm raises its price,the firm may be able to increase its total revenue even though it will sell fewer units.
C)  By lowering its price below the market price,the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
D)  For all firms,average revenue equals the price of the good.E) A) and B)
F) All of the above

Question 15

Profit-maximizing firms in a competitive market produce an output level where

Accepted Answer

A)  marginal cost equals marginal revenue.
B)  marginal cost equals average total cost.
C)  marginal revenue is increasing.
D)  price is less than marginal revenue.E) A) and B)
F) B) and D)

Question 16

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Accepted Answer

A)  more than double.
B)  double.
C)  increase but by less than double.
D)  may increase or decrease depending on the price elasticity of demand.E) None of the above
F) B) and D)

Question 17

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Accepted Answer

A)  a one-unit increase in output will increase the firm's profit.
B)  a one-unit decrease in output will increase the firm's profit.
C)  total revenue exceeds total cost.
D)  total cost exceeds total revenue.E) B) and C)
F) B) and D)

Question 18

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Accepted Answer

A)  total revenue.
B)  marginal revenue.
C)  average revenue.
D)  All of the above are correct.E) All of the above
F) B) and D)

Question 19

Firms operating in competitive markets produce output levels where marginal revenue equals

Accepted Answer

A)  price.
B)  average revenue.
C)  total revenue divided by output.
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 20

Figure 14-12  
-Refer to Figure 14-12.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b) most likely reflects

Accepted Answer

A)  perfectly inelastic long-run market supply.
B)  perfectly elastic long-run market supply.
C)  the entry of firms into the industry when some resources used in production are available only in limited quantities.
D)  the fact that zero profits cannot be sustained in the long run.E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

Correct Answer
verified

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Correct Answer
verified

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Correct Answer
verified

Because there are many sellers in a competitive market,individual firms are unable to maximize profits.

Correct Answer
verified

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct Answer
verified

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct Answer
verified

Correct Answer
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Which of the following statements regarding a competitive firm is correct?

Correct Answer
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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 P2,a profit-maximizing firm's losses can be represented by the area

Correct Answer
verified

Profit-maximizing firms in a competitive market produce an output level where

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Correct Answer
verified

Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.

Correct Answer
verified

Firms operating in competitive markets produce output levels where marginal revenue equals

Correct Answer
verified

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Correct Answer
verified

Figure 14-12 -Refer to Figure 14-12.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b) most likely reflects

Correct Answer
verified

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct Answer
verified

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct Answer
verified

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Correct Answer
verified

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

Correct Answer
verified

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.If the market price is P1,in the short run the firm will earn

Correct Answer
verified

Exam 14: Firms in Competitive Markets

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

Correct AnswerverifiedShow Answer

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Correct AnswerverifiedShow Answer

Because there are many sellers in a competitive market,individual firms are unable to maximize profits.

Correct AnswerverifiedShow Answer

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct AnswerverifiedShow Answer

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive firm is correct?

Correct AnswerverifiedShow Answer

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 P2,a profit-maximizing firm's losses can be represented by the area

Correct AnswerverifiedShow Answer

Profit-maximizing firms in a competitive market produce an output level where

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Figure 14-14 -Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Comparing marginal revenue to marginal cost (i) reveals the contribution of the last unit of production to total profit. (ii) is helpful in making profit-maximizing production decisions. (iii) tells a firm whether its fixed costs are too high.

Correct AnswerverifiedShow Answer

Firms operating in competitive markets produce output levels where marginal revenue equals

Correct AnswerverifiedShow Answer

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Correct AnswerverifiedShow Answer

Figure 14-12 -Refer to Figure 14-12.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b) most likely reflects

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Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct AnswerverifiedShow Answer

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Correct AnswerverifiedShow Answer

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

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Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.If the market price is P1,in the short run the firm will earn

Correct AnswerverifiedShow Answer

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