Question 1

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)  total revenue must equal total variable cost for each firm.
B)  economic profits must be zero.
C)  price must equal average variable cost for each firm.
D)  Both a and c are correct.E) B) and C)
F) All of the above

Question 2

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is John's Vineyard's economic profit at its profit-maximizing output level?

Accepted Answer

A)  $25
B)  $75
C)  $115
D)  $225E) B) and C)
F) A) and C)

Question 3

In a particular market,there are 500 firms.Each firm has a marginal cost of $30 when it produces 200 units of output.One point on the market supply curve is

Accepted Answer

A)  Quantity = 200, Price = $30
B)  Quantity = 500, Price = $30
C)  Quantity = 100,000, Price = $30
D)  Quantity = 100,000, Price = $15,000E) A) and D)
F) B) and C)

Question 4

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
 
-Refer to Table 14-3.At a production level of 4 units which of the following is true?

Accepted Answer

A)  Marginal cost is $6.
B)  Total revenue is greater than variable cost.
C)  Marginal revenue is less than marginal cost.
D)  The firm is maximizing profit.E) A) and D)
F) A) and C)

Question 5

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
 
-Refer to Table 14-3.At which quantity of output is marginal revenue equal to marginal cost?

Accepted Answer

A)  3
B)  6
C)  8
D)  9E) A) and D)
F) None of the above

Question 6

A firm in a competitive market has the following cost structure: 
If the market price is $4,this firm will

Accepted Answer

A)  produce two units in the short run and exit in the long run.
B)  produce three units in the short run and exit in the long run.
C)  produce four units in the short run and exit in the long run.
D)  shut down in the short run and exit in the long run.E) A) and B)
F) None of the above

Question 7

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
 
-Refer to Table 14-3.The maximum profit available to this firm is

Accepted Answer

A)  $2
B)  $3
C)  $4
D)  $5E) None of the above
F) A) and D)

Question 8

Tommy's Tires operates in a perfectly competitive market.If tires sell for $50 each and average total cost per tire is $40 at the profit-maximizing output level,then in the long run

Accepted Answer

A)  more firms will enter the market.
B)  some firms will exit from the market.
C)  the equilibrium price per tire will rise.
D)  average total costs will fall.E) C) and D)
F) A) and B)

Question 9

Which of the following statements regarding a competitive market is false?

Accepted Answer

A)  There are many buyers and many sellers in the market.
B)  Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume.
C)  Price and average revenue are equal.
D)  Price and marginal revenue are equal.E) A) and B)
F) A) and C)

Question 10

Figure 14-4
The figure below depicts the cost structure of a firm in a competitive market.
 
-Refer to Figure 14-4.When market price is P₅,a profit-maximizing firm's profits can be represented by the area

Accepted Answer

A)  P₅  Q₃.
B)  (P₅ - P₃)   Q₂.
C)  (P₅ - P₄)   Q₃.
D)  When market price is P₅ there are no profits.E) C) and D)
F) A) and D)

Question 11

Assume a firm 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) None of the above
F) C) and D)

Question 12

Starting from a situation in which a firm in a competitive market produces and sells 500 doorknobs for a price of $10 per doorknob,which of the following events would decrease the firm's average revenue?

Accepted Answer

A)  The firm increases its output above 500 doorknobs.
B)  The firm decreases its output below 500 doorknobs.
C)  The market price of doorknobs rises above $10.
D)  The market price of doorknobs falls below $10.E) A) and B)
F) B) and C)

Question 13

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.At what quantity does John's Vineyard maximize profits?

Accepted Answer

A)  3
B)  6
C)  7
D)  8E) B) and C)
F) C) and D)

Question 14

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle,Washington.Since the market for wheat is generally considered to be competitive,the Wheeler Farm does not

Accepted Answer

A)  choose the quantity of wheat to produce.
B)  choose the price at which it sells its wheat.
C)  have any fixed costs of production.
D)  set marginal revenue equal to marginal cost to maximize profit.E) C) and D)
F) A) and B)

Question 15

Refer to Figure 14-6.If at a market price of $1.75,52,500 units of output are supplied to this market,how many identical firms are participating in this market?

Accepted Answer

A)  75
B)  100
C)  250
D)  300E) B) and C)
F) A) and B)

Question 16

Of the following characteristics of competitive markets,which are necessary for firms to be price takers? (i) 	There are many sellers.
(ii) 	Firms can freely enter or exit the market.
(iii) 	Goods offered for sale are largely the same.

Accepted Answer

A)  (i)  and (ii)  only
B)  (i)  and (iii)  only
C)  (ii)  only
D)  All are necessary.E) All of the above
F) None of the above

Question 17

For a firm in a competitive market,marginal revenue is always equal to average revenue.

Accepted Answer

A) True 
 B)False

Question 18

When an individual firm in a competitive market increases its production,it is likely that the market price will fall.

Accepted Answer

A) True 
 B)False

Question 19

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Accepted Answer

A)  maximization of total revenue.
B)  maximization of profit.
C)  minimization of variable cost.
D)  minimization of average total cost.E) B) and D)
F) None of the above

Question 20

The assumption of a fixed number of firms is appropriate for analysis of

Accepted Answer

A)  the short run, but not the long run.
B)  the long run, but not the short run.
C)  both the short run and the long run.
D)  neither the short run nor the long run.E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.The maximum profit available to this firm is

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Tommy's Tires operates in a perfectly competitive market.If tires sell for $50 each and average total cost per tire is $40 at the profit-maximizing output level,then in the long run

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Of the following characteristics of competitive markets,which are necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same.

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Starting from a situation in which a firm in a competitive market produces and sells 500 doorknobs for a price of $10 per doorknob,which of the following events would decrease the firm's average revenue?

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

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For a firm in a competitive market,marginal revenue is always equal to average revenue.

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In a particular market,there are 500 firms.Each firm has a marginal cost of $30 when it produces 200 units of output.One point on the market supply curve is

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Figure 14-4 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-4.When market price is P₅,a profit-maximizing firm's profits can be represented by the area

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Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.At which quantity of output is marginal revenue equal to marginal cost?

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Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.At a production level of 4 units which of the following is true?

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Refer to Figure 14-6.If at a market price of $1.75,52,500 units of output are supplied to this market,how many identical firms are participating in this market?

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A firm in a competitive market has the following cost structure: If the market price is $4,this firm will

Correct AnswerverifiedShow Answer

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Correct AnswerverifiedShow Answer

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle,Washington.Since the market for wheat is generally considered to be competitive,the Wheeler Farm does not

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Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is John's Vineyard's economic profit at its profit-maximizing output level?

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When firms are neither entering nor exiting a perfectly competitive market,

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Which of the following statements regarding a competitive market is false?

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The assumption of a fixed number of firms is appropriate for analysis of

Correct AnswerverifiedShow Answer

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.At what quantity does John's Vineyard maximize profits?

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When an individual firm in a competitive market increases its production,it is likely that the market price will fall.

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