Question 1

Figure 14-10
In the figure below, panel (a)  depicts the linear marginal cost of a firm in a competitive market, and panel (b)  depicts the linear market supply curve for a market with a fixed number of identical firms. 
-Refer to Figure 14-10. If there are 700 identical firms in this market, what is the value of Q1?

Accepted Answer

A)   140,000
B)   210,000
C)   280,000
D)   420,000E) B) and D)
F) None of the above

Question 2

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Accepted Answer

A)   increase.
B)   remain unchanged.
C)   decrease by less than 20 percent.
D)   decrease by more than 20 percent.E) B) and C)
F) A) and B)

Question 3

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 4

Table 14-5
The table represents a demand curve faced by a firm in a competitive market. 
-Refer to Table 14-5. For this firm, the marginal revenue of the 12th unit is

Accepted Answer

A)   $9.
B)   $10.
C)   $11
D)   The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold.E) B) and D)
F) None of the above

Question 5

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

Accepted Answer

A)   $0
B)   $200
C)   $250
D)   $450E) A) and D)
F) B) and C)

Question 7

For a particular competitive firm, the minimum value of average variable cost (AVC)  is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost (ATC)  is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?

Accepted Answer

A)   In the short run, the firm will shut down if the price of its product is $14.
B)   In the long run, the firm will shut down if the price of its product is $11.
C)   For this firm, the minimum value of variable cost (V
C)   is $2,400.
D)   If the firm's fixed cost (F
C)   amounts to $500, then the firm cannot earn a positive profit unless the price of its product exceeds $16.E) All of the above
F) C) and D)

Question 8

When existing firms in a competitive market are profitable, an incentive exists for

Accepted Answer

A)   new firms to seek government subsidies that would allow them to enter the market.
B)   new firms to enter the market, even without government subsidies.
C)   existing firms to raise prices.
D)   existing firms to increase production.E) C) and D)
F) None of the above

Question 9

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. Firms will shut down in the short run if the market price

Accepted Answer

A)   exceeds P3.
B)   is less than P1.
C)   is greater than P1 but less than P3.
D)   exceeds P2.E) A) and B)
F) A) and C)

Question 10

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

We can measure the profits earned by a firm in a competitive industry as

Accepted Answer

A)   (P - AT
C)   × Q.
B)   (P - M
C)   × Q.
C)   MR × MC.
D)   (MC - AT
C)   × Q.E) A) and B)
F) All of the above

Question 13

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Accepted Answer

A)   price is less than average total cost.
B)   marginal revenue exceeds the marginal cost.
C)   price is greater than average variable cost.
D)   price is greater than average fixed cost but less than average variable cost.E) A) and D)
F) None of the above

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) B) and C)
F) A) and D)

Question 15

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

Accepted Answer

A)   sunk cost.
B)   average fixed cost.
C)   average variable cost.
D)   marginal cost.E) A) and B)
F) A) and C)

Question 16

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

Accepted Answer

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

Question 17

The long-run supply curve for a competitive industry may be upward sloping if

Accepted Answer

A)   there are barriers to entry.
B)   firms that enter the industry are able to do so at lower average total costs than the existing firms in the industry.
C)   some resources are available only in limited quantities.
D)   accounting profits are positive.E) C) and D)
F) A) and B)

Question 18

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

Accepted Answer

A)   increase.
B)   decrease.
C)   remain the same.
D)   We do not have enough information with which to answer this question.E) A) and B)
F) A) and C)

Question 19

Figure 14-10
In the figure below, panel (a)  depicts the linear marginal cost of a firm in a competitive market, and panel (b)  depicts the linear market supply curve for a market with a fixed number of identical firms. 
-Refer to Figure 14-10. If there are 500 identical firms in this market, what is the value of Q1?

Accepted Answer

A)   10,000
B)   20,000
C)   50,000
D)   150,000E) B) and D)
F) C) and D)

Question 20

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?

Accepted Answer

A)   $2
B)   $4
C)   $6
D)   $8E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Correct Answer
verified

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct Answer
verified

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

Correct Answer
verified

We can measure the profits earned by a firm in a competitive industry as

Correct Answer
verified

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the marginal revenue of the 12th unit is

Correct Answer
verified

The long-run supply curve for a competitive industry may be upward sloping if

Correct Answer
verified

Correct Answer
verified

When existing firms in a competitive market are profitable, an incentive exists for

Correct Answer
verified

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

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

Correct Answer
verified

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

Correct Answer
verified

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Correct Answer
verified

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

Correct Answer
verified

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Correct Answer
verified

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

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will shut down in the short run if the market price

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?

Correct Answer
verified

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Correct AnswerverifiedShow Answer

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct AnswerverifiedShow Answer

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

Correct AnswerverifiedShow Answer

We can measure the profits earned by a firm in a competitive industry as

Correct AnswerverifiedShow Answer

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the marginal revenue of the 12th unit is

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive industry may be upward sloping if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When existing firms in a competitive market are profitable, an incentive exists for

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

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

Correct AnswerverifiedShow Answer

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

Correct AnswerverifiedShow Answer

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Correct AnswerverifiedShow Answer

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

Correct AnswerverifiedShow Answer

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will shut down in the short run if the market price

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?

Correct AnswerverifiedShow Answer

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified