Question 1

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 2

Scenario 14-3
As part of an estate settlement Mary received $1 million.She decided to use the money to purchase a small business in Anywhere,USA.Her business operates in a perfectly competitive industry.If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year.She also quit her job with Lucky.Com Inc.to devote all of her time to her new business;her salary at Lucky.Com Inc.was $75,000 per year.
-Refer to Scenario 14-3.At the end of the first year of operating her new business,Mary's accountant reported an accounting profit of $150,000.What was Mary's economic profit?

Accepted Answer

A)   -$150,000
B)   -$50,000
C)   -$25,000
D)   $25,000E) B) and D)
F) A) and C) C

Question 3

In a perfectly competitive market,

Accepted Answer

A)   no one seller can influence the price of the product.
B)   price exceeds marginal revenue for each unit sold.
C)   average revenue exceeds marginal revenue for each unit sold.
D)   administrative barriers can make it difficult for firms to enter an industry.E) All of the above
F) A) and B)

Question 4

In a long-run equilibrium,the marginal firm has

Accepted Answer

A)   price equal to minimum marginal cost.
B)   total revenue equal to total cost.
C)   accounting profit equal to zero.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 5

Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Accepted Answer

A) True 
 B)False

Question 6

Figure 14-1 
-Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning zero economic profits in the short run?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4E) B) and C)
F) A) and C)

Question 7

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A)   horizontal.
B)   likely to slope downward.
C)   determined by forces external to the firm.
D)   the portion of its marginal cost curve that lies above its average variable cost.E) B) and D)
F) A) and B)

Question 8

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Accepted Answer

A) True 
 B)False  False

Question 9

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Accepted Answer

A)   its total cost is less than $9,000.
B)   its marginal revenue is less than $9.
C)   its average revenue is greater than $9.
D)   the firm cannot be a competitive firm since competitive firms can only earn zero profit.E) A) and B)
F) A) and C)

Question 10

For a firm in a perfectly competitive market,the price of the good is always

Accepted Answer

A)   equal to marginal revenue.
B)   equal to total revenue.
C)   greater than average revenue.
D)   equal to the firm's efficient scale of output.E) B) and C)
F) B) and D) A

Question 11

All firms maximize profits by producing an output level where marginal revenue equals marginal cost;for firms operating in perfectly competitive industries,maximizing profits also means producing an output level where price equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Accepted Answer

A)   200 units
B)   300 units
C)   400 units
D)   500 unitsE) A) and B)
F) All of the above

Question 14

Figure 14-10 
-Refer to Figure 14-10.If the price is P3 in the short run,what will happen in the long run?

Accepted Answer

A)   Nothing.The price is consistent with zero economic profits,so there is no incentive for firms to enter or exit the industry.
B)   Individual firms will earn positive economic profits in the short run,which will entice other firms to enter the industry.
C)   Individual firms will earn negative economic profits in the short run,which will cause some firms to exit the industry.
D)   Because the price is below the firm's average variable costs,the firms will shut down.E) C) and D)
F) A) and B)

Question 15

Figure 14-6 
-Refer to Figure 14-6.If the firm is in a short-run position where P < AVC,it is most likely to be on what segment of its supply curve?

Accepted Answer

A)   BC
B)   CD
C)   DF
D)   ABE) A) and B)
F) A) and D)

Question 16

A firm that exits its market has to pay

Accepted Answer

A)   its variable costs but not its fixed costs.
B)   its fixed costs but not its variable costs.
C)   both its variable costs and its fixed costs.
D)   neither its variable costs nor its fixed costs.E) A) and C)
F) None of the above

Question 17

When marginal revenue equals marginal cost,the firm

Accepted Answer

A)   should increase the level of production to maximize its profit.
B)   may be minimizing its losses rather than maximizing its profit.
C)   must be generating positive economic profits.
D)   must be generating positive accounting profits.E) A) and B)
F) All of the above

Question 18

In the long run,when price is less than average total cost for all possible levels of production,a firm in a competitive market will choose to exit (or not enter)the market.

Accepted Answer

A) True 
 B)False

Question 19

In the short run for 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 = $15,000.E) A) and D)
F) A) and C)

Question 20

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

Accepted Answer

A) True 
 B)False

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

Correct Answer
verified
C

In a perfectly competitive market,

Correct Answer
verified

In a long-run equilibrium,the marginal firm has

Correct Answer
verified

Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Correct Answer
verified

Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning zero economic profits in the short run?

Correct Answer
verified

The short-run supply curve for a firm in a perfectly competitive market is

Correct Answer
verified

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Correct Answer
verified
False

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Correct Answer
verified

For a firm in a perfectly competitive market,the price of the good is always

Correct Answer
verified
A

All firms maximize profits by producing an output level where marginal revenue equals marginal cost;for firms operating in perfectly competitive industries,maximizing profits also means producing an output level where price equals marginal cost.

Correct Answer
verified

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

Correct Answer
verified

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Correct Answer
verified

Figure 14-10 -Refer to Figure 14-10.If the price is P3 in the short run,what will happen in the long run?

Correct Answer
verified

Figure 14-6 -Refer to Figure 14-6.If the firm is in a short-run position where P < AVC,it is most likely to be on what segment of its supply curve?

Correct Answer
verified

A firm that exits its market has to pay

Correct Answer
verified

When marginal revenue equals marginal cost,the firm

Correct Answer
verified

In the long run,when price is less than average total cost for all possible levels of production,a firm in a competitive market will choose to exit (or not enter)the market.

Correct Answer
verified

In the short run for 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

Correct Answer
verified

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

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

Correct AnswerverifiedC

In a perfectly competitive market,

Correct AnswerverifiedShow Answer

In a long-run equilibrium,the marginal firm has

Correct AnswerverifiedShow Answer

Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning zero economic profits in the short run?

Correct AnswerverifiedShow Answer

The short-run supply curve for a firm in a perfectly competitive market is

Correct AnswerverifiedShow Answer

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Correct AnswerverifiedFalse

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market,the price of the good is always

Correct AnswerverifiedA

All firms maximize profits by producing an output level where marginal revenue equals marginal cost;for firms operating in perfectly competitive industries,maximizing profits also means producing an output level where price equals marginal cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Correct AnswerverifiedShow Answer

Figure 14-10 -Refer to Figure 14-10.If the price is P3 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

Figure 14-6 -Refer to Figure 14-6.If the firm is in a short-run position where P < AVC,it is most likely to be on what segment of its supply curve?

Correct AnswerverifiedShow Answer

A firm that exits its market has to pay

Correct AnswerverifiedShow Answer

When marginal revenue equals marginal cost,the firm

Correct AnswerverifiedShow Answer

In the long run,when price is less than average total cost for all possible levels of production,a firm in a competitive market will choose to exit (or not enter)the market.

Correct AnswerverifiedShow Answer

In the short run for 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

Correct AnswerverifiedShow Answer

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified
A

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