Question 1

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 13-1
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 13-1.At Q = 999,the firm's total costs equal

Accepted Answer

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

Question 3

Table 13-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 13-14.What is Bob's total fixed cost?

Accepted Answer

A)   $0
B)   $3
C)   $5
D)   $9E) A) and B)
F) A) and C)

Question 4

Figure 13-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

Accepted Answer

A)   P7 F*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 C)
F) A) and D)

Question 5

Raiman's Shoe Repair produces custom-made shoes.When Mr.Raiman produces 12 pairs per week,the marginal cost of the 12th pair is $84,and the marginal revenue of the 12th pair is $70.What would you advise Mr.Raiman to do?

Accepted Answer

A)   shut down the business
B)   produce more custom-made shoes
C)   decrease the price
D)   produce fewer custom-made shoesE) A) and B)
F) A) and C)

Question 6

In a perfectly competitive market,the market supply curve is

Accepted Answer

A)   the marginal cost curve above average total cost for a representative firm.
B)   the horizontal sum of all the individual firms' supply curves.
C)   the vertical sum of all the individual firms' supply curves.
D)   always a horizontal line.E) C) and D)
F) B) and D)

Question 7

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

Question 8

Figure 13-12  
-Refer to Figure 13-12.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 D)
F) A) and C)

Question 9

Figure 13-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-2.If the market price is P3,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) All of the above
F) B) and D)

Question 10

When economists refer to a production cost that has already been committed and cannot be recovered,they use the term

Accepted Answer

A)   implicit cost.
B)   explicit cost.
C)   variable cost.
D)   sunk cost.E) None of the above
F) C) and D)

Question 11

Which of the following statements regarding a competitive market is not correct?

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

Question 12

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? Quantity
Total Costs
0
$1
1
$7
2
$14
3
$22
4
$31
5
$41

Accepted Answer

A)   200 units
B)   300 units
C)   400 units
D)   500 unitsE) B) and C)
F) C) and D)

Question 13

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Accepted Answer

A)   sunk costs
B)   marginal costs
C)   variable costs
D)   opportunity costsE) All of the above
F) B) and D)

Question 14

The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien,Wisconsin.Because the market for milk is generally considered to be competitive,the Doris Dairy Farm does not choose the

Accepted Answer

A)   quantity of milk to produce.
B)   price at which it sells its milk.
C)   profits it earns.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 15

Table 13-7
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 13-7.If the firm is maximizing profit,how much profit is it earning?

Accepted Answer

A)   $0
B)   $1
C)   $10
D)   There is insufficient data to determine the firm's profit.E) C) and D)
F) None of the above

Question 16

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Scenario 13-2
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 13-2.At Q = 999,the firm's total costs equal

Accepted Answer

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

Question 19

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 20

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Exam 13: Firms in Competitive Markets

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

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Figure 13-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

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

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Which of these types of costs can be ignored when an individual or a firm is making decisions?

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Table 13-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 13-7.If the firm is maximizing profit,how much profit is it earning?

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Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Correct AnswerverifiedIn a competitive market where firms are ...View AnswerShow Answer

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

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When economists refer to a production cost that has already been committed and cannot be recovered,they use the term

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Which of the following statements regarding a competitive market is not correct?

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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? Quantity Total Costs 0 $1 1 $7 2 $14 3 $22 4 $31 5 $41

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Figure 13-12 -Refer to Figure 13-12.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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Table 13-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 13-14.What is Bob's total fixed cost?

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Raiman's Shoe Repair produces custom-made shoes.When Mr.Raiman produces 12 pairs per week,the marginal cost of the 12th pair is $84,and the marginal revenue of the 12th pair is $70.What would you advise Mr.Raiman to do?

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A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

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

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In a perfectly competitive market,the market supply curve is

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Scenario 13-2 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 13-2.At Q = 999,the firm's total costs equal

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Scenario 13-1 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 13-1.At Q = 999,the firm's total costs equal

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Figure 13-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-2.If the market price is P3,in the short run the firm will earn

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The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien,Wisconsin.Because the market for milk is generally considered to be competitive,the Doris Dairy Farm does not choose the

Correct AnswerverifiedShow Answer

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In a competitive market where firms are ...
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