Question 1

A competitive firm currently produces and sells 500 units of output.Its total revenue is $3,500;the marginal cost of producing the 500th unit of output is $5.75;and the average total cost of producing the 500th unit of output is $4.00.Is the firm maximizing its profit,or should it increase or decrease output in order to increase its profit?

Accepted Answer

For this firm,price = marginal...

Question 2

A competitive market is in long-run equilibrium.If demand increases,we can be certain that price will

Accepted Answer

A)   rise in the short run.Some firms will enter the industry.Price will then rise to reach the new long-run equilibrium.
B)   rise in the short run.Some firms will enter the industry.Price will then fall to reach the new long-run equilibrium.
C)   fall in the short run.All,some,or no firms will shut down,and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
D)   not rise in the short run because firms will enter to maintain the price.E) A) and B)
F) None of the above

Question 3

A firm sells 100 units of output and its total revenue is $800.The firm's average revenue amounts to __________.

Accepted Answer

The answer of A firm sells 100 units of output...

Question 4

In the long-run equilibrium of a competitive market with free entry and exit,firms operate at their __________ scale.

Accepted Answer

The answer of In the long-run equilibrium of a competitive...

Question 5

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 C)
F) A) and B)

Question 6

Competitive firms that earn a loss in the short run should

Accepted Answer

A)   shut down if P 
B)   raise their price.
C)   lower their output.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 7

Which of the following is not a characteristic of a competitive market?

Accepted Answer

A)   Buyers and sellers are price takers.
B)   Each firm sells a virtually identical product.
C)   Entry is limited.
D)   Each firm chooses an output level that maximizes profits.E) B) and D)
F) A) and B)

Question 8

Table 14-13
Diana's Dress Emporium
 
-Refer to Table 14-13.What is the marginal cost of the 1st unit?

Accepted Answer

A)   $50
B)   $75
C)   $80
D)   $150E) A) and C)
F) None of the above

Question 9

Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?

Accepted Answer

A)   decrease quantity to 13 units
B)   increase quantity to 17 units
C)   continue to operate at 14 units
D)   increase quantity to 16 unitsE) None of the above
F) A) and C)

Question 10

Who is a price taker in a competitive market?

Accepted Answer

A)   buyers only
B)   sellers only
C)   both buyers and sellers
D)   neither buyers nor sellersE) None of the above
F) All of the above

Question 11

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6.When market price is P3,a profit-maximizing firm's total revenue

Accepted Answer

A)   can be represented by the area P3 * Q3.
B)   can be represented by the area P3 * Q2.
C)   can be represented by the area (P3-P2) * Q3.
D)   is zero.E) B) and D)
F) B) and C)

Question 12

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14.Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75.At this new price,if Bob produces and sells the profit-maximizing quantity,how much profit will he earn?

Accepted Answer

A)   $0.25
B)   $1.25
C)   $2.25
D)   The firm will lose $6.25.E) C) and D)
F) A) and B)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Profit-maximizing firms enter a competitive market when existing firms in that market have

Accepted Answer

A)   total revenues that exceed fixed costs.
B)   total revenues that exceed total variable costs.
C)   average total costs that exceed average revenue.
D)   average total costs less than market price.E) A) and B)
F) A) and C)

Question 15

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Accepted Answer

The firm selects the level of output at ...

Question 16

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

Accepted Answer

A)   more units of output because its marginal revenue is greater than its marginal cost.
B)   fewer units of output because its marginal revenue is less than its marginal cost.
C)   more units of output because its marginal revenue is less than its marginal cost.
D)   fewer units of output because its marginal revenue is greater than its marginal cost.E) B) and C)
F) A) and D)

Question 17

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3.The firm will earn zero economic profit if the market price is

Accepted Answer

A)   $0
B)   $6
C)   $7
D)   $10E) None of the above
F) All of the above

Question 18

A sunk cost is one that

Accepted Answer

A)   changes as the level of output changes in the short run.
B)   was paid in the past and will not change regardless of the present decision.
C)   should determine the rational course of action in the future.
D)   has the most impact on profit-making decisions.E) B) and C)
F) A) and D)

Question 19

A competitive market is in long-run equilibrium.If demand decreases,we can be certain that price will

Accepted Answer

A)   fall in the short run.All firms will shut down,and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
B)   fall in the short run.No firms will shut down,but some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
C)   fall in the short run.All,some,or no firms will shut down,and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
D)   not fall in the short run because firms will exit to maintain the price.E) C) and D)
F) A) and B)

Question 20

A profit-maximizing firm in a competitive market is able to sell its product for $7.At its current level of output,the firm's average total cost is $10.The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units.The firm experiences a

Accepted Answer

A)   profit of more than $27.
B)   profit of exactly $27.
C)   loss of more than $27.
D)   loss of exactly $27.E) None of the above
F) A) and B)

Exam 14: Firms in Competitive Markets

Correct Answer
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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3.The firm will earn zero economic profit if the market price is

Correct Answer
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Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Correct Answer
verified
The firm selects the level of output at ...
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Table 14-13 Diana's Dress Emporium -Refer to Table 14-13.What is the marginal cost of the 1st unit?

Correct Answer
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A competitive market is in long-run equilibrium.If demand increases,we can be certain that price will

Correct Answer
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Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?

Correct Answer
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Correct Answer
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For this firm,price = marginal...
View Answer

A firm sells 100 units of output and its total revenue is $800.The firm's average revenue amounts to __________.

Correct Answer
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Profit-maximizing firms enter a competitive market when existing firms in that market have

Correct Answer
verified

Who is a price taker in a competitive market?

Correct Answer
verified

Correct Answer
verified

A sunk cost is one that

Correct Answer
verified

A competitive market is in long-run equilibrium.If demand decreases,we can be certain that price will

Correct Answer
verified

A profit-maximizing firm in a competitive market is able to sell its product for $7.At its current level of output,the firm's average total cost is $10.The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units.The firm experiences a

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6.When market price is P3,a profit-maximizing firm's total revenue

Correct Answer
verified

In the long-run equilibrium of a competitive market with free entry and exit,firms operate at their __________ scale.

Correct Answer
verified

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

Correct Answer
verified

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

Correct Answer
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Competitive firms that earn a loss in the short run should

Correct Answer
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Which of the following is not a characteristic of a competitive market?

Correct Answer
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Exam 14: Firms in Competitive Markets

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3.The firm will earn zero economic profit if the market price is

Correct AnswerverifiedShow Answer

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow Answer

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13.What is the marginal cost of the 1st unit?

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A competitive market is in long-run equilibrium.If demand increases,we can be certain that price will

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Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?

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Correct AnswerverifiedFor this firm,price = marginal...View AnswerShow Answer

A firm sells 100 units of output and its total revenue is $800.The firm's average revenue amounts to __________.

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Profit-maximizing firms enter a competitive market when existing firms in that market have

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Who is a price taker in a competitive market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A sunk cost is one that

Correct AnswerverifiedShow Answer

A competitive market is in long-run equilibrium.If demand decreases,we can be certain that price will

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market is able to sell its product for $7.At its current level of output,the firm's average total cost is $10.The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units.The firm experiences a

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6.When market price is P3,a profit-maximizing firm's total revenue

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a competitive market with free entry and exit,firms operate at their __________ scale.

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

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

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Competitive firms that earn a loss in the short run should

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Which of the following is not a characteristic of a competitive market?

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The firm selects the level of output at ...
View Answer

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For this firm,price = marginal...
View Answer

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