Question 1

A firm in a competitive market has the following cost structure:  If the market price is $8,how many units of output should the firm produce to maximize profit?

Accepted Answer

A)   5 units
B)   6 units
C)   7 units
D)   8 unitsE) B) and C)
F) All of the above

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

If marginal cost exceeds marginal revenue,the firm

Accepted Answer

A)   is most likely to be at a profit-maximizing level of output.
B)   should increase the level of production to maximize its profit.
C)   should reduce its average fixed cost in order to lower its marginal cost.
D)   may still be earning a positive accounting profit.E) A) and D)
F) None of the above

Question 4

In the long run,a profit-maximizing firm will choose to exit a market when

Accepted Answer

A)   average fixed cost is falling.
B)   variable costs exceed sunk costs.
C)   marginal cost exceeds marginal revenue at the current level of production.
D)   total revenue is less than total cost.E) B) and C)
F) A) and C)

Question 5

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Accepted Answer

A) True 
 B)False

Question 6

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Accepted Answer

A)   more than triple.
B)   less than triple.
C)   exactly triple.
D)   Any of the above may be true depending on the firm's labor productivity.E) C) and D)
F) B) and D)

Question 7

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each.Which of the following statements is correct? (i) 
Marginal revenue equals $3.
(ii) 
Average revenue equals $100.
(iii) 
Total revenue equals $300.

Accepted Answer

A)   (i) only
B)   (iii) only
C)   (i) and (ii) only
D)   (i) , (ii) ,and (iii) E) All of the above
F) B) and C)

Question 8

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost;otherwise,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 9

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur...

Question 10

In a perfectly competitive market,the process of entry and exit will end when

Accepted Answer

A)   price equals minimum marginal cost.
B)   marginal revenue equals marginal cost.
C)   economic profits are zero.
D)   accounting profits are zero.E) B) and C)
F) A) and C)

Question 11

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) All of the above

Question 12

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price is determined by

Accepted Answer

A)   the minimum point on the firms' average variable cost curve.
B)   the minimum point on the firms' average total cost curve.
C)   the portion of the marginal cost curve below average variable cost.
D)   a firm's level of sunk costs.E) All of the above
F) C) and D)

Question 13

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 14

In the long run,a firm will exit a competitive industry if

Accepted Answer

A)   total revenue exceeds total cost.
B)   the price exceeds average total cost.
C)   average total cost exceeds the price.
D)   Both a and b are correct.E) None of the above
F) A) and B)

Question 15

Figure 14-14  
-Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is not correct?

Accepted Answer

A)   Point A is a long-run equilibrium point.
B)   Points A,B,and C are short-run equilibria points.
C)   Point B is a long-run equilibrium point.
D)   Point C is a long-run equilibrium point.E) B) and D)
F) C) and D)

Question 16

Suppose that some firms in a competitive industry are earning zero economic profits,while others are experiencing losses.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) None of the above
F) All of the above

Question 17

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 Q2?

Accepted Answer

A)   140,000
B)   210,000
C)   280,000
D)   420,000E) B) and C)
F) A) and D)

Question 18

What is the relationship between price and marginal revenue for a competitive firm?

Accepted Answer

Price and marginal r...

Question 19

Figure 14-9
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 14-9.When 100 identical firms participate in this market,at what price will 15,000 units be supplied to this market?

Accepted Answer

A)   $1.00
B)   $1.50
C)   $2.00
D)   The price cannot be determined from the information provided.E) B) and D)
F) All of the above

Question 20

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) None of the above
F) A) and B)

Exam 14: Firms in Competitive Markets

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

Correct Answer
verified

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the long run.

Correct Answer
verified

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct Answer
verified
Because a normal rate of retur...
View Answer

In the long run,a firm will exit a competitive industry if

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the market price is $8,how many units of output should the firm produce to maximize profit?

Correct Answer
verified

In the long run,a profit-maximizing firm will choose to exit a market when

Correct Answer
verified

If marginal cost exceeds marginal revenue,the firm

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is not correct?

Correct Answer
verified

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price is determined by

Correct Answer
verified

What is the relationship between price and marginal revenue for a competitive firm?

Correct Answer
verified
Price and marginal r...
View Answer

In a perfectly competitive market,the process of entry and exit will end when

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

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Correct Answer
verified

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each.Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $100. (iii) Total revenue equals $300.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost;otherwise,the firm will shut down.

Correct Answer
verified

Suppose that some firms in a competitive industry are earning zero economic profits,while others are experiencing losses.All else equal,in the long run,we would expect the number of firms in the industry to

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

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

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

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the long run.

Correct AnswerverifiedShow Answer

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct AnswerverifiedBecause a normal rate of retur...View AnswerShow Answer

In the long run,a firm will exit a competitive industry if

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the market price is $8,how many units of output should the firm produce to maximize profit?

Correct AnswerverifiedShow Answer

In the long run,a profit-maximizing firm will choose to exit a market when

Correct AnswerverifiedShow Answer

If marginal cost exceeds marginal revenue,the firm

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price is determined by

Correct AnswerverifiedShow Answer

What is the relationship between price and marginal revenue for a competitive firm?

Correct AnswerverifiedPrice and marginal r...View AnswerShow Answer

In a perfectly competitive market,the process of entry and exit will end when

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

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Correct AnswerverifiedShow Answer

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each.Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $100. (iii) Total revenue equals $300.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost;otherwise,the firm will shut down.

Correct AnswerverifiedShow Answer

Suppose that some firms in a competitive industry are earning zero economic profits,while others are experiencing losses.All else equal,in the long run,we would expect the number of firms in the industry to

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

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Because a normal rate of retur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Price and marginal r...
View 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