Question 1

A firm in a competitive market has the following cost structure:  If the market price is $16, this firm will

Accepted Answer

A)  produce 4 units of output in the short run and exit in the long run.
B)  produce 5 units of output in the short run and exit in the long run.
C)  produce 5 units of output in the short run and face competition from new market entrants in the long run.
D)  shut down in the short run and exit in the long run.E) C) and D)
F) All of the above

Question 2

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that a firm operating in perfectly competitive market sells 200 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 $600.
(iii) 
Average revenue exceeds marginal revenue, but we don't know by how much.

Accepted Answer

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

Question 4

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) All of the above
F) B) and D)

Question 5

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Accepted Answer

A)  increase the price of the good that it produces and sells.
B)  increase its quantity of output.
C)  decrease its total cost.
D)  decrease its average total cost.E) All of the above
F) C) and D)

Question 6

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 7

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Accepted Answer

A)  price is less than average total cost.
B)  price is greater than average total cost.
C)  average revenue is greater than average fixed cost.
D)  average revenue is greater than marginal cost.E) A) and B)
F) A) and C)

Question 8

Land of Many Lakes (LML)  sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

Accepted Answer

A)  can choose the price at which it sells its butter but not the quantity of butter that it produces.
B)  can choose quantity of butter that it produces but not the price at which it sells its butter.
C)  can choose both the price at which it sells its butter and the quantity of butter that it produces.
D)  cannot choose either the price at which it sells it butter or the quantity of butter that it produces.E) All of the above
F) B) and D)

Question 9

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Accepted Answer

A) True 
 B)False

Question 10

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

Accepted Answer

Profit <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> , ...

Question 11

A firm in a competitive market has the following cost structure:  If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Accepted Answer

A)  1 unit
B)  2 units
C)  3 units
D)  4 unitsE) B) and C)
F) B) and D)

Question 12

Table 14-1 
-Refer to Table 14-1. Over which range of output is average revenue equal to price?

Accepted Answer

A)  1 to 5 units
B)  3 to 7 units
C)  5 to 9 units
D)  Average revenue is equal to price over the entire range of output.E) A) and C)
F) None of the above

Question 13

Comparing marginal revenue to marginal cost (i) 
Reveals the contribution of the last unit of production to total profit.
(ii) 
Is helpful in making profit-maximizing production decisions.
(iii) 
Tells a firm whether its fixed costs are too high.

Accepted Answer

A)  (i)  only
B)  (i)  and (ii)  only
C)  (ii)  and (iii)  only
D)  (i)  and (iii)  onlyE) None of the above
F) A) and C)

Question 14

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

Accepted Answer

A)  fixed costs decrease as output increases from Q3 to Q4.
B)  it can earn a positive profit by increasing production to Q4.
C)  profit is still maximized at a production level of Q3.
D)  average revenue exceeds marginal revenue at a production level of Q4.E) B) and C)
F) B) and D)

Question 15

The analysis of competitive firms sheds light on the decisions that lie behind the

Accepted Answer

A)  demand curve.
B)  supply curve.
C)  way firms make pricing decisions in the not-for-profit sector of the economy.
D)  way financial markets set interest rates.E) B) and C)
F) B) and D)

Question 16

In a market with 1,000 identical firms, the short-run market supply is the

Accepted Answer

A)  marginal cost curve above average variable cost for a typical firm in the market.
B)  quantity supplied by the typical firm in the market at each price.
C)  sum of the prices charged by each of the 1,000 individual firms at each quantity.
D)  sum of the quantities supplied by each of the 1,000 individual firms at each price.E) None of the above
F) A) and D)

Question 17

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

Question 18

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-8. The firm should not produce an output level beyond

Accepted Answer

A)  4 units.
B)  5 units.
C)  6 units.
D)  7 units.E) A) and B)
F) None of the above

Question 19

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

Accepted Answer

A)  shut down her business in the short run but continue to operate in the long run.
B)  continue to operate in the short run but shut down in the long run.
C)  continue to operate in both the short run and long run.
D)  shut down in both the short run and long run.E) A) and D)
F) B) and C)

Question 20

A competitive firm currently produces and sells 500 units of output. Its total revenue is $6,000; the marginal cost of producing the 500th unit of output is $14.50; and the average total cost of producing the 500th unit of output is $9.50. 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 = margina...

Exam 14: Firms in Competitive Markets

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct Answer
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Table 14-1 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

Correct Answer
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Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

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
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Correct Answer
verified

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

Correct Answer
verified
Profit , ...
View Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

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

The analysis of competitive firms sheds light on the decisions that lie behind the

Correct Answer
verified

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

Correct Answer
verified

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the market price is $16, this firm will

Correct Answer
verified

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct Answer
verified

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm should not produce an output level beyond

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Correct Answer
verified

Comparing marginal revenue to marginal cost (i) Reveals the contribution of the last unit of production to total profit. (ii) Is helpful in making profit-maximizing production decisions. (iii) Tells a firm whether its fixed costs are too high.

Correct Answer
verified

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Correct Answer
verified

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

Correct Answer
verified

Correct Answer
verified

In a market with 1,000 identical firms, the short-run market supply is the

Correct Answer
verified

Exam 14: Firms in Competitive Markets

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct AnswerverifiedShow Answer

Table 14-1 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

Correct AnswerverifiedShow Answer

Mrs. Smith operates a business in a competitive market. The current market price is $8.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

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

Correct AnswerverifiedShow Answer

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

Correct AnswerverifiedProfit , ...View AnswerShow Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

Correct AnswerverifiedShow Answer

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

The analysis of competitive firms sheds light on the decisions that lie behind the

Correct AnswerverifiedShow Answer

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

Correct AnswerverifiedShow Answer

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the market price is $16, this firm will

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct AnswerverifiedShow Answer

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm should not produce an output level beyond

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Correct AnswerverifiedShow Answer

Comparing marginal revenue to marginal cost (i) Reveals the contribution of the last unit of production to total profit. (ii) Is helpful in making profit-maximizing production decisions. (iii) Tells a firm whether its fixed costs are too high.

Correct AnswerverifiedShow Answer

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Correct AnswerverifiedShow Answer

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a market with 1,000 identical firms, the short-run market supply is the

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Profit , ...
View Answer

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

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