Question 1

Consider a competitive market with 50 identical firms.Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market. D = 200 - 10P and the market supply is given by the equation QS = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market.   How many units should a firm in this market produce to maximize profit? A)  1 unit B)  2 units C)  3 units D)  4 units" class="answers-bank-image d-inline" rel="preload" > How many units should a firm in this market produce to maximize profit?

Accepted Answer

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

Question 2

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11.The marginal revenue from producing the 4th unit equals (i) $5.
(ii) the price.
(iii) the marginal cost.

Accepted Answer

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

Question 3

Table 14-5
 
-Refer to Table 14-5.The price of the product is

Accepted Answer

A)   $9.
B)   $11.
C)   $13.
D)   $15.E) B) and C)
F) None of the above

Question 4

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2.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) A) and D)
F) A) and B)

Question 5

Firms operating in competitive markets produce output levels where marginal revenue equals

Accepted Answer

A)   price.
B)   average revenue.
C)   total revenue divided by output.
D)   All of the above are correct.E) C) and D)
F) A) and B) D

Question 6

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1.If the market price is $6.30,the firm will earn

Accepted Answer

A)   positive economic profits in the short run.
B)   negative economic profits in the short run but remain in business.
C)   negative economic profits and shut down.
D)   zero economic profits in the short run.E) A) and B)
F) A) and C)

Question 7

Free entry means that

Accepted Answer

A)   the government pays any entry costs for individual firms.
B)   no legal barriers prevent a firm from entering an industry.
C)   a firm's marginal cost is zero.
D)   a firm has no fixed costs in the short run.E) None of the above
F) A) and B)

Question 8

In the short-run,a firm's supply curve is equal to the

Accepted Answer

A)   marginal cost curve above its average variable cost curve.
B)   marginal cost curve above its average total cost curve.
C)   average variable cost curve above its marginal cost curve.
D)   average total cost curve above its marginal cost curve.E) B) and C)
F) A) and B)

Question 9

In the long-run equilibrium of a market with free entry and exit,if all firms have the same cost structure,then

Accepted Answer

A)   marginal cost exceeds average total cost.
B)   the price of the good exceeds average total cost.
C)   average total cost exceeds the price of the good.
D)   firms are operating at their efficient scale.E) B) and C)
F) C) and D)

Question 10

The long-run supply curve for a competitive industry

Accepted Answer

A)   may be horizontal if entry into the industry lowers average total cost.
B)   may be upward-sloping if higher-cost firms enter the industry.
C)   will be horizontal if there is free entry into the industry.
D)   will be upward-sloping if there are barriers to entry into the industry.E) A) and C)
F) A) and B)

Question 11

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

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 per loaf.At this new price,what is Bob's profit-maximizing quantity?

Accepted Answer

A)   5 units
B)   6 units
C)   7 units
D)   8 unitsE) B) and D)
F) B) and C)

Question 13

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11.Marginal revenue equals marginal cost when the firm produces

Accepted Answer

A)   2 units.
B)   3 units.
C)   4 units.
D)   5 units.E) C) and D)
F) A) and D)

Question 14

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Accepted Answer

A)   ABCD.
B)   AB.
C)   CD.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 15

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False  False

Question 16

Table 14-12
Bill's Birdhouses
 
-Refer to Table 14-12.What is the average revenue when 4 units are sold?

Accepted Answer

A)   $0
B)   $68
C)   $80
D)   $400E) B) and C)
F) A) and C)

Question 17

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13.If the price is P1 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) A) and B)
F) B) and D)

Question 18

When price is below average variable cost,a firm in a competitive market will

Accepted Answer

A)   shut down and incur fixed costs.
B)   shut down and incur both variable and fixed costs.
C)   continue to operate as long as average revenue exceeds marginal cost.
D)   continue to operate as long as average revenue exceeds average fixed cost.E) All of the above
F) B) and C)

Question 19

Suppose the long-run supply curve for a good is upward-sloping.The upward slope could be explained by

Accepted Answer

A)   decreases in production costs resulting from more firms coming into the market.
B)   a breakdown of the "free entry and exit" feature of competition.
C)   a breakdown of the "price taking" feature of competition.
D)   the fact that a resource used in the production of the good is available only in limited quantities.E) B) and C)
F) All of the above

Question 20

Table 14-5
 
-Refer to Table 14-5.The marginal revenue of the 12th unit is

Accepted Answer

A)   $9.
B)   $10.
C)   $11
D)   The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold.E) None of the above
F) B) and D) C

Exam 14: Firms in Competitive Markets

Correct Answer
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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.The marginal revenue from producing the 4th unit equals (i) $5. (ii) the price. (iii) the marginal cost.

Correct Answer
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Table 14-5 -Refer to Table 14-5.The price of the product is

Correct Answer
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Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.If the market price is P3,in the short run the firm will earn

Correct Answer
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Firms operating in competitive markets produce output levels where marginal revenue equals

Correct Answer
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D

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.If the market price is $6.30,the firm will earn

Correct Answer
verified

Free entry means that

Correct Answer
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In the short-run,a firm's supply curve is equal to the

Correct Answer
verified

In the long-run equilibrium of a market with free entry and exit,if all firms have the same cost structure,then

Correct Answer
verified

The long-run supply curve for a competitive industry

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.Marginal revenue equals marginal cost when the firm produces

Correct Answer
verified

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Correct Answer
verified

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct Answer
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False

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the average revenue when 4 units are sold?

Correct Answer
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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

Correct Answer
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When price is below average variable cost,a firm in a competitive market will

Correct Answer
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Suppose the long-run supply curve for a good is upward-sloping.The upward slope could be explained by

Correct Answer
verified

Table 14-5 -Refer to Table 14-5.The marginal revenue of the 12th unit is

Correct Answer
verified
C

Exam 14: Firms in Competitive Markets

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.The marginal revenue from producing the 4th unit equals (i) $5. (ii) the price. (iii) the marginal cost.

Correct AnswerverifiedShow Answer

Table 14-5 -Refer to Table 14-5.The price of the product is

Correct AnswerverifiedShow Answer

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.If the market price is P3,in the short run the firm will earn

Correct AnswerverifiedShow Answer

Firms operating in competitive markets produce output levels where marginal revenue equals

Correct AnswerverifiedD

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.If the market price is $6.30,the firm will earn

Correct AnswerverifiedShow Answer

Free entry means that

Correct AnswerverifiedShow Answer

In the short-run,a firm's supply curve is equal to the

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a market with free entry and exit,if all firms have the same cost structure,then

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive industry

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.Marginal revenue equals marginal cost when the firm produces

Correct AnswerverifiedShow Answer

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct AnswerverifiedFalse

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the average revenue when 4 units are sold?

Correct AnswerverifiedShow Answer

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

When price is below average variable cost,a firm in a competitive market will

Correct AnswerverifiedShow Answer

Suppose the long-run supply curve for a good is upward-sloping.The upward slope could be explained by

Correct AnswerverifiedShow Answer

Table 14-5 -Refer to Table 14-5.The marginal revenue of the 12th unit is

Correct AnswerverifiedC

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D

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False

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C