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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


A) profit of more than $27.
B) profit of exactly $27.
C) loss of more than $27.
D) loss of exactly $27.

E) All of the above
F) C) and D)

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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?

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For this firm,price = marginal...

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Who is a price taker in a competitive market?


A) buyers only
B) sellers only
C) both buyers and sellers
D) neither buyers nor sellers

E) None of the above
F) A) and D)

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A sunk cost is one that


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) A) and B)
F) A) and C)

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Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. 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? A) $0.25 B) $1.25 C) $2.25 D) The firm will lose $6.25. -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?


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

E) A) and D)
F) B) and C)

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


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 D)
F) A) and C)

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


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 C)
F) None of the above

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

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Table 14-13 Diana's Dress Emporium Table 14-13 Diana's Dress Emporium -Refer to Table 14-13.What is the marginal cost of the 1st unit? A) $50 B) $75 C) $80 D) $150 -Refer to Table 14-13.What is the marginal cost of the 1st unit?


A) $50
B) $75
C) $80
D) $150

E) B) and C)
F) A) and D)

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


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) All of the above
F) None of the above

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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?

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The firm selects the level of output at ...

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


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 C)
F) A) and D)

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

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Competitive firms that earn a loss in the short run should


A) shut down if P < AVC.
B) raise their price.
C) lower their output.
D) All of the above are correct.

E) None of the above
F) All of the above

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


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 D)
F) B) and C)

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: 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 A) $0 B) $6 C) $7 D) $10 -Refer to Figure 14-3.The firm will earn zero economic profit if the market price is


A) $0
B) $6
C) $7
D) $10

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

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

A) True
B) False

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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. 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? A) 10,000 B) 20,000 C) 50,000 D) 150,000 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? A) 10,000 B) 20,000 C) 50,000 D) 150,000 -Refer to Figure 14-10.If there are 500 identical firms in this market,what is the value of Q1?


A) 10,000
B) 20,000
C) 50,000
D) 150,000

E) A) and D)
F) All of the above

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Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: 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? A) decrease quantity to 13 units B) increase quantity to 17 units C) continue to operate at 14 units D) increase quantity to 16 units -Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?


A) decrease quantity to 13 units
B) increase quantity to 17 units
C) continue to operate at 14 units
D) increase quantity to 16 units

E) A) and B)
F) A) and C)

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


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

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