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Exam 14: Firms in Competitive Markets

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Question 101

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When firms are neither entering nor exiting a perfectly competitive market,

A) total revenue must equal total cost for each firm.
B) economic profits must be zero.
C) price must equal the minimum of marginal cost for each firm.
D) Both a and b are correct.

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

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Question 102

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Which of the following firms is the closest to being a perfectly competitive firm?

A) a hot dog vendor in New York
B) Microsoft Corporation
C) Ford Motor Company
D) the campus bookstore

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

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Question 103

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Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

A firm lacks market power if it cannot influence __________.

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

List and describe the characteristics of a perfectly competitive market.

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 50 units of output and at that output level, marginal revenue is $6. Suppose that the firm increases output by 50%. Total revenue will be

A competitive firm's short-run supply curve is part of which of the following 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 costs

Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation Q^D = 200 - 10P and the market supply is given by the equation Q^S = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market. Output Marginal Cost 0 -- 1 $5 2 $10 3 $15 4 $20 5 $25 How many units should a firm in this market produce to maximize profit?

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

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

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

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

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

If a firm can influence the market price of the good it sells, then it is said to have __________.

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

When new entrants into a competitive market have higher costs than existing firms,