Question 1

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

Question 2

In the short run,a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Accepted Answer

A) True 
 B)False

Question 3

When existing firms in a competitive market are profitable,an incentive exists for

Accepted Answer

A)   new firms to seek government subsidies that would allow them to enter the market.
B)   new firms to enter the market, even without government subsidies.
C)   existing firms to raise prices.
D)   existing firms to increase production.E) B) and C)
F) A) and C)

Question 4

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 maximizing profit,how much profit is it earning?

Accepted Answer

A)   $0
B)   $1
C)   $10
D)   There is insufficient data to determine the firm's profit.E) A) and B)
F) A) and D)

Question 7

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

A)   new firms to enter the market.
B)   the market price to rise.
C)   its profits to rise.
D)   Both b)  and c)  are correct.E) B) and C)
F) A) and C)

Question 8

A firm that has little ability to influence market prices operates in a

Accepted Answer

A)   competitive market.
B)   strategic market.
C)   thin market.
D)   power market.E) None of the above
F) A) and D)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   marginal revenue equal to long-run average total cost.
B)   total revenue equal to average total cost.
C)   average revenue greater than marginal cost.
D)   accounting profits equal to zero.E) A) and D)
F) A) and C)

Question 11

A firm in a competitive market has the following cost structure: 
If the market price is $4,this firm will

Accepted Answer

A)   produce 2 units in the short run and exit in the long run.
B)   produce 3 units in the short run and exit in the long run.
C)   produce 4 units in the short run and exit in the long run.
D)   shut down in the short run and exit in the long run.E) B) and C)
F) All of the above

Question 12

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 13

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 14

A key characteristic of a competitive market is that

Accepted Answer

A)   government antitrust laws regulate competition.
B)   producers sell nearly identical products.
C)   firms minimize total costs.
D)   firms have price setting power.E) A) and D)
F) B) and D)

Question 15

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

Accepted Answer

A) True 
 B)False

Question 16

Profit-maximizing firms in a competitive market produce an output level where

Accepted Answer

A)   marginal cost equals marginal revenue.
B)   marginal cost equals average total cost.
C)   marginal revenue is increasing.
D)   price is less than marginal revenue.E) All of the above
F) A) and B)

Question 17

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Accepted Answer

A)   $-1,600.
B)   $1,600.
C)   $3,200.
D)   $8,000.E) C) and D)
F) All of the above

Question 18

In a competitive market,no single producer can influence the market price because

Accepted Answer

A)   many other sellers are offering a product that is essentially identical.
B)   consumers have more influence over the market price than producers do.
C)   government intervention prevents firms from influencing price.
D)   producers agree not to change the price.E) A) and B)
F) B) and D)

Question 19

The long-run supply curve for a competitive industry may be upward sloping if

Accepted Answer

A)   there are barriers to entry.
B)   firms that enter the industry are able to do so at lower average total costs than the existing firms in the industry.
C)   some resources are available only in limited quantities.
D)   accounting profits are positive.E) None of the above
F) B) and D)

Question 20

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

Exam 14: Firms in Competitive Markets.

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct Answer
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A firm that has little ability to influence market prices operates in a

Correct Answer
verified

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

Correct Answer
verified

When existing firms in a competitive market are profitable,an incentive exists for

Correct Answer
verified

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 maximizing profit,how much profit is it earning?

Correct Answer
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Correct Answer
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In a competitive market,no single producer can influence the market price because

Correct Answer
verified

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

Correct Answer
verified

A key characteristic of a competitive market is that

Correct Answer
verified

In the short run,a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Correct Answer
verified

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct Answer
verified

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct Answer
verified

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

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

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

Correct Answer
verified

The long-run supply curve for a competitive industry may be upward sloping if

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

Profit-maximizing firms in a competitive market produce an output level where

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the market price is $4,this firm will

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
verified

Exam 14: Firms in Competitive Markets.

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct AnswerverifiedShow Answer

A firm that has little ability to influence market prices operates in a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When existing firms in a competitive market are profitable,an incentive exists for

Correct AnswerverifiedShow Answer

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 maximizing profit,how much profit is it earning?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a competitive market,no single producer can influence the market price because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A key characteristic of a competitive market is that

Correct AnswerverifiedShow Answer

In the short run,a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Correct AnswerverifiedShow Answer

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct AnswerverifiedShow Answer

Assume a firm in a competitive industry is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct AnswerverifiedShow Answer

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

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

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

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive industry may be upward sloping if

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

Profit-maximizing firms in a competitive market produce an output level where

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the market price is $4,this firm will

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

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