Question 1

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Accepted Answer

A) True 
 B)False

Question 2

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning positive economic profits in the short run?

Accepted Answer

A)   Pa
B)   Pb
C)   Pc
D)   PdE) B) and D)
F) B) and C)

Question 3

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
 
-Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Accepted Answer

A)   $55
B)   $120
C)   $137
D)   $140E) None of the above
F) B) and D)

Question 4

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 profit

Accepted Answer

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) A) and B)

Question 5

If Bradley's Butcher Shop sells its product in a competitive market, then

Accepted Answer

A)   the price of that product depends on the quantity of the product that Bradley's Butcher Shop produces and sells because the firm's demand curve is downward sloping.
B)   Bradley's Butcher Shop's total cost must be a constant multiple of its quantity of output.
C)   Bradley's Butcher Shop's total revenue must be proportional to its quantity of output.
D)   Bradley's Butcher Shop's total revenue must be equal to its average revenue.E) All of the above
F) A) and B)

Question 6

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

Accepted Answer

A)   above $6.30 but less than $8.
B)   above $6.30.
C)   less than $6.30 but more than $4.50.
D)   less than $4.50.E) B) and D)
F) None of the above

Question 7

When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

Accepted Answer

A)   the firms will suffer long-run economic losses.
B)   the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.
C)   some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs.
D)   all firms will go out of business, since consumers will not pay prices that enable firms to cover their total production costs.E) All of the above
F) A) and D)

Question 8

Scenario 14-5
A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition.
-Refer to Scenario 14-5. As a result of the increase in the demand for tomatoes, we would predict that in the short run that the

Accepted Answer

A)   production of tomatoes would be at efficient scale.
B)   price of tomatoes would rise.
C)   total cost for existing irradiated tomato producers must rise.
D)   number of firms in the market would fall as prices fall and firms exit the market.E) None of the above
F) A) and B)

Question 9

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 1,000, the firm's profits equal

Accepted Answer

A)   -$5,000.
B)   $2,500.
C)   $5,000.
D)   $10,000.E) A) and C)
F) None of the above

Question 10

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

Question 11

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Question 12

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

Accepted Answer

A)   marginal revenue exceeds marginal cost.
B)   marginal cost exceeds marginal revenue.
C)   total cost exceeds total revenue.
D)   None of the above is correct.E) None of the above
F) A) and D)

Question 13

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

Accepted Answer

A)   sunk cost.
B)   average fixed cost.
C)   average variable cost.
D)   marginal cost.E) None of the above
F) B) and C)

Question 14

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 B)
F) All of the above

Question 15

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $6 value on reading a book.

Accepted Answer

A)   You should leave the theater since the net benefit from seeing the remainder of the show is -$20, while going home will earn you at least $8 of satisfaction.
B)   You should stay and watch the remainder of the show.
C)   You should go home and watch TV.
D)   You should go home and read a book.E) A) and B)
F) None of the above

Question 16

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 B)
F) A) and C)

Question 17

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-3. For this firm, the average revenue is

Accepted Answer

A)   $26.
B)   $39.
C)   $13.
D)   $0.E) B) and C)
F) All of the above

Question 18

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Accepted Answer

A)   average total cost curve.
B)   average variable cost curve.
C)   marginal cost curve.
D)   marginal revenue curve.E) B) and D)
F) None of the above

Question 19

Which of the following industries is least likely to exhibit the characteristic of free entry?

Accepted Answer

A)   bookstores
B)   hairstyling salons
C)   yoga studios
D)   satellite radioE) All of the above
F) A) and D)

Question 20

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)   earning small but positive economic profits.
B)   facing the prospect of future losses.
C)   operating at the efficient scale.
D)   that work together to raise market prices.E) A) and C)
F) None of the above

Exam 14: Firms in Competitive Markets

Correct Answer
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Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the average revenue is

Correct Answer
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When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

Correct Answer
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If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

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. Which of the four prices corresponds to a firm earning positive economic profits in the short run?

Correct Answer
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When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Correct Answer
verified

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct Answer
verified

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 profit

Correct Answer
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If Bradley's Butcher Shop sells its product in a competitive market, then

Correct Answer
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When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct Answer
verified

Which of the following industries is least likely to exhibit the characteristic of free entry?

Correct Answer
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Correct Answer
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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 1,000, the firm's profits equal

Correct Answer
verified

Correct Answer
verified

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

Correct Answer
verified

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

A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Correct Answer
verified

The long-run supply curve for a competitive industry

Correct Answer
verified

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Correct AnswerverifiedShow Answer

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the average revenue is

Correct AnswerverifiedShow Answer

When market conditions in a competitive industry are such that firms cannot cover their total production costs, then

Correct AnswerverifiedShow Answer

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

Correct AnswerverifiedShow Answer

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning positive economic profits in the short run?

Correct AnswerverifiedShow Answer

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Correct AnswerverifiedShow Answer

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct AnswerverifiedShow Answer

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 profit

Correct AnswerverifiedShow Answer

If Bradley's Butcher Shop sells its product in a competitive market, then

Correct AnswerverifiedShow Answer

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct AnswerverifiedShow Answer

Which of the following industries is least likely to exhibit the characteristic of free entry?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 1,000, the firm's profits equal

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to

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

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Correct AnswerverifiedShow Answer

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive industry

Correct AnswerverifiedShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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