Question 1

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Accepted Answer

A) True 
 B)False

Question 4

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run?
 Explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 5

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Accepted Answer

A)  If marginal revenue is greater than marginal cost,the firm should increase its output.
B)  If marginal revenue is less than marginal cost,the firm should decrease its output.
C)  If marginal revenue equals marginal cost,the firm should continue producing its current level of output.
D)  All of the above are correct.E) A) and D)
F) B) and D)

Question 9

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Accepted Answer

A)  is horizontal and equal to the minimum of long-run marginal cost for each firm.
B)  must slope downward.
C)  must slope upward.
D)  is horizontal and equal to the minimum of long-run average cost for each firm.E) B) and C)
F) C) and D)

Question 10

Competitive firms that earn a loss in the short run should

Accepted Answer

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

Question 11

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.   Output  Marginal Cost 0−−15210315420525\begin{array} { | c | c | } \hline 	ext { Output } & 	ext { Marginal Cost } \\hline 0 & - - \\hline 1 & 5 \\hline 2 & 10 \\hline 3 & 15 \\hline 4 & 20 \\hline 5 & 25 \\hline\end{array} Output 012345​ Marginal Cost −−510152025​​  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 units E) A) and C)
F) B) and C)

Question 12

A seller in a competitive market can

Accepted Answer

A)  sell all he wants at the going price,so he has little reason to charge less.
B)  influence the market price by adjusting his output.
C)  influence the profits earned by competing firms by adjusting his output.
D)  All of the above are correct.E) B) and D)
F) All of the above

Question 13

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:   Price  Quantity  Total  Cost 503515528531254175523\begin{array} { | l | l | l | } \hline 	ext { Price } & 	ext { Quantity } & \begin{array} { l } 	ext { Total } \	ext { Cost }\end{array} \\hline 5 & 0 & 3 \\hline 5 & 1 & 5 \\hline 5 & 2 & 8 \\hline 5 & 3 & 12 \\hline 5 & 4 & 17 \\hline 5 & 5 & 23 \\hline\end{array} Price 555555​ Quantity 012345​ Total  Cost ​358121723​​ 
-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) B) and C)
F) A) and D)

Question 14

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 15

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Accepted Answer

A) True 
 B)False

Question 16

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 D)
F) None of the above

Question 17

Which of the following statements is correct?

Accepted Answer

A)  For all firms,marginal revenue equals the price of the good.
B)  Only for competitive firms does average revenue equal the price of the good.
C)  Marginal revenue can be calculated as total revenue divided by the quantity sold.
D)  Only for competitive firms does average revenue equal marginal revenue.E) B) and C)
F) A) and B)

Question 18

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics,which states that rational people

Accepted Answer

A)  consider sunk costs.
B)  equate prices to the average costs of production.
C)  prefer to purchase products from smaller rather than larger firms.
D)  think at the margin.E) B) and C)
F) A) and D)

Question 19

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?

Accepted Answer

The firm selects the level of output at ...

Question 20

Which of the following statements is correct regarding a firm's decision-making?

Accepted Answer

A)  The decision to shut down and the decision to exit are both short-run decisions.
B)  The decision to shut down and the decision to exit are both long-run decisions.
C)  The decision to shut down is a short-run decision,whereas the decision to exit is a long-run decision.
D)  The decision to exit is a short-run decision,whereas the decision to shut down is a long-run decision.E) C) and D)
F) All of the above

Exam 14: Firms in Competitive Markets

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Correct Answer
verified

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?

Correct Answer
verified
The firm selects the level of output at ...
View Answer

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Correct Answer
verified

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
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

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct Answer
verified

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
verified

Which of the following statements is correct regarding a firm's decision-making?

Correct Answer
verified

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Correct Answer
verified
In a competitive market where firms are ...
View Answer

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Correct Answer
verified

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics,which states that rational people

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Correct Answer
verified

Competitive firms that earn a loss in the short run should

Correct Answer
verified

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Correct Answer
verified

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Correct Answer
verified

Correct Answer
verified

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct Answer
verified

A seller in a competitive market can

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow Answer

Which of the following statements best expresses a firm's profit-maximizing decision rule?

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 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

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

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

Which of the following statements is correct regarding a firm's decision-making?

Correct AnswerverifiedShow Answer

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Correct AnswerverifiedIn a competitive market where firms are ...View AnswerShow Answer

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Correct AnswerverifiedShow Answer

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics,which states that rational people

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Correct AnswerverifiedShow Answer

Competitive firms that earn a loss in the short run should

Correct AnswerverifiedShow Answer

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Correct AnswerverifiedShow Answer

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct AnswerverifiedShow Answer

A seller in a competitive market can

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The firm selects the level of output at ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
In a competitive market where firms are ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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