Question 1

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. If the market price is $10, what is the firm's short­run economic profit?

Accepted Answer

A)   $9
B)   $15
C)   $30
D)   $50E) All of the above
F) A) and B)

Question 3

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)   Profit = MR - MC
B)   Profit = MR - TC
C)   Profit = (P - M
C)   × Q
D)   Profit = (P - AT
C)   × QE) C) and D)
F) B) and C)

Question 4

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. The firm's short­run supply curve is its marginal cost curve above

Accepted Answer

A)   $1.
B)   $3.
C)   $4.50.
D)   $6.30.E) A) and D)
F) All of the above

Question 6

In the short run for a particular market, there are 300 firms. Each firm has a marginal cost of $30 when it produces 200 units of output. One point on the market supply curve is

Accepted Answer

A)   quantity = 100,000; price = $30.
B)   quantity = 300; price = $30.
C)   quantity = 600,000; price = $30.
D)   quantity = 600,000; price = $90,000.E) A) and B)
F) A) and C)

Question 7

Entry into a market by new firms will increase the

Accepted Answer

A)   supply of the good.
B)   profits of existing firms.
C)   price of the good.
D)   marginal cost of producing the good.E) A) and D)
F) A) and B)

Question 8

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Accepted Answer

A)   average fixed cost for the marginal firm.
B)   marginal cost of the marginal firm.
C)   average total cost of the marginal firm.
D)   average variable cost of the marginal firm.E) All of the above
F) A) and B)

Question 9

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Accepted Answer

A)   downward sloping.
B)   upward sloping.
C)   horizontal.
D)   vertical.E) A) and C)
F) A) and B)

Question 10

The term shutdown

Accepted Answer

A)   and the term exit both refer to short-run decisions that a firm might make.
B)   and the term exit both refer to long-run decisions that a firm might make.
C)   refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make.
D)   refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.E) None of the above
F) A) and B)

Question 11

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

Accepted Answer

A)   $0.
B)   $6.
C)   $7.
D)   $10.E) B) and C)
F) C) and D)

Question 12

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

Accepted Answer

A) True 
 B)False

Question 13

For a particular competitive firm, the minimum value of average variable cost (AVC)  is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost (ATC)  is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?

Accepted Answer

A)   In the short run, the firm will shut down if the price of its product is $11.
B)   In the long run, the firm will shut down if the price of its product is $14.
C)   If the price of its product is $12, then the firm's loss if it produces 200 units of output is the same as its loss if it shuts down.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 14

In a market with a fixed number of firms, as long as price is above average

Accepted Answer

A)   variable cost, each firm's marginal­cost curve is its supply curve.
B)   variable cost, each firm's average­total­cost curve is its supply curve.
C)   total cost, each firm's marginal­cost curve is its supply curve.
D)   total cost, each firm's average­total­cost curve is its supply curve.E) A) and D)
F) None of the above

Question 15

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

Question 16

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Accepted Answer

A)   total revenues exceed her total accounting costs.
B)   marginal revenue exceeds her total cost.
C)   marginal revenue exceeds her marginal cost.
D)   marginal cost exceeds her marginal revenue.E) A) and C)
F) None of the above

Question 17

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1. To maximize its profit, the firm should

Accepted Answer

A)   increase its output.
B)   continue to produce 1,000 units.
C)   decrease its output but continue to produce.
D)   shut down.E) C) and D)
F) B) and C)

Question 18

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

Accepted Answer

A)   total revenue must equal total variable cost for each firm.
B)   economic profits must be zero.
C)   price must equal average variable cost for each firm.
D)   Both a and c are correct.E) B) and D)
F) All of the above

Question 19

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales. 
-Refer to Table 14-14. What is the total revenue from selling 5 units?

Accepted Answer

A)   $2.50
B)   $3.25
C)   $12.50
D)   $16.25E) A) and D)
F) All of the above

Question 20

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

Accepted Answer

A)   ethnic restaurants
B)   municipal water and sewer
C)   corn farming
D)   grocery storesE) A) and D)
F) A) and C)

Exam 14: Firms in Competitive Markets

Which of the following could be used to calculate the profit for a firm?

Correct Answer
verified

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Correct Answer
verified

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's shortrun economic profit?

Correct Answer
verified

In a market with a fixed number of firms, as long as price is above average

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's shortrun supply curve is its marginal cost curve above

Correct Answer
verified

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

Correct Answer
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In the short run for a particular market, there are 300 firms. Each firm has a marginal cost of $30 when it produces 200 units of output. One point on the market supply curve is

Correct Answer
verified

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

Correct Answer
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Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the total revenue from selling 5 units?

Correct Answer
verified

Correct Answer
verified

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Correct Answer
verified

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Correct Answer
verified

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. To maximize its profit, the firm should

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Entry into a market by new firms will increase the

Correct Answer
verified

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Correct Answer
verified

The term shutdown

Correct Answer
verified

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Correct Answer
verified

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Which of the following could be used to calculate the profit for a firm?

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's short­run economic profit?

Correct AnswerverifiedShow Answer

In a market with a fixed number of firms, as long as price is above average

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's short­run supply curve is its marginal cost curve above

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run for a particular market, there are 300 firms. Each firm has a marginal cost of $30 when it produces 200 units of output. One point on the market supply curve is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the total revenue from selling 5 units?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Correct AnswerverifiedShow Answer

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. To maximize its profit, the firm should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Entry into a market by new firms will increase the

Correct AnswerverifiedShow Answer

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Correct AnswerverifiedShow Answer

The term shutdown

Correct AnswerverifiedShow Answer

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Correct AnswerverifiedShow Answer

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's shortrun economic profit?

Correct Answer
verified

Correct Answer
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Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm's shortrun supply curve is its marginal cost curve above

Correct Answer
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Correct Answer
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