Question 1

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A)  horizontal.
B)  likely to slope downward.
C)  determined by forces external to the firm.
D)  the portion of its marginal cost curve that lies above its average variable cost.E) C) and D)
F) A) and B)

Question 2

The exit of existing firms from a competitive market will

Accepted Answer

A)  increase market supply and increase market price.
B)  increase market supply and decrease market price.
C)  decrease market supply and increase market price.
D)  decrease market supply and decrease market price.E) A) and B)
F) None of the above

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units?

Accepted Answer

A)  Yes, because the marginal revenue exceeds the marginal cost.
B)  Yes, because the marginal revenue exceeds the average total cost.
C)  No, because the marginal cost exceeds the marginal revenue.
D)  No, because the average total cost exceeds the marginal revenue.E) A) and B)
F) A) and C)

Question 5

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Accepted Answer

A) True 
 B)False

Question 6

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Accepted Answer

A)  will also be -0.3.
B)  depends on how large a crop the farmer produces.
C)  will range between -0.3 and -1.0.
D)  will be infinite.E) A) and B)
F) A) and C)

Question 7

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Accepted Answer

A) True 
 B)False

Question 8

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Accepted Answer

A)  Pay the $85 to buy the watch.
B)  Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch.
C)  Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch.
D)  Do not buy the watch.E) A) and B)
F) A) and C)

Question 9

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Accepted Answer

A) True 
 B)False

Question 10

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

Accepted Answer

Profit = (...

Question 11

In a competitive market, firms are unable to differentiate their product from that of other producers.

Accepted Answer

A) True 
 B)False

Question 12

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Accepted Answer

A)  production of the 100th unit of output increases the firm's profit by $3.
B)  production of the 100th unit of output increases the firm's average total cost by $7.
C)  firm's profit-maximizing level of output is less than 100 units.
D)  production of the101st unit of output must increase the firm's profit by more than $3.E) A) and B)
F) A) and C)

Question 13

Figure 14-14  
-Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a)  will

Accepted Answer

A)  have a zero economic profit.
B)  have a negative accounting profit.
C)  exit the market.
D)  choose to increase production to increase profit.E) None of the above
F) C) and D)

Question 14

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

Accepted Answer

No, the firm should shut down,...

Question 15

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

Question 16

A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does not necessarily

Accepted Answer

A)  increase the firm's total revenue by $20.
B)  increase the firm's total cost by $22.
C)  decrease the firm's profit by $2.
D)  increase the firm's average variable cost by $0.44.E) B) and C)
F) A) and D)

Question 17

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Accepted Answer

A)  at least some firms will shut down.
B)  price will fall below marginal cost for some firms.
C)  price will fall below average total cost for some firms.
D)  at least some firms will enter the industry.E) A) and C)
F) A) and D)

Question 18

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. How does the firm's marginal revenue (MR)  compare to its marginal cost (MC)  when it increases its output from 150 units to 151 units?

Accepted Answer

A)  MR exceeds MC by $7.95.
B)  MR exceeds MC by $11.05.
C)  MC exceeds MR by $11.05.
D)  MC exceeds MR by $13.50.E) C) and D)
F) A) and D)

Question 19

Which of the following statements regarding a competitive firm is correct?

Accepted Answer

A)  Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
B)  If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
C)  By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
D)  For all firms, average revenue equals the price of the good.E) A) and B)
F) A) and C)

Question 20

In the long run the market supply

Accepted Answer

A)  must always be horizontal.
B)  could be upward sloping if the cost of production falls as new firms enter the market.
C)  could be upward sloping if the cost of production rises as new firms enter the market.
D)  could be upward sloping if technological improvements lower the cost of producing in the market.E) C) and D)
F) B) and C)

Exam 14: Firms in Competitive Markets

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

Correct Answer
verified
Profit = (...
View Answer

A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does not necessarily

Correct Answer
verified

The exit of existing firms from a competitive market will

Correct Answer
verified

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

Correct Answer
verified
No, the firm should shut down,...
View Answer

In the long run the market supply

Correct Answer
verified

Which of the following statements regarding a competitive firm is correct?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Correct Answer
verified

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Correct Answer
verified

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct Answer
verified

In a competitive market, firms are unable to differentiate their product from that of other producers.

Correct Answer
verified

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Correct Answer
verified

The short-run supply curve for a firm in a perfectly competitive market is

Correct Answer
verified

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a) will

Correct Answer
verified

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Correct Answer
verified

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

Correct AnswerverifiedProfit = (...View AnswerShow Answer

A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does not necessarily

Correct AnswerverifiedShow Answer

The exit of existing firms from a competitive market will

Correct AnswerverifiedShow Answer

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

Correct AnswerverifiedNo, the firm should shut down,...View AnswerShow Answer

In the long run the market supply

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive firm is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Correct AnswerverifiedShow Answer

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Correct AnswerverifiedShow Answer

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct AnswerverifiedShow Answer

In a competitive market, firms are unable to differentiate their product from that of other producers.

Correct AnswerverifiedShow Answer

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Correct AnswerverifiedShow Answer

The short-run supply curve for a firm in a perfectly competitive market is

Correct AnswerverifiedShow Answer

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a) will

Correct AnswerverifiedShow Answer

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Correct AnswerverifiedShow Answer

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Correct AnswerverifiedShow Answer

Correct Answer
verified
Profit = (...
View Answer

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No, the firm should shut down,...
View Answer

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