Question 1

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. D = 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.   How many units should a firm in this market produce to maximize profit? A) 1 unit B) 2 units C) 3 units D) 4 units" class="answers-bank-image d-inline" rel="preload" > 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 unitsE) A) and B)
F) C) and D)

Question 2

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs: 
-Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Accepted Answer

A)  first unit.
B)  second unit.
C)  fourth unit.
D)  fifth unit.E) A) and D)
F) All of the above

Question 3

For a firm in a perfectly competitive market, the price of the good is always

Accepted Answer

A)  equal to marginal revenue.
B)  equal to total revenue.
C)  greater than average revenue.
D)  equal to the firm's efficient scale of output.E) None of the above
F) All of the above

Question 4

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Accepted Answer

A)  Jose's restaurant is earning a positive economic profit.
B)  Jose's restaurant should shut down immediately.
C)  Jose's restaurant is losing money in the short run but should continue to operate.
D)  the market price will rise in the short run to increase profits.E) All of the above
F) A) and D)

Question 5

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) A) and D)
F) None of the above

Question 6

All competitive firms earn zero economic profit in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 7

A firm lacks market power if it cannot influence __________.

Accepted Answer

the price ...

Question 8

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A)  $6.
B)  $7.
C)  $8.
D)  $9.E) All of the above
F) None of the above

Question 9

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. At Q = 1,000, the firm's profits equal

Accepted Answer

A)  -$200.
B)  $1,000.
C)  $3,000.
D)  $4,000.E) C) and D)
F) All of the above

Question 10

The expression "Let bygones be bygones" is associated with what type of cost?

Accepted Answer

The expres...

Question 11

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Accepted Answer

A)  should exit the industry unless her economic profits are positive.
B)  will earn zero accounting profits but positive economic profits.
C)  will earn zero economic profits but positive accounting profits.
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.E) B) and D)
F) A) and B)

Question 12

In a perfectly competitive market, the process of entry and exit will end when (i) 
Accounting profits are zero.
(ii) 
Economic profits are zero.
(iii) 
Price equals minimum marginal cost.
(iv) 
Price equals minimum average total cost.

Accepted Answer

A)  (i)  and (ii)  only
B)  (ii)  and (iii)  only
C)  (ii)  and (iv)  only
D)  (i) , (ii) , (iii) , and (iv) E) None of the above
F) B) and C)

Question 13

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) A) and D)
F) None of the above

Question 14

​For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Accepted Answer

A) True 
 B)False

Question 15

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

A)  average revenue is greater than average total cost.
B)  average revenue is equal to marginal cost.
C)  marginal cost is greater than average total cost.
D)  price is above or below marginal cost.E) A) and C)
F) C) and D)

Question 16

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Accepted Answer

A) True 
 B)False

Question 17

Figure 14-9
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 14-9. If there are 100 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  10,000
B)  20,000
C)  40,000
D)  80,000E) B) and C)
F) A) and D)

Question 18

Figure 14-7 
-Refer to Figure 14-7. At what price is the firm's maximum profit zero?

Accepted Answer

A)  $80
B)  $90
C)  $100
D)  $125E) A) and D)
F) A) and C)

Question 19

In a competitive market, the actions of any single buyer or seller will

Accepted Answer

A)  discourage entry by competitors.
B)  influence the profits of other firms in the market.
C)  have a negligible impact on the market price.
D)  Both a and b are correct.E) None of the above
F) All of the above

Question 20

In the long run, a firm should exit the industry if its total costs exceed its total revenues.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

A firm lacks market power if it cannot influence __________.

Correct Answer
verified
the price ...
View Answer

In the long run, a firm should exit the industry if its total costs exceed its total revenues.

Correct Answer
verified

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct Answer
verified

In a perfectly competitive market, the process of entry and exit will end when (i) Accounting profits are zero. (ii) Economic profits are zero. (iii) Price equals minimum marginal cost. (iv) Price equals minimum average total cost.

Correct Answer
verified

For a firm in a perfectly competitive market, the price of the good is always

Correct Answer
verified

In a competitive market, the actions of any single buyer or seller will

Correct Answer
verified

Correct Answer
verified

All competitive firms earn zero economic profit in both the short run and the long run.

Correct Answer
verified

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Correct Answer
verified

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. At Q = 1,000, the firm's profits equal

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

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Correct Answer
verified

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct Answer
verified

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Correct Answer
verified

For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Correct Answer
verified

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct Answer
verified

Figure 14-7 -Refer to Figure 14-7. At what price is the firm's maximum profit zero?

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

The expression "Let bygones be bygones" is associated with what type of cost?

Correct Answer
verified
The expres...
View Answer

Exam 14: Firms in Competitive Markets

A firm lacks market power if it cannot influence __________.

Correct Answerverifiedthe price ...View AnswerShow Answer

In the long run, a firm should exit the industry if its total costs exceed its total revenues.

Correct AnswerverifiedShow Answer

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the process of entry and exit will end when (i) Accounting profits are zero. (ii) Economic profits are zero. (iii) Price equals minimum marginal cost. (iv) Price equals minimum average total cost.

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market, the price of the good is always

Correct AnswerverifiedShow Answer

In a competitive market, the actions of any single buyer or seller will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All competitive firms earn zero economic profit in both the short run and the long run.

Correct AnswerverifiedShow Answer

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Correct AnswerverifiedShow Answer

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. At Q = 1,000, the firm's profits equal

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

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct AnswerverifiedShow Answer

Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10. In this situation,

Correct AnswerverifiedShow Answer

​For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. At what price is the firm's maximum profit zero?

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

The expression "Let bygones be bygones" is associated with what type of cost?

Correct AnswerverifiedThe expres...View AnswerShow Answer

Correct Answer
verified
the price ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The expres...
View Answer