Question 1

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

Accepted Answer

A)  marginal revenue is lower than it was previously.
B)  marginal cost is lower than it was previously.
C)  quantity of output is higher than it was previously.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 2

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) C) and D)

Question 3

When existing firms in a competitive market are profitable, an incentive exists for

Accepted Answer

A)  new firms to seek government subsidies that would allow them to enter the market.
B)  new firms to enter the market, even without government subsidies.
C)  existing firms to raise prices.
D)  existing firms to increase production.E) All of the above
F) C) and D)

Question 4

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. At Q=500, the firm's profits equal

Accepted Answer

A)  $1,000.
B)  $4,000.
C)  $7,000.
D)  $10,000.E) C) and D)
F) A) and B)

Question 5

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

Accepted Answer

A)  increases if MR  ATC.
B)  does not change.
C)  increases.
D)  decreases.E) None of the above
F) All of the above

Question 6

In the long run, when price is greater than average total cost, some firms in a competitive market will choose to enter the market.

Accepted Answer

A) True 
 B)False

Question 7

The short-run market supply curve in a perfectly competitive industry

Accepted Answer

A)  shows the total quantity supplied by all firms at each possible price.
B)  is perfectly inelastic at the market price.
C)  is perfectly elastic at the market price.
D)  shows the variety of prices that different firms will charge for a given quantity.E) None of the above
F) All of the above

Question 8

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 total revenue

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

Question 9

A competitive firm sells its output for $30 per unit. Is the firm's marginal revenue less than, equal to, or greater than $30?

Accepted Answer

For a competitive firm, price ...

Question 10

Suppose that a firm operating in perfectly competitive market sells 300 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 $100.
(iii) Total revenue equals $300.

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 C)

Question 11

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Accepted Answer

A) True 
 B)False

Question 12

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 = 999, the firm's profits equal

Accepted Answer

A)  $993.
B)  $997.
C)  $1,003.
D)  $1,007.E) B) and D)
F) All of the above

Question 13

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 negative economic profits in the short run and shutting down?

Accepted Answer

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

Question 14

A firm in a competitive market has the following cost structure:
Output
Total Costs
0
$1
1
$6
2
$9
3
$10
4
$17
5
$26
What is the lowest price at which this firm might choose to operate?

Accepted Answer

A)  $2
B)  $3
C)  $4
D)  $5E) A) and B)
F) C) and D)

Question 15

A competitive firm is producing 500 units of output and its efficient scale is 400 units of output. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

Accepted Answer

No, the market cannot be in a ...

Question 16

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. Firms will shut down in the short run if the market price

Accepted Answer

A)  exceeds P3.
B)  is less than P1.
C)  is greater than P1 but less than P3.
D)  exceeds P2.E) A) and B)
F) A) and C)

Question 17

​Table 14-16
The table represents the demand information for a firm in a competitive market.  ​
-​Refer to Table 14-16. For this firm, marginal revenue at an output of 10 units is

Accepted Answer

A)  ​$15.
B)  ​$150.
C)  ​$1500.
D)  ​$0.E) A) and B)
F) All of the above

Question 18

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

Question 19

Table 14-1 
-Refer to Table 14-1. Over which range of output is average revenue equal to price?

Accepted Answer

A)  1 to 5 units
B)  3 to 7 units
C)  5 to 9 units
D)  Average revenue is equal to price over the entire range of output.E) None of the above
F) B) and D)

Question 20

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. At which price range will the firm continue to operate in the short run but earn negative profits?

Accepted Answer

A)  any price higher than P4
B)  any price higher than P3 but less than P4
C)  any price higher than P2 but less than P3
D)  any price lower than P1E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

​Table 14-16 The table represents the demand information for a firm in a competitive market. ​ -​Refer to Table 14-16. For this firm, marginal revenue at an output of 10 units is

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A competitive firm is producing 500 units of output and its efficient scale is 400 units of output. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

Correct AnswerverifiedNo, the market cannot be in a ...View AnswerShow Answer

The short-run market supply curve in a perfectly competitive industry

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Table 14-1 -Refer to Table 14-1. Over which range of output is average revenue equal to price?

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A firm in a competitive market has the following cost structure: Output Total Costs 0 $1 1 $6 2 $9 3 $10 4 $17 5 $26 What is the lowest price at which this firm might choose to operate?

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Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

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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

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Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will shut down in the short run if the market price

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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 negative economic profits in the short run and shutting down?

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Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=500, the firm's profits equal

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When existing firms in a competitive market are profitable, an incentive exists for

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Suppose that a firm operating in perfectly competitive market sells 300 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 $100. (iii) Total revenue equals $300.

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A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

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In the long run, when price is greater than average total cost, some firms in a competitive market will choose to enter the market.

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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 = 999, the firm's profits equal

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Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. At which price range will the firm continue to operate in the short run but earn negative profits?

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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 will earn a negative economic profit but remain in business in the short run if the market price is

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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 total revenue

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A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

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A competitive firm sells its output for $30 per unit. Is the firm's marginal revenue less than, equal to, or greater than $30?

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Table 14-16 The table represents the demand information for a firm in a competitive market. -Refer to Table 14-16. For this firm, marginal revenue at an output of 10 units is

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For a competitive firm, price ...
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