Question 1

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False

Question 2

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

Accepted Answer

A)  -$1,600.
B)  $1,600.
C)  $3,200.
D)  $8,000.E) None of the above
F) A) and C)

Question 3

Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Accepted Answer

A)  $0.50
B)  $7.50
C)  $10
D)  There is insufficient data to determine the firm's profit.E) A) and B)
F) All of the above

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. When the firm produces 150 units of output, its profit is

Accepted Answer

A)  $2,150.00.
B)  $2,325.00.
C)  $3,100.75.
D)  $3,675.00.E) A) and B)
F) A) and C)

Question 5

The long-run market supply curve in a competitive market will

Accepted Answer

A)  always be horizontal.
B)  be the portion of the MC that lies above the minimum of AVC for the marginal firm.
C)  typically be more elastic than the short-run supply curve.
D)  be above the competitive firm's efficient scale.E) A) and D)
F) None of the above

Question 6

A competitive firm maximizes its profit by producing output up to the point at which price is equal to ______.

Accepted Answer

The answer of A competitive firm maximizes its profit by...

Question 7

A firm that exits its market has to pay

Accepted Answer

A)  its variable costs but not its fixed costs.
B)  its fixed costs but not its variable costs.
C)  both its variable costs and its fixed costs.
D)  neither its variable costs nor its fixed costs.E) C) and D)
F) B) and D)

Question 8

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Accepted Answer

A)  positive profits.
B)  zero profits.
C)  losses but will remain in business.
D)  losses and will shut down.E) A) and B)
F) C) and D)

Question 9

When new firms enter a perfectly competitive market,

Accepted Answer

A)  economic profits of existing firms will continue to be zero.
B)  entering firms will earn zero economic profit upon entry into the market.
C)  existing firms may see their costs rise if more firms compete for limited resources.
D)  prices will rise as existing firms raise prices to keep new firms out of the market.E) B) and D)
F) None of the above

Question 10

At the profit-maximizing level of output,

Accepted Answer

A)  marginal revenue equals average total cost.
B)  marginal revenue equals average variable cost.
C)  marginal revenue equals marginal cost.
D)  average revenue equals average total cost.E) A) and D)
F) B) and C)

Question 11

Figure 14-7 
-Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Accepted Answer

A)  Q = 270.
B)  Q = 322.
C)  Q = 515.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 12

Profit-maximizing firms in a competitive market produce an output level where

Accepted Answer

A)  marginal cost equals marginal revenue.
B)  marginal cost equals average total cost.
C)  marginal revenue is increasing.
D)  price is less than marginal revenue.E) None of the above
F) A) and B)

Question 13

Table 14-5
The table represents a demand curve faced by a firm in a competitive market. 
-Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Accepted Answer

A)  $9.
B)  $11.
C)  $13.
D)  $15.E) B) and C)
F) A) and D)

Question 14

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)  earning small but positive economic profits.
B)  facing the prospect of future losses.
C)  operating at the efficient scale.
D)  that work together to raise market prices.E) A) and D)
F) A) and C)

Question 16

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 D)
F) C) and D)

Question 17

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Accepted Answer

A)  ABCF
B)  CD
C)  DF
D)  BCDE) None of the above
F) B) and C)

Question 18

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Accepted Answer

A)  restaurants and MP3 players
B)  electricity and natural gas
C)  corn and satellite radio
D)  rice and soybeansE) All of the above
F) None of the above

Question 19

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Accepted Answer

A)  $40
B)  $80
C)  $160
D)  This cannot be determined from the given information.E) All of the above
F) B) and D)

Question 20

Figure 14-10
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 14-10. If there are 500 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  12,000
B)  60,000
C)  240,000
D)  300,000E) C) and D)
F) A) and B)

Exam 14: Firms in Competitive Markets

At the profit-maximizing level of output,

Correct Answer
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Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Correct Answer
verified

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

Correct Answer
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Correct Answer
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Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Correct Answer
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Profit-maximizing firms in a competitive market produce an output level where

Correct Answer
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Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Correct Answer
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When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Correct Answer
verified

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct Answer
verified

The long-run market supply curve in a competitive market will

Correct Answer
verified

When new firms enter a perfectly competitive market,

Correct Answer
verified

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Correct Answer
verified

A firm that exits its market has to pay

Correct Answer
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A competitive firm maximizes its profit by producing output up to the point at which price is equal to ______.

Correct Answer
verified

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct Answer
verified

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct Answer
verified

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Correct Answer
verified

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Correct Answer
verified

Exam 14: Firms in Competitive Markets

At the profit-maximizing level of output,

Correct AnswerverifiedShow Answer

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Correct AnswerverifiedShow Answer

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Correct AnswerverifiedShow Answer

Profit-maximizing firms in a competitive market produce an output level where

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Correct AnswerverifiedShow Answer

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Correct AnswerverifiedShow Answer

When all firms and potential firms in a market have the same cost curves, the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct AnswerverifiedShow Answer

The long-run market supply curve in a competitive market will

Correct AnswerverifiedShow Answer

When new firms enter a perfectly competitive market,

Correct AnswerverifiedShow Answer

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Correct AnswerverifiedShow Answer

A firm that exits its market has to pay

Correct AnswerverifiedShow Answer

A competitive firm maximizes its profit by producing output up to the point at which price is equal to ______.

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct AnswerverifiedShow Answer

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct AnswerverifiedShow Answer

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Correct AnswerverifiedShow Answer

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Correct AnswerverifiedShow Answer

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