Question 1

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $20 and its average total cost equals $25.The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.At Q = 1,000,the firm's profits equal

Accepted Answer

A)   $-5,000.
B)   $2,500.
C)   $5,000.
D)   $10,000.E) B) and C)
F) B) and D)

Question 2

Figure 14-11  
-Refer to Figure 14-11.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b) most likely reflects

Accepted Answer

A)   perfectly inelastic long-run market supply.
B)   perfectly elastic long-run market supply.
C)   the entry of firms into the industry when some resources used in production are available only in limited quantities.
D)   the fact that zero profits cannot be sustained in the long run.E) A) and C)
F) All of the above

Question 3

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket?

Accepted Answer

A)   $5
B)   $30
C)   $35
D)   $65E) C) and D)
F) All of the above

Question 4

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Accepted Answer

A) True 
 B)False

Question 5

When firms in a competitive market have different costs,it is likely that

Accepted Answer

A)   free entry and exit in the market will be violated.
B)   the market will no longer be considered competitive.
C)   long-run market supply will be downward sloping.
D)   some firms will earn positive economic profits in the long run.E) C) and D)
F) A) and D)

Question 6

Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold.What is the average revenue per unit,and how many units were sold?

Accepted Answer

A)   $5 and 50 units
B)   $5 and 100 units
C)   $10 and 50 units
D)   $10 and 100 unitsE) None of the above
F) A) and D)

Question 7

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the 100th unit for $5.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 8

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 9

In calculating accounting profit,accountants typically don't include

Accepted Answer

A)   long-run costs.
B)   sunk costs.
C)   explicit costs of production.
D)   opportunity costs that do not involve an outflow of money.E) B) and C)
F) B) and D)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 12

A competitive firm's short-run supply curve is part of which of the following curves?

Accepted Answer

A)   marginal revenue
B)   average variable cost
C)   average total cost
D)   marginal costE) A) and D)
F) B) and D)

Question 13

In a market with 1,000 identical firms,the short-run market supply is the

Accepted Answer

A)   marginal cost curve above average variable cost for a typical firm in the market.
B)   quantity supplied by the typical firm in the market at each price.
C)   sum of the prices charged by each of the 1,000 individual firms at each quantity.
D)   sum of the quantities supplied by each of the 1,000 individual firms at each price.E) A) and B)
F) None of the above

Question 14

Joe's Garage 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)   Joe's Garage is earning a positive economic profit.
B)   Joe's Garage should shut down immediately.
C)   Joe's Garage 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) A) and B)
F) A) and C)

Question 15

Table 14-6
John's Vineyard
 
-Refer to Table 14-6.What is John's Vineyard's economic profit at its profit-maximizing output level?

Accepted Answer

A)   $25
B)   $75
C)   $115
D)   $225E) None of the above
F) C) and D)

Question 16

Figure 14-5 
-Refer to Figure 14-5.Firms will be encouraged to enter this market for all prices that exceed

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 17

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 D)

Question 18

If ABC Company sells its product in a competitive market,then

Accepted Answer

A)   the price of that product depends on the quantity of the product that ABC Company produces and sells since ABC Company's demand curve is downward sloping.
B)   ABC Company's total revenue must be proportional to its quantity of output.
C)   ABC Company's total cost must be a multiple of its quantity of output.
D)   ABC Company's total revenue must be equal to its average revenue.E) None of the above
F) A) and D)

Question 19

Table 14-1
 
-Refer to Table 14-1.For a firm operating in a competitive market,the average revenue is

Accepted Answer

A)   $21.
B)   $14.
C)   $7.
D)   $0.E) C) and D)
F) All of the above

Question 20

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Accepted Answer

The firm selects the level of output at ...

Exam 14: Firms in Competitive Markets

Figure 14-5 -Refer to Figure 14-5.Firms will be encouraged to enter this market for all prices that exceed

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Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket?

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When firms in a competitive market have different costs,it is likely that

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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $20 and its average total cost equals $25.The firm sells its output for $30 per unit. -Refer to Scenario 14-2.At Q = 1,000,the firm's profits equal

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

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Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold.What is the average revenue per unit,and how many units were sold?

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In calculating accounting profit,accountants typically don't include

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A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost.

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If ABC Company sells its product in a competitive market,then

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Joe's Garage 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,

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A competitive firm's short-run supply curve is part of which of the following curves?

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In a market with 1,000 identical firms,the short-run market supply is the

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Table 14-1 -Refer to Table 14-1.For a firm operating in a competitive market,the average revenue is

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Table 14-6 John's Vineyard -Refer to Table 14-6.What is John's Vineyard's economic profit at its profit-maximizing output level?

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Figure 14-11 -Refer to Figure 14-11.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b) most likely reflects

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Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow Answer

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the 100th unit for $5.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

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

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

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

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The firm selects the level of output at ...
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