Question 1

When economic profits are zero in equilibrium,the firm's revenue must be sufficient to cover all opportunity costs.

Accepted Answer

A) True 
 B)False

Question 2

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:   Price  Quantity  Total  Cost 503515528531254175523\begin{array} { | l | l | l | } \hline 	ext { Price } & 	ext { Quantity } & \begin{array} { l } 	ext { Total } \	ext { Cost }\end{array} \\hline 5 & 0 & 3 \\hline 5 & 1 & 5 \\hline 5 & 2 & 8 \\hline 5 & 3 & 12 \\hline 5 & 4 & 17 \\hline 5 & 5 & 23 \\hline\end{array} Price 555555​ Quantity 012345​ Total  Cost ​358121723​​ 
-Refer to Table 14-11.If the firm is producing 2 units of output,it should

Accepted Answer

A)  produce more units of output because its marginal revenue is greater than its marginal cost.
B)  fewer units of output because its marginal revenue is less than its marginal cost.
C)  produce more units of output because its marginal revenue is less than its marginal cost.
D)  produce fewer units of output because its marginal revenue is greater than its marginal cost. E) B) and D)
F) A) and B)

Question 3

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided...

Question 4

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price?
 If a firm set its price below the current market price,what effect would this have on the market?

Accepted Answer

The firm could not sell any more of its ...

Question 5

In a competitive market with identical firms,

Accepted Answer

A)  an increase in demand in the short run will result in a new price above the minimum of average total cost,allowing firms to earn a positive economic profit in both the short run and the long run.
B)  firms cannot earn positive economic profit in either the short run or long run.
C)  firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.
D)  free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.E) A) and B)
F) All of the above

Question 6

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

When profit-maximizing firms in competitive markets are earning profits,

Accepted Answer

A)  market demand must exceed market supply at the market equilibrium price.
B)  market supply must exceed market demand at the market equilibrium price.
C)  new firms will enter the market.
D)  the most inefficient firms will be encouraged to leave the market.E) A) and D)
F) None of the above

Question 9

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Accepted Answer

A)  Nothing.The price is consistent with zero economic profits,so there is no incentive for firms to enter or exit the industry.
B)  Individual firms will earn positive economic profits in the short run,which will entice other firms to enter the industry.
C)  Individual firms will earn negative economic profits in the short run,which will cause some firms to exit the industry.
D)  Because the price is below the firm's average variable costs,the firms will shut down.E) All of the above
F) A) and B)

Question 10

One of the defining characteristics of a perfectly competitive market is

Accepted Answer

A)  a small number of sellers.
B)  a large number of buyers and a small number of sellers.
C)  a similar product.
D)  significant advertising by firms to promote their products.E) A) and D)
F) B) and D)

Exam 14: Firms in Competitive Markets

In a competitive market with identical firms,

Correct Answer
verified

When profit-maximizing firms in competitive markets are earning profits,

Correct Answer
verified

When economic profits are zero in equilibrium,the firm's revenue must be sufficient to cover all opportunity costs.

Correct Answer
verified

One of the defining characteristics of a perfectly competitive market is

Correct Answer
verified

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct Answer
verified
Because a normal rate of retur...
View Answer

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct Answer
verified
Average revenue is total revenue divided...
View Answer

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Correct Answer
verified

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price,what effect would this have on the market?

Correct Answer
verified
The firm could not sell any more of its ...
View Answer

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

Correct Answer
verified

Correct Answer
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Exam 14: Firms in Competitive Markets

In a competitive market with identical firms,

Correct AnswerverifiedShow Answer

When profit-maximizing firms in competitive markets are earning profits,

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When economic profits are zero in equilibrium,the firm's revenue must be sufficient to cover all opportunity costs.

Correct AnswerverifiedShow Answer

One of the defining characteristics of a perfectly competitive market is

Correct AnswerverifiedShow Answer

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct AnswerverifiedBecause a normal rate of retur...View AnswerShow Answer

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct AnswerverifiedAverage revenue is total revenue divided...View AnswerShow Answer

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price,what effect would this have on the market?

Correct AnswerverifiedThe firm could not sell any more of its ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Because a normal rate of retur...
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Correct Answer
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Average revenue is total revenue divided...
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Correct Answer
verified

Correct Answer
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The firm could not sell any more of its ...
View Answer

Correct Answer
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Correct Answer
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