Question 1

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A) electricity 
B) satellite radio 
C) mineral mining 
D) tennis shoes 
A) electricity 
B) satellite radio 
C) mineral mining 
D) tennis shoes

Question 2

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Accepted Answer

A) True 
 B)False

Question 3

Competitive markets are characterized by

Accepted Answer

A) a small number of buyers and sellers. 
B) unique products. 
C) the interdependence of firms. 
D) free entry and exit by firms. 
A) a small number of buyers and sellers. 
B) unique products. 
C) the interdependence of firms. 
D) free entry and exit by firms.

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=499, the firm's profits equal

Accepted Answer

A) $3,980. 
B) $3,992. 
C) $3,997. 
D) $4,017. 
A) $3,980. 
B) $3,992. 
C) $3,997. 
D) $4,017.

Question 5

Figure 14-12    
-Refer to Figure 14-12. 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. 
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.

Question 6

Table 14-15-a  
-Refer to Table 14-15-a. What is the lowest price at which this firm would operate in the short run?

Accepted Answer

A) $5. 
B) $6. 
C) $7. 
D) $8. 
A) $5. 
B) $6. 
C) $7. 
D) $8.

Question 7

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Accepted Answer

A) True 
 B)False

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

Question 9

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Accepted Answer

A) True 
 B)False

Question 10

In the long run, a profit-maximizing firm will choose to exit a market when

Accepted Answer

A) average fixed cost is falling. 
B) variable costs exceed sunk costs. 
C) marginal cost exceeds marginal revenue at the current level of production. 
D) total revenue is less than total cost. 
A) average fixed cost is falling. 
B) variable costs exceed sunk costs. 
C) marginal cost exceeds marginal revenue at the current level of production. 
D) total revenue is less than total cost.

Question 11

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

Accepted Answer

No, the firm should shut down,

Question 12

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Accepted Answer

Profit is zero for a

Question 13

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 P1 but less than P4, 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. 
A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down.

Question 14

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Accepted Answer

A) True 
 B)False

Question 15

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Accepted Answer

A competitive firm has the abi

Question 16

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

Question 17

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:  
-Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6.
(ii) the price.(iii) the marginal cost.

Accepted Answer

A) (i) only 
B) (i) and (ii) only 
C) (iii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (i) and (ii) only 
C) (iii) only 
D) (i), (ii), and (iii)

Question 18

Suppose that a firm operating in perfectly competitive market sells 50 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i)
Marginal revenue equals $5.
(ii)
Average revenue equals $10.
(iii)
Price equals $15.

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii)

Question 19

Which of the following is not a characteristic of a competitive market?

Accepted Answer

A) Buyers and sellers are price takers. 
B) Each firm sells a virtually identical product. 
C) Entry is limited. 
D) Each firm chooses an output level that maximizes profits. 
A) Buyers and sellers are price takers. 
B) Each firm sells a virtually identical product. 
C) Entry is limited. 
D) Each firm chooses an output level that maximizes profits.

Question 20

In a perfectly competitive market, the process of entry and exit will end when

Accepted Answer

A) price equals minimum marginal cost. 
B) marginal revenue equals marginal cost. 
C) economic profits are zero. 
D) accounting profits are zero. 
A) price equals minimum marginal cost. 
B) marginal revenue equals marginal cost. 
C) economic profits are zero. 
D) accounting profits are zero.

Exam 14: Firms in Competitive Markets

Which of the following industries is most likely to exhibit the characteristic of free entry?

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Competitive markets are characterized by

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=499, the firm's profits equal

Figure 14-12 -Refer to Figure 14-12. 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

Table 14-15-a -Refer to Table 14-15-a. What is the lowest price at which this firm would operate in the short run?

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

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

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

In the long run, a profit-maximizing firm will choose to exit a market when

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

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 P1 but less than P4, individual firms in a competitive industry will earn

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6. (ii) the price.(iii) the marginal cost.

Suppose that a firm operating in perfectly competitive market sells 50 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i) Marginal revenue equals $5. (ii) Average revenue equals $10. (iii) Price equals $15.

Which of the following is not a characteristic of a competitive market?

In a perfectly competitive market, the process of entry and exit will end when

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.