Question 1

Table 14-12
Bill's Birdhouses  
-Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?

Accepted Answer

A) $30 
B) $50 
C) $80 
D) $160 
A) $30 
B) $50 
C) $80 
D) $160

Question 2

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

Accepted Answer

A) selling running apparel 
B) satellite radio 
C) yoga studios 
D) wheat farming 
A) selling running apparel 
B) satellite radio 
C) yoga studios 
D) wheat farming

Question 3

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. 
A) $9. 
B) $11. 
C) $13. 
D) $15.

Question 4

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should

Accepted Answer

A) make more than 20 wedding cakes per month. 
B) make fewer than 20 wedding cakes per month. 
C) continue to make 20 wedding cakes per month. 
D) We do not have enough information to answer the question. 
A) make more than 20 wedding cakes per month. 
B) make fewer than 20 wedding cakes per month. 
C) continue to make 20 wedding cakes per month. 
D) We do not have enough information to answer the question.

Question 5

A market might have an upward-sloping long-run supply curve if

Accepted Answer

A) firms have different costs. 
B) consumers exercise market power over producers. 
C) all factors of production are essentially available in unlimited supply. 
D) the entry of new firms into the market has no effect on the cost structure of firms in the market. 
A) firms have different costs. 
B) consumers exercise market power over producers. 
C) all factors of production are essentially available in unlimited supply. 
D) the entry of new firms into the market has no effect on the cost structure of firms in the market.

Question 6

For a particular competitive firm, the minimum value of average variable cost (AVC) is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost (ATC) is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?

Accepted Answer

A) In the short run, the firm will shut down if the price of its product is $11. 
B) In the long run, the firm will shut down if the price of its product is $14. 
C) If the price of its product is $12, then the firm's loss if it produces 200 units of output is the same as its loss if it shuts down. 
D) All of the above are correct. 
A) In the short run, the firm will shut down if the price of its product is $11. 
B) In the long run, the firm will shut down if the price of its product is $14. 
C) If the price of its product is $12, then the firm's loss if it produces 200 units of output is the same as its loss if it shuts down. 
D) All of the above are correct.

Question 7

Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to

Accepted Answer

A) increase. 
B) decrease. 
C) remain the same. 
D) We do not have enough information with which to answer this question. 
A) increase. 
B) decrease. 
C) remain the same. 
D) We do not have enough information with which to answer this question.

Question 8

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7. It follows that the firm's

Accepted Answer

A) average total cost curve intersects the marginal cost curve at an output level of less than 200 units. 
B) average variable cost curve intersects the marginal cost curve at an output level of less than 200 units. 
C) profit is $400. 
D) All of the above are correct. 
A) average total cost curve intersects the marginal cost curve at an output level of less than 200 units. 
B) average variable cost curve intersects the marginal cost curve at an output level of less than 200 units. 
C) profit is $400. 
D) All of the above are correct.

Question 9

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.  
-Refer to Table 14-6. What is the total revenue from selling 7 units?

Accepted Answer

A) $120 
B) $490 
C) $562 
D) $840 
A) $120 
B) $490 
C) $562 
D) $840

Question 10

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

Accepted Answer

A) fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
B) fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
C) fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D) not fall in the short run because firms will exit to maintain the price. 
A) fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
B) fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
C) fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D) not fall in the short run because firms will exit to maintain the price.

Question 11

When price is below average variable cost, a firm in a competitive market will

Accepted Answer

A) shut down and incur fixed costs. 
B) shut down and incur both variable and fixed costs. 
C) continue to operate as long as average revenue exceeds marginal cost. 
D) continue to operate as long as average revenue exceeds average fixed cost. 
A) shut down and incur fixed costs. 
B) shut down and incur both variable and fixed costs. 
C) continue to operate as long as average revenue exceeds marginal cost. 
D) continue to operate as long as average revenue exceeds average fixed cost.

Question 12

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

Accepted Answer

A) $15 
B) $30 
C) $35 
D) $50 
A) $15 
B) $30 
C) $35 
D) $50

Question 13

For a firm operating in a competitive industry, which of the following statements is not correct?

Accepted Answer

A) Price equals average revenue. 
B) Price equals marginal revenue. 
C) Total revenue is constant. 
D) Marginal revenue is constant. 
A) Price equals average revenue. 
B) Price equals marginal revenue. 
C) Total revenue is constant. 
D) Marginal revenue is constant.

Question 14

A firm in a competitive market has the following cost structure:   If the market price is $4, this firm will

Accepted Answer

A) produce 2 units in the short run and exit in the long run. 
B) produce 3 units in the short run and exit in the long run. 
C) produce 4 units in the short run and exit in the long run. 
D) shut down in the short run and exit in the long run. 
A) produce 2 units in the short run and exit in the long run. 
B) produce 3 units in the short run and exit in the long run. 
C) produce 4 units in the short run and exit in the long run. 
D) shut down in the short run and exit in the long run.

Question 15

When it produces and sells 80 units of output, a competitive firm's average total cost is $25 and its profit is $480. What is the firm's total revenue if it sells 85 units of output?

Accepted Answer

At @#IMG-DLM& , prof

Question 16

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?

Accepted Answer

A) $2 
B) $4 
C) $6 
D) $8 
A) $2 
B) $4 
C) $6 
D) $8

Question 17

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. If the market price is $6.30, the firm will earn

Accepted Answer

A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run. 
A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits and shut down. 
D) zero economic profits in the short run.

Question 18

In a competitive market, no single producer can influence the market price because

Accepted Answer

A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price. 
A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price.

Question 19

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

Accepted Answer

A) decreases in production costs resulting from more firms coming into the market. 
B) a breakdown of the "free entry and exit" feature of competition. 
C) a breakdown of the "price taking" feature of competition. 
D) the fact that a resource used in the production of the good is available only in limited quantities. 
A) decreases in production costs resulting from more firms coming into the market. 
B) a breakdown of the "free entry and exit" feature of competition. 
C) a breakdown of the "price taking" feature of competition. 
D) the fact that a resource used in the production of the good is available only in limited quantities.

Question 20

What name do economists have for a cost that has already been committed and cannot be recovered?

Accepted Answer

Economists

Exam 14: Firms in Competitive Markets

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal revenue from selling the 1st unit?

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

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

A market might have an upward-sloping long-run supply curve if

Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7. It follows that the firm's

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the total revenue from selling 7 units?

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

When price is below average variable cost, a firm in a competitive market will

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

For a firm operating in a competitive industry, which of the following statements is not correct?

A firm in a competitive market has the following cost structure: If the market price is $4, this firm will

When it produces and sells 80 units of output, a competitive firm's average total cost is $25 and its profit is $480. What is the firm's total revenue if it sells 85 units of output?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. If the firm produces the profit-maximizing level of production, how much profit will the firm earn?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $6.30, the firm will earn

In a competitive market, no single producer can influence the market price because

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

What name do economists have for a cost that has already been committed and cannot be recovered?

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

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