Question 1

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Accepted Answer

In order to be a competitive firm, the s

Question 2

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A) Profit = MR - MC 
B) Profit = MR - TC 
C) Profit = (P - M
C)  × Q 
D) Profit = (P - AT
C)  × Q 
A) Profit = MR - MC 
B) Profit = MR - TC 
C) Profit = (P - M
C)  × Q 
D) Profit = (P - AT
C)  × Q

Question 3

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. 
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.

Question 4

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

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. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to

Accepted Answer

A) $16.40. 
B) $17.00. 
C) $18.00. 
D) $19.60. 
A) $16.40. 
B) $17.00. 
C) $18.00. 
D) $19.60.

Question 6

Table 14-13
Diana's Dress Emporium  
-Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

Accepted Answer

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

Question 7

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

Accepted Answer

Profit = (

Question 8

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Accepted Answer

A) will also be -0.3. 
B) depends on how large a crop the farmer produces. 
C) will range between -0.3 and -1.0. 
D) will be infinite. 
A) will also be -0.3. 
B) depends on how large a crop the farmer produces. 
C) will range between -0.3 and -1.0. 
D) will be infinite.

Question 9

A seller in a competitive market can

Accepted Answer

A) sell all he wants at the going price, so he has little reason to charge less. 
B) influence the market price by adjusting his output. 
C) influence the profits earned by competing firms by adjusting his output. 
D) All of the above are correct. 
A) sell all he wants at the going price, so he has little reason to charge less. 
B) influence the market price by adjusting his output. 
C) influence the profits earned by competing firms by adjusting his output. 
D) All of the above are correct.

Question 10

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. If the market price is Pb, in the short run the firm will earn

Accepted Answer

A) positive economic profits. 
B) negative economic profits but will try to remain open. 
C) negative economic profits and will shut down. 
D) zero economic profits. 
A) positive economic profits. 
B) negative economic profits but will try to remain open. 
C) negative economic profits and will shut down. 
D) zero economic profits.

Question 11

Table 14-12
Bill's Birdhouses  
-Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Accepted Answer

A) $12 
B) $68 
C) $80 
D) $480 
A) $12 
B) $68 
C) $80 
D) $480

Question 12

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.  
-Refer to Table 14-14. What is the marginal revenue of the 4th unit?

Accepted Answer

A) $2.00 
B) $3.25 
C) $10.00 
D) $13.00 
A) $2.00 
B) $3.25 
C) $10.00 
D) $13.00

Question 13

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 14

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

Accepted Answer

A) Pa 
B) Pb 
C) Pc 
D) Pd 
A) Pa 
B) Pb 
C) Pc 
D) Pd

Question 15

You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $6 value on reading a book.

Accepted Answer

A) You should leave the theater since the net benefit from seeing the remainder of the show is -$20, while going home will earn you at least $8 of satisfaction. 
B) You should stay and watch the remainder of the show. 
C) You should go home and watch TV. 
D) You should go home and read a book. 
A) You should leave the theater since the net benefit from seeing the remainder of the show is -$20, while going home will earn you at least $8 of satisfaction. 
B) You should stay and watch the remainder of the show. 
C) You should go home and watch TV. 
D) You should go home and read a book.

Question 16

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

Accepted Answer

A) under diseconomies of scale. 
B) with small, but positive, levels of profit. 
C) at their efficient scale. 
D) where price is equal to average fixed cost. 
A) under diseconomies of scale. 
B) with small, but positive, levels of profit. 
C) at their efficient scale. 
D) where price is equal to average fixed cost.

Question 17

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, the Brookside Racquet Club should

Accepted Answer

A) shut down because staying open would be more expensive. 
B) lower their prices to increase their profits. 
C) stay open because shutting down would be more expensive. 
D) stay open because the firm is making an economic profit. 
A) shut down because staying open would be more expensive. 
B) lower their prices to increase their profits. 
C) stay open because shutting down would be more expensive. 
D) stay open because the firm is making an economic profit.

Question 18

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

Accepted Answer

A) increase price in the short run but not in the long run. 
B) increase price in the long run but not in the short run. 
C) increase price both in the short and the long run. 
D) not affect price in either the short or the long run. 
A) increase price in the short run but not in the long run. 
B) increase price in the long run but not in the short run. 
C) increase price both in the short and the long run. 
D) not affect price in either the short or the long run.

Question 19

In the long run, each firm in a competitive industry earns

Accepted Answer

A) zero accounting profits. 
B) zero economic profits. 
C) positive economic profits. 
D) positive, negative, or zero economic profits. 
A) zero accounting profits. 
B) zero economic profits. 
C) positive economic profits. 
D) positive, negative, or zero economic profits.

Question 20

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. The marginal cost of producing the 4th unit is

Accepted Answer

A) $7. 
B) $8. 
C) $10. 
D) $23. 
A) $7. 
B) $8. 
C) $10. 
D) $23.

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Which of the following could be used to calculate the profit for a firm?

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

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

A seller in a competitive market can

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pb, in the short run the firm will earn

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the marginal revenue of the 4th unit?

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.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, the Brookside Racquet Club should

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

In the long run, each firm in a competitive industry earns

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. The marginal cost of producing the 4th unit is

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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Exam 14: Firms in Competitive Markets

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Which of the following could be used to calculate the profit for a firm?

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

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

A profit-maximizing competitive firm is earning a profit of $24,000. Its marginal cost is $17 and its average total cost is $13. How many units of output is the firm producing and selling?

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

A seller in a competitive market can

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pb, in the short run the firm will earn

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the marginal revenue of the 4th unit?

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.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $125,000. Because of this information, in the short run, the Brookside Racquet Club should

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

In the long run, each firm in a competitive industry earns

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. The marginal cost of producing the 4th unit is

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