Question 1

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

Accepted Answer

A) a decrease in the product's market price. 
B) an increase in the product's market price. 
C) no change in the product's market price. 
D) either an increase or no change in the product's market price depending on the number of firms in the market. 
A) a decrease in the product's market price. 
B) an increase in the product's market price. 
C) no change in the product's market price. 
D) either an increase or no change in the product's market price depending on the number of firms in the market.

Question 2

Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.    
-Refer to Figure 14-9. If there are 400 identical firms in this market, what level of output will be supplied to the market when price is $2.00?

Accepted Answer

A) 10,000 
B) 20,000 
C) 40,000 
D) 80,000 
A) 10,000 
B) 20,000 
C) 40,000 
D) 80,000

Question 3

When new entrants into a competitive market have higher costs than existing firms,

Accepted Answer

A) accounting profits will be the primary determinant of entry into the market. 
B) sunk costs become an important determinant of the short-run entry strategy. 
C) market price will rise. 
D) long-run supply is constant. 
A) accounting profits will be the primary determinant of entry into the market. 
B) sunk costs become an important determinant of the short-run entry strategy. 
C) market price will rise. 
D) long-run supply is constant.

Question 4

In order to maximize profits in the short run, a firm should produce where

Accepted Answer

A) marginal revenue exceeds marginal cost by the greatest amount. 
B) marginal cost is minimized. 
C) average total cost is minimized. 
D) marginal cost equals marginal revenue. 
A) marginal revenue exceeds marginal cost by the greatest amount. 
B) marginal cost is minimized. 
C) average total cost is minimized. 
D) marginal cost equals marginal revenue.

Question 5

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

Accepted Answer

No, the market cannot be in a

Question 6

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Accepted Answer

A) average revenue exceeds marginal cost. 
B) the firm is earning a positive profit. 
C) decreasing output would increase the firm's profit. 
D) All of the above are correct. 
A) average revenue exceeds marginal cost. 
B) the firm is earning a positive profit. 
C) decreasing output would increase the firm's profit. 
D) All of the above are correct.

Question 7

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

Accepted Answer

A) is greater than marginal revenue. 
B) equals marginal revenue. 
C) is less than marginal revenue. 
D) is minimized. 
A) is greater than marginal revenue. 
B) equals marginal revenue. 
C) is less than marginal revenue. 
D) is minimized.

Question 8

Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.    
-Refer to Figure 14-9. If at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market?

Accepted Answer

A) 75 
B) 100 
C) 250 
D) 300 
A) 75 
B) 100 
C) 250 
D) 300

Question 9

Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith's firm is correct?

Accepted Answer

A) Mrs. Smith is earning a loss and should shut down in the short run. 
B) Mrs. Smith is earning a loss but should continue to operate in the short run. 
C) Mrs. Smith is earning a profit since the price is above the average variable cost. 
D) Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down. 
A) Mrs. Smith is earning a loss and should shut down in the short run. 
B) Mrs. Smith is earning a loss but should continue to operate in the short run. 
C) Mrs. Smith is earning a profit since the price is above the average variable cost. 
D) Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.

Question 10

Figure 14-14    
-Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

Accepted Answer

A) have a zero economic profit. 
B) have a negative accounting profit. 
C) exit the market. 
D) choose to increase production to increase profit. 
A) have a zero economic profit. 
B) have a negative accounting profit. 
C) exit the market. 
D) choose to increase production to increase profit.

Question 11

Figure 14-14    
-Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

Accepted Answer

A) more firms in the industry but lower levels of output for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point X in panel (b). 
D) lower prices once the new long-run equilibrium is reached. 
A) more firms in the industry but lower levels of output for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point X in panel (b). 
D) lower prices once the new long-run equilibrium is reached.

Question 12

Table 14-13
Diana's Dress Emporium  
-Refer to Table 14-13. What is the marginal cost of the 1st unit?

Accepted Answer

A) $50 
B) $75 
C) $80 
D) $150 
A) $50 
B) $75 
C) $80 
D) $150

Question 13

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.  
-Refer to Table 14-2. This firm maximizes total revenue by producing

Accepted Answer

A) 1 units. 
B) 3 units. 
C) 5 units. 
D) as many units as possible. 
A) 1 units. 
B) 3 units. 
C) 5 units. 
D) as many units as possible.

Question 14

We can measure the profits earned by a firm in a competitive industry as

Accepted Answer

A) (P - AT
C)  × Q. 
B) (P - M
C)  × Q. 
C) MR × MC. 
D) (MC - AT
C)  × Q. 
A) (P - AT
C)  × Q. 
B) (P - M
C)  × Q. 
C) MR × MC. 
D) (MC - AT
C)  × Q.

Question 15

In a competitive market, firms are unable to differentiate their product from that of other producers.

Accepted Answer

A) True 
 B)False

Question 16

In a competitive market, the actions of any single buyer or seller will

Accepted Answer

A) discourage entry by competitors. 
B) influence the profits of other firms in the market. 
C) have a negligible impact on the market price. 
D) None of the above is correct. 
A) discourage entry by competitors. 
B) influence the profits of other firms in the market. 
C) have a negligible impact on the market price. 
D) None of the above is correct.

Question 17

Table 14-1  
-Refer to Table 14-1. Over what range of output is marginal revenue declining?

Accepted Answer

A) 1 to 6 units 
B) 3 to 7 units 
C) 7 to 9 units 
D) Marginal revenue is constant over the entire range of output. 
A) 1 to 6 units 
B) 3 to 7 units 
C) 7 to 9 units 
D) Marginal revenue is constant over the entire range of output.

Question 18

A key characteristic of a competitive market is that

Accepted Answer

A) government antitrust laws regulate competition. 
B) producers sell nearly identical products. 
C) firms minimize total costs. 
D) firms have price setting power. 
A) government antitrust laws regulate competition. 
B) producers sell nearly identical products. 
C) firms minimize total costs. 
D) firms have price setting power.

Question 19

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P

Question 20

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A) total revenue must equal total cost for each firm. 
B) economic profits must be zero. 
C) price must equal the minimum of marginal cost for each firm. 
D) Both a and b are correct. 
A) total revenue must equal total cost for each firm. 
B) economic profits must be zero. 
C) price must equal the minimum of marginal cost for each firm. 
D) Both a and b are correct.

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

When new entrants into a competitive market have higher costs than existing firms,

In order to maximize profits in the short run, a firm should produce where

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith's firm is correct?

Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

Figure 14-14 -Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is the marginal cost of the 1st unit?

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. This firm maximizes total revenue by producing

We can measure the profits earned by a firm in a competitive industry as

In a competitive market, firms are unable to differentiate their product from that of other producers.

In a competitive market, the actions of any single buyer or seller will

Table 14-1 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

A key characteristic of a competitive market is that

When firms are neither entering nor exiting a perfectly competitive market,

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

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

When new entrants into a competitive market have higher costs than existing firms,

In order to maximize profits in the short run, a firm should produce where

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

Mrs. Smith is operating a firm in a competitive market. The market price is $6.50. At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00. Which of the following statements about Mrs. Smith's firm is correct?

Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

Figure 14-14 -Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is the marginal cost of the 1st unit?

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. This firm maximizes total revenue by producing

We can measure the profits earned by a firm in a competitive industry as

In a competitive market, firms are unable to differentiate their product from that of other producers.

In a competitive market, the actions of any single buyer or seller will

Table 14-1 -Refer to Table 14-1. Over what range of output is marginal revenue declining?

A key characteristic of a competitive market is that

When firms are neither entering nor exiting a perfectly competitive market,

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