Question 1

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Accepted Answer

A) its total cost is more than $9,000. 
B) its marginal revenue is less than $10. 
C) its average total cost is less than $10. 
D) the firm cannot be a competitive firm because competitive firms cannot earn positive profits. 
A) its total cost is more than $9,000. 
B) its marginal revenue is less than $10. 
C) its average total cost is less than $10. 
D) the firm cannot be a competitive firm because competitive firms cannot earn positive profits.

Question 2

Firms operating in competitive markets produce output levels where marginal revenue equals

Accepted Answer

A) price. 
B) average revenue. 
C) total revenue divided by output. 
D) All of the above are correct. 
A) price. 
B) average revenue. 
C) total revenue divided by output. 
D) All of the above are correct.

Question 3

The term shutdown

Accepted Answer

A) and the term exit both refer to short-run decisions that a firm might make. 
B) and the term exit both refer to long-run decisions that a firm might make. 
C) refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make. 
D) refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make. 
A) and the term exit both refer to short-run decisions that a firm might make. 
B) and the term exit both refer to long-run decisions that a firm might make. 
C) refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make. 
D) refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.

Question 4

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Accepted Answer

A) $40 
B) $80 
C) $160 
D) This cannot be determined from the given information. 
A) $40 
B) $80 
C) $160 
D) This cannot be determined from the given information.

Question 5

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 $200. 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 6

Scenario 14-4
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
-Refer to Scenario 14-4. How large would Victor's accounting profits need to be to allow him to attain zero economic profit?

Accepted Answer

A) $100,000 
B) $125,000 
C) $175,000 
D) $225,000 
A) $100,000 
B) $125,000 
C) $175,000 
D) $225,000

Question 7

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Accepted Answer

A) above $6.30. 
B) less than $6.30 but more than $4.50. 
C) less than $4.50. 
D) exactly $6.30. 
A) above $6.30. 
B) less than $6.30 but more than $4.50. 
C) less than $4.50. 
D) exactly $6.30.

Question 8

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-9. If the firm's marginal cost is $5, it should

Accepted Answer

A) reduce fixed costs by lowering production. 
B) increase production to maximize profit. 
C) decrease production to maximize profit. 
D) maintain its current level of production to maximize profit. 
A) reduce fixed costs by lowering production. 
B) increase production to maximize profit. 
C) decrease production to maximize profit. 
D) maintain its current level of production to maximize profit.

Question 9

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Accepted Answer

The decrease in demand results in firms

Question 10

Table 14-13
Diana's Dress Emporium  
-Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Accepted Answer

A) $78 
B) $243 
C) $278 
D) $375 
A) $78 
B) $243 
C) $278 
D) $375

Question 11

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. At which level of production will the firm maximize profit?

Accepted Answer

A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units 
A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units

Question 12

​Table 14-17
The table below shows the price and cost information for a firm that operates in a perfectly competitive market.  
-​Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Accepted Answer

A) ​3 units. 
B) ​4 units. 
C) ​5 units. 
D) ​6 units. 
A) ​3 units. 
B) ​4 units. 
C) ​5 units. 
D) ​6 units.

Question 13

Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Accepted Answer

A) $0.50 
B) $7.50 
C) $10 
D) There is insufficient data to determine the firm's profit. 
A) $0.50 
B) $7.50 
C) $10 
D) There is insufficient data to determine the firm's profit.

Question 14

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 15

​Table 14-17
The table below shows the price and cost information for a firm that operates in a perfectly competitive market.  
-​Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

Accepted Answer

A) ​$36. 
B) ​$30. 
C) ​$5. 
D) ​$6. 
A) ​$36. 
B) ​$30. 
C) ​$5. 
D) ​$6.

Question 16

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

Accepted Answer

A) implicit cost. 
B) explicit cost. 
C) variable cost. 
D) sunk cost. 
A) implicit cost. 
B) explicit cost. 
C) variable cost. 
D) sunk cost.

Question 17

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

Accepted Answer

If the selling price is not su

Question 18

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Accepted Answer

The market is not competitive

Question 19

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Accepted Answer

A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units 
A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units

Question 20

Figure 14-11  
-Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Accepted Answer

A) A only 
B) A and C only 
C) B only 
D) B and D only 
A) A only 
B) A and C only 
C) B only 
D) B and D only

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Firms operating in competitive markets produce output levels where marginal revenue equals

The term shutdown

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

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 $200. In order to maximize profits, Laura should

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm's marginal cost is $5, it should

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of production will the firm maximize profit?

Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

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

Exam 14: Firms in Competitive Markets

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Firms operating in competitive markets produce output levels where marginal revenue equals

The term shutdown

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm's marginal cost is $5, it should

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of production will the firm maximize profit?

​Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -​Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

​Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -​Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

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

Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.