Question 1

What does it mean for a buyer or seller to be a price taker?

Accepted Answer

A buyer or seller is a price t

Question 2

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 short-run economic profit?

Accepted Answer

A) $9 
B) $15 
C) $30 
D) $50 
A) $9 
B) $15 
C) $30 
D) $50

Question 3

Table 14-12
Bill's Birdhouses  
-Refer to Table 14-12. At what quantity does Bill maximize profits?

Accepted Answer

A) 3 
B) 6 
C) 7 
D) 8 
A) 3 
B) 6 
C) 7 
D) 8

Question 4

Which of the following is a characteristic of a competitive market?

Accepted Answer

A) There are many buyers but few sellers. 
B) Many firms have market power because they own patents. 
C) Buyers and sellers are price takers. 
D) Firms sell differentiated products. 
A) There are many buyers but few sellers. 
B) Many firms have market power because they own patents. 
C) Buyers and sellers are price takers. 
D) Firms sell differentiated products.

Question 5

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Accepted Answer

A) total revenues exceed her total accounting costs. 
B) marginal revenue exceeds her total cost. 
C) marginal revenue exceeds her marginal cost. 
D) marginal cost exceeds her marginal revenue. 
A) total revenues exceed her total accounting costs. 
B) marginal revenue exceeds her total cost. 
C) marginal revenue exceeds her marginal cost. 
D) marginal cost exceeds her marginal revenue.

Question 6

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

Accepted Answer

The price (average r

Question 7

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 Pd, 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 8

Figure 14-10
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 14-10. If there are 500 identical firms in this market, what is the value of Q2?

Accepted Answer

A) 12,000 
B) 60,000 
C) 240,000 
D) 300,000 
A) 12,000 
B) 60,000 
C) 240,000 
D) 300,000

Question 9

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Accepted Answer

A) can be represented by the area P2 × Q2. 
B) can be represented by the area P3 × Q2. 
C) can be represented by the area (P3-P2) × Q3. 
D) are zero. 
A) can be represented by the area P2 × Q2. 
B) can be represented by the area P3 × Q2. 
C) can be represented by the area (P3-P2) × Q3. 
D) are zero.

Question 10

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.
​

Accepted Answer

A) True 
 B)False

Question 11

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 total cost is

Accepted Answer

A) $3,450.00. 
B) $3,525.75. 
C) $3,675.00. 
D) $3,850.25. 
A) $3,450.00. 
B) $3,525.75. 
C) $3,675.00. 
D) $3,850.25.

Question 12

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A) horizontal. 
B) likely to slope downward. 
C) determined by forces external to the firm. 
D) the portion of its marginal cost curve that lies above its average variable cost. 
A) horizontal. 
B) likely to slope downward. 
C) determined by forces external to the firm. 
D) the portion of its marginal cost curve that lies above its average variable cost.

Question 13

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i)
Marginal revenue equals $3.
(ii)
Average revenue equals $3.
(iii)
Total revenue equals $900.

Accepted Answer

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

Question 14

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A) zero. 
B) equal to the industry profits. 
C) the market supply curve. 
D) a horizontal line. 
A) zero. 
B) equal to the industry profits. 
C) the market supply curve. 
D) a horizontal line.

Question 15

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Accepted Answer

The answer of In the long-run equilibrium of a competitive...

Question 16

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

Accepted Answer

A) have a negligible impact on the market price. 
B) have little effect on market equilibrium quantity but will affect market equilibrium price. 
C) affect marginal revenue and average revenue but not price. 
D) adversely affect the profitability of more than one firm in the market. 
A) have a negligible impact on the market price. 
B) have little effect on market equilibrium quantity but will affect market equilibrium price. 
C) affect marginal revenue and average revenue but not price. 
D) adversely affect the profitability of more than one firm in the market.

Question 17

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. What is Victor's opportunity costs of operating his new business?

Accepted Answer

A) $25,000 
B) $75,000 
C) $100,000 
D) $175,000 
A) $25,000 
B) $75,000 
C) $100,000 
D) $175,000

Question 18

When determining whether to shut down in the short run, a competitive firm should ignore (i)
Fixed costs.
(ii)
Variable costs.
(iii)
Sunk costs.

Accepted Answer

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

Question 19

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

Accepted Answer

A) its average revenue is greater than $8. 
B) its marginal revenue is less than $8. 
C) its total cost is less than $4,000. 
D) All of the above are correct. 
A) its average revenue is greater than $8. 
B) its marginal revenue is less than $8. 
C) its total cost is less than $4,000. 
D) All of the above are correct.

Question 20

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False

What does it mean for a buyer or seller to be a price taker?

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 short-run economic profit?

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. At what quantity does Bill maximize profits?

Which of the following is a characteristic of a competitive market?

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

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 Pd, in the short run the firm will earn

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.

The short-run supply curve for a firm in a perfectly competitive market is

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $3. (iii) Total revenue equals $900.

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

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

When determining whether to shut down in the short run, a competitive firm should ignore (i) Fixed costs. (ii) Variable costs. (iii) Sunk costs.

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

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

What does it mean for a buyer or seller to be a price taker?

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 short-run economic profit?

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. At what quantity does Bill maximize profits?

Which of the following is a characteristic of a competitive market?

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

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 Pd, in the short run the firm will earn

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses. ​

The short-run supply curve for a firm in a perfectly competitive market is

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $3. (iii) Total revenue equals $900.

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

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

When determining whether to shut down in the short run, a competitive firm should ignore (i) Fixed costs. (ii) Variable costs. (iii) Sunk costs.

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

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

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.