Question 1

In a perfectly competitive market, the process of entry and exit will end when

Accepted Answer

A) price equals minimum marginal cost. 
B) marginal revenue equals marginal cost. 
C) economic profits are zero. 
D) accounting profits are zero. 
A) price equals minimum marginal cost. 
B) marginal revenue equals marginal cost. 
C) economic profits are zero. 
D) accounting profits are zero.

Question 2

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 3

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 50 units of output and at that output level, marginal revenue is $6. Suppose that the firm increases output by 50%. Total revenue will be

Accepted Answer

A) ​$300. 
B) ​$450. 
C) ​$600. 
D) ​the same since price will fall by 50%. 
A) ​$300. 
B) ​$450. 
C) ​$600. 
D) ​the same since price will fall by 50%.

Question 4

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Accepted Answer

A) shift the demand curve outward so that price will rise to the level of production cost. 
B) cause the remaining firms to collude so that they can produce more efficiently. 
C) cause the market supply to decline and the price of organic produce to rise. 
D) cause firms in the organic-produce industry to suffer long-run economic losses. 
A) shift the demand curve outward so that price will rise to the level of production cost. 
B) cause the remaining firms to collude so that they can produce more efficiently. 
C) cause the market supply to decline and the price of organic produce to rise. 
D) cause firms in the organic-produce industry to suffer long-run economic losses.

Question 5

If a firm can influence the market price of the good it sells, then it is said to have __________.

Accepted Answer

The answer of If a firm can influence the market...

Question 6

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell

Question 7

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

Accepted Answer

A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down. 
A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down.

Question 8

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

Accepted Answer

A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units 
A) 100 units 
B) 200 units 
C) 300 units 
D) 400 units

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

Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market.
Output
Marginal Cost
0
--
1
$5
2
$10
3
$15
4
$20
5
$25
How many units should a firm in this market produce to maximize profit?

Accepted Answer

A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units 
A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units

Question 11

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A) a hot dog vendor in New York 
B) Microsoft Corporation 
C) Ford Motor Company 
D) the campus bookstore 
A) a hot dog vendor in New York 
B) Microsoft Corporation 
C) Ford Motor Company 
D) the campus bookstore

Question 15

A competitive firm's short-run supply curve is part of which of the following curves?

Accepted Answer

A) marginal revenue 
B) average variable cost 
C) average total cost 
D) marginal cost 
A) marginal revenue 
B) average variable cost 
C) average total cost 
D) marginal cost

Question 16

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.

Question 17

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 18

A firm lacks market power if it cannot influence __________.

Accepted Answer

the price

Question 19

Suppose that firms in a competitive industry are earning positive economic profits. 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 20

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

Exam 14: Firms in Competitive Markets

In a perfectly competitive market, the process of entry and exit will end when

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

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 50 units of output and at that output level, marginal revenue is $6. Suppose that the firm increases output by 50%. Total revenue will be

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

If a firm can influence the market price of the good it sells, then it is said to have __________.

List and describe the characteristics of a perfectly competitive market.

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

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

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

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

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Which of the following firms is the closest to being a perfectly competitive firm?

A competitive firm's short-run supply curve is part of which of the following curves?

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

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?

A firm lacks market power if it cannot influence __________.

Suppose that firms in a competitive industry are earning positive economic profits. All else equal, in the long run, we would expect the number of firms in the industry to

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

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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