Question 1

Table 14-5
The table represents a demand curve faced by a firm in a competitive market.  
-Refer to Table 14-5. For this firm, the price of the product is

Accepted Answer

A) $9. 
B) $11. 
C) $13. 
D) $15. 
A) $9. 
B) $11. 
C) $13. 
D) $15.

Question 2

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.  
-Refer to Table 14-6. What is the average revenue when 4 units are sold?

Accepted Answer

A) $60 
B) $120 
C) $125 
D) $197 
A) $60 
B) $120 
C) $125 
D) $197

Question 3

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 4

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. If the marginal cost of producing the 501st unit would be $19, producing and selling the 501st unit would

Accepted Answer

A) decrease the firm's profit by $19. 
B) decrease the firm's profit by $2. 
C) increase the firm's profit by $1. 
D) increase the firm's profit by $3. 
A) decrease the firm's profit by $19. 
B) decrease the firm's profit by $2. 
C) increase the firm's profit by $1. 
D) increase the firm's profit by $3.

Question 5

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A) ​Firms are price takers. 
B) ​Individual firms are price setters. 
C) ​Firms are able to sell all of the output that they choose to produce. 
D) ​Firms produce identical goods. 
A) ​Firms are price takers. 
B) ​Individual firms are price setters. 
C) ​Firms are able to sell all of the output that they choose to produce. 
D) ​Firms produce identical goods.

Question 6

When a perfectly competitive firm decides to shut down, it is most likely that

Accepted Answer

A) marginal cost is above average variable cost. 
B) marginal cost is above average total cost. 
C) price is below the firm's average variable cost. 
D) fixed costs exceed variable costs. 
A) marginal cost is above average variable cost. 
B) marginal cost is above average total cost. 
C) price is below the firm's average variable cost. 
D) fixed costs exceed variable costs.

Question 7

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

Accepted Answer

A) fixed costs decrease as output increases from Q3 to Q4. 
B) it can earn a positive profit by increasing production to Q4. 
C) profit is still maximized at a production level of Q3. 
D) average revenue exceeds marginal revenue at a production level of Q4. 
A) fixed costs decrease as output increases from Q3 to Q4. 
B) it can earn a positive profit by increasing production to Q4. 
C) profit is still maximized at a production level of Q3. 
D) average revenue exceeds marginal revenue at a production level of Q4.

Question 8

When new firms enter a perfectly competitive market,

Accepted Answer

A) demand increases. 
B) the short-run market supply curve shifts right. 
C) the short-run market supply curve shifts left. 
D) existing firms will increase prices to keep the new firms from entering. 
A) demand increases. 
B) the short-run market supply curve shifts right. 
C) the short-run market supply curve shifts left. 
D) existing firms will increase prices to keep the new firms from entering.

Question 9

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 10

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 300 identical firms in this market, what level of output will be supplied to the market when price is $2.00?

Accepted Answer

A) 300 
B) 6,000 
C) 30,000 
D) 60,000 
A) 300 
B) 6,000 
C) 30,000 
D) 60,000

Question 11

Which of the following statements regarding a competitive market is not correct?

Accepted Answer

A) There are many buyers and many sellers in the market. 
B) Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume. 
C) Price and average revenue are equal. 
D) Price and marginal revenue are equal. 
A) There are many buyers and many sellers in the market. 
B) Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume. 
C) Price and average revenue are equal. 
D) Price and marginal revenue are equal.

Question 12

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:   The long-run supply curve for this market is

Accepted Answer

A) positively sloped for all prices above $10. 
B) horizontal at a price of $5. 
C) horizontal at a price of $6. 
D) horizontal at a price of $7. 
A) positively sloped for all prices above $10. 
B) horizontal at a price of $5. 
C) horizontal at a price of $6. 
D) horizontal at a price of $7.

Question 13

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?

Accepted Answer

A) The firm will continue to produce to attempt to pay fixed costs. 
B) The firm will immediately stop production to minimize its losses. 
C) The firm will stop production as soon as it is able to pay its sunk costs. 
D) The firm will continue to produce in the short run but will likely exit the market in the long run. 
A) The firm will continue to produce to attempt to pay fixed costs. 
B) The firm will immediately stop production to minimize its losses. 
C) The firm will stop production as soon as it is able to pay its sunk costs. 
D) The firm will continue to produce in the short run but will likely exit the market in the long run.

Question 14

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.  
-Refer to Table 14-6. What is the total revenue from selling 4 units?

Accepted Answer

A) $120 
B) $257 
C) $317 
D) $480 
A) $120 
B) $257 
C) $317 
D) $480

Question 15

Scenario 14-5
A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition.
-Refer to Scenario 14-5. If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market, the

Accepted Answer

A) short-run market supply curve for irradiated tomatoes would be affected but not the long-run market supply. 
B) long-run market supply curve for irradiated tomatoes would be perfectly elastic. 
C) long-run market supply of irradiated tomatoes would be downward sloping. 
D) long-run market supply of irradiated tomatoes would be upward sloping. 
A) short-run market supply curve for irradiated tomatoes would be affected but not the long-run market supply. 
B) long-run market supply curve for irradiated tomatoes would be perfectly elastic. 
C) long-run market supply of irradiated tomatoes would be downward sloping. 
D) long-run market supply of irradiated tomatoes would be upward sloping.

Question 16

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 600 identical firms in this market, what is the value of Q1?

Accepted Answer

A) 6,000 
B) 12,000 
C) 60,000 
D) 120,000 
A) 6,000 
B) 12,000 
C) 60,000 
D) 120,000

Question 17

A golf course in Fargo, North Dakota - where it is very cold in the winter - is closed between November 1 and April 1. If the owner of the golf course is rational, what criterion does he or she use in deciding to close the course for this extended period of time?

Accepted Answer

The owner has determined that

Question 18

Firms in a competitive market are said to be price takers because there are many sellers in the market, and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.  
-Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75 per loaf. At this new price, what is Bob's profit-maximizing quantity?

Accepted Answer

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

Exam 14: Firms in Competitive Markets

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the price of the product is

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the average revenue when 4 units are sold?

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.

Which of the following is not a characteristic of a perfectly competitive market?

When a perfectly competitive firm decides to shut down, it is most likely that

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

When new firms enter a perfectly competitive market,

Which of the following statements regarding a competitive market is not correct?

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: The long-run supply curve for this market is

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the total revenue from selling 4 units?

A golf course in Fargo, North Dakota - where it is very cold in the winter - is closed between November 1 and April 1. If the owner of the golf course is rational, what criterion does he or she use in deciding to close the course for this extended period of time?

Firms in a competitive market are said to be price takers because there are many sellers in the market, and the goods offered by the firms are very similar if not identical.

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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