Question 1

Who is a price taker in a competitive market?

Accepted Answer

A) buyers only 
B) sellers only 
C) both buyers and sellers 
D) neither buyers nor sellers 
A) buyers only 
B) sellers only 
C) both buyers and sellers 
D) neither buyers nor sellers

Question 2

Figure 14-14    
-Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Accepted Answer

A) Points W, Y, and Z represent both short-run and long-run equilibria. 
B) Points W, Y, Z, and X represent short-run equilibria. 
C) Points W, Y, and Z represent long-run equilibria. 
D) Points W and Z represent long-run equilibria. 
A) Points W, Y, and Z represent both short-run and long-run equilibria. 
B) Points W, Y, Z, and X represent short-run equilibria. 
C) Points W, Y, and Z represent long-run equilibria. 
D) Points W and Z represent long-run equilibria.

Question 3

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

Accepted Answer

A) new firms to enter the market. 
B) the market price to fall. 
C) its profits to fall. 
D) All of the above are correct. 
A) new firms to enter the market. 
B) the market price to fall. 
C) its profits to fall. 
D) All of the above are correct.

Question 4

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's marginal revenue if it instead produced and sold 4 units of output?

Accepted Answer

A) $2 
B) $8 
C) $32 
D) $64 
A) $2 
B) $8 
C) $32 
D) $64

Question 5

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Accepted Answer

A) $7. 
B) $6. 
C) $4. 
D) We do not have enough information to answer the question. 
A) $7. 
B) $6. 
C) $4. 
D) We do not have enough information to answer the question.

Question 6

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.  
-Refer to Table 14-14. What is Bob's total fixed cost?

Accepted Answer

A) $0 
B) $3 
C) $5 
D) $9 
A) $0 
B) $3 
C) $5 
D) $9

Question 7

The analysis of competitive firms sheds light on the decisions that lie behind the

Accepted Answer

A) demand curve. 
B) supply curve. 
C) way firms make pricing decisions in the not-for-profit sector of the economy. 
D) way financial markets set interest rates. 
A) demand curve. 
B) supply curve. 
C) way firms make pricing decisions in the not-for-profit sector of the economy. 
D) way financial markets set interest rates.

Question 8

Suppose that a competitive market is initially in equilibrium. Then demand increases. If some resources used in production are not available in sufficient quantities for entering firms,

Accepted Answer

A) the long-run market supply curve will be upward sloping. 
B) the long-run market supply curve will be perfectly elastic. 
C) in the long run firms will suffer economic losses, leading them to exit the industry. 
D) the number of firms will decrease, and the market will become a monopoly. 
A) the long-run market supply curve will be upward sloping. 
B) the long-run market supply curve will be perfectly elastic. 
C) in the long run firms will suffer economic losses, leading them to exit the industry. 
D) the number of firms will decrease, and the market will become a monopoly.

Question 9

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

Accepted Answer

A) $5 
B) $30 
C) $35 
D) $65 
A) $5 
B) $30 
C) $35 
D) $65

Question 10

The expression "Let bygones be bygones" is associated with what type of cost?

Accepted Answer

The expres

Question 11

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 $11, it should

Accepted Answer

A) increase production to maximize profit. 
B) increase the price of the product to maximize profit. 
C) advertise to attract additional buyers to maximize profit. 
D) reduce production to increase profit. 
A) increase production to maximize profit. 
B) increase the price of the product to maximize profit. 
C) advertise to attract additional buyers to maximize profit. 
D) reduce production to increase profit.

Question 12

Figure 14-7  
-Refer to Figure 14-7. At what price is the firm's maximum profit zero?

Accepted Answer

A) $80 
B) $90 
C) $100 
D) $125 
A) $80 
B) $90 
C) $100 
D) $125

Question 13

In a competitive market the current price is $6. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Accepted Answer

A) In the short run firms will shut down, and in the long run firms will leave the market. 
B) In the short run firms will continue to operate, but in the long run firms will leave the market. 
C) New firms will likely enter this market to capture some of the economic profits. 
D) The firm will earn zero profits in both the short run and long run. 
A) In the short run firms will shut down, and in the long run firms will leave the market. 
B) In the short run firms will continue to operate, but in the long run firms will leave the market. 
C) New firms will likely enter this market to capture some of the economic profits. 
D) The firm will earn zero profits in both the short run and long run.

Question 14

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

Accepted Answer

A) Firms are price takers. 
B) Firms have difficulty entering the market. 
C) There are many sellers in the market. 
D) Goods offered for sale are largely the same. 
A) Firms are price takers. 
B) Firms have difficulty entering the market. 
C) There are many sellers in the market. 
D) Goods offered for sale are largely the same.

Question 15

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

Accepted Answer

A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue. 
A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue.

Question 16

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:  
-Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces

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 17

When a firm produces 2,000 units of output, its average total cost is $3.00 and its average revenue is $2.90. What is the firm's profit or loss?

Accepted Answer

The firm's

Question 18

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

Accepted Answer

A) new firms to enter the market. 
B) the market price to rise. 
C) its profits to rise. 
D) Both b and c are correct. 
A) new firms to enter the market. 
B) the market price to rise. 
C) its profits to rise. 
D) Both b and c are correct.

Question 19

Shrimp Galore, a shrimp harvesting business in the Pacific Northwest, has a 30-year loan on its shrimp harvesting boat. The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2010 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of $75,000 dollars after paying all 2010 expenses (including the annual loan payment). In this case, Shrimp Galore should

Accepted Answer

A) produce nothing and experience a loss of $25,000. 
B) produce nothing and experience a loss of $75,000. 
C) continue to operate because expected profits will rise in the future. 
D) continue to operate even though it predicts a loss of $75,000. 
A) produce nothing and experience a loss of $25,000. 
B) produce nothing and experience a loss of $75,000. 
C) continue to operate because expected profits will rise in the future. 
D) continue to operate even though it predicts a loss of $75,000.

Question 20

Table 14-13  
-Refer to Table 14-13. What is the marginal cost of the 8th unit?

Accepted Answer

A) $0 
B) $100 
C) $120 
D) $140 
A) $0 
B) $100 
C) $120 
D) $140

Exam 14: Firms in Competitive Markets

Who is a price taker in a competitive market?

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's marginal revenue if it instead produced and sold 4 units of output?

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is Bob's total fixed cost?

The analysis of competitive firms sheds light on the decisions that lie behind the

Suppose that a competitive market is initially in equilibrium. Then demand increases. If some resources used in production are not available in sufficient quantities for entering firms,

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

The expression "Let bygones be bygones" is associated with what type of cost?

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 $11, it should

Figure 14-7 -Refer to Figure 14-7. At what price is the firm's maximum profit zero?

In a competitive market the current price is $6. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

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

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

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces

When a firm produces 2,000 units of output, its average total cost is $3.00 and its average revenue is $2.90. What is the firm's profit or loss?

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

Table 14-13 -Refer to Table 14-13. What is the marginal cost of the 8th unit?

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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