Question 1

​In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 2

When price is greater than marginal cost for a firm in a competitive market,

Accepted Answer

A) marginal cost must be falling. 
B) the firm must be minimizing its losses. 
C) there are opportunities to increase profit by increasing production. 
D) the firm should decrease output to maximize profit. 
A) marginal cost must be falling. 
B) the firm must be minimizing its losses. 
C) there are opportunities to increase profit by increasing production. 
D) the firm should decrease output to maximize profit.

Question 3

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 at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market?

Accepted Answer

A) 75 
B) 100 
C) 250 
D) 300 
A) 75 
B) 100 
C) 250 
D) 300

Question 4

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. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?

Accepted Answer

A) average fixed cost 
B) average revenue 
C) total cost 
D) total revenue 
A) average fixed cost 
B) average revenue 
C) total cost 
D) total revenue

Question 5

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 profit

Accepted Answer

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

Question 6

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

Accepted Answer

A) quantity of output is higher than it was previously. 
B) average total cost is higher than it was previously. 
C) marginal revenue is higher than it was previously. 
D) All of the above are correct. 
A) quantity of output is higher than it was previously. 
B) average total cost is higher than it was previously. 
C) marginal revenue is higher than it was previously. 
D) All of the above are correct.

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's short-run supply curve is its marginal cost curve above

Accepted Answer

A) $1. 
B) $3. 
C) $4.50. 
D) $6.30. 
A) $1. 
B) $3. 
C) $4.50. 
D) $6.30.

Question 8

A restaurant that has market power can

Accepted Answer

A) minimize costs more efficiently than its competitors. 
B) influence the market price for the meals it sells. 
C) reduce its marketing budget more than its competitors. 
D) ignore profit-maximizing strategies when setting the price for its meals. 
A) minimize costs more efficiently than its competitors. 
B) influence the market price for the meals it sells. 
C) reduce its marketing budget more than its competitors. 
D) ignore profit-maximizing strategies when setting the price for its meals.

Question 9

In a market with a fixed number of firms, as long as price is above average

Accepted Answer

A) variable cost, each firm's marginal-cost curve is its supply curve. 
B) variable cost, each firm's average-total-cost curve is its supply curve. 
C) total cost, each firm's marginal-cost curve is its supply curve. 
D) total cost, each firm's average-total-cost curve is its supply curve. 
A) variable cost, each firm's marginal-cost curve is its supply curve. 
B) variable cost, each firm's average-total-cost curve is its supply curve. 
C) total cost, each firm's marginal-cost curve is its supply curve. 
D) total cost, each firm's average-total-cost curve is its supply curve.

Question 10

A firm sells 100 units of output and its total revenue is $800. The firm's average revenue amounts to __________.

Accepted Answer

The answer of A firm sells 100 units of output...

Question 11

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.  
-Refer to Table 14-2. For this firm, the average revenue from selling 3 units is

Accepted Answer

A) $12. 
B) $4. 
C) $3. 
D) $1. 
A) $12. 
B) $4. 
C) $3. 
D) $1.

Question 12

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 13

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 the marginal revenue of the 4th unit?

Accepted Answer

A) $2.00 
B) $3.25 
C) $10.00 
D) $13.00 
A) $2.00 
B) $3.25 
C) $10.00 
D) $13.00

Question 14

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. Firms would be encouraged to enter this market for all prices that exceed

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 15

In a competitive market,

Accepted Answer

A) no single buyer or seller can influence the price of the product. 
B) there are only a small number of sellers. 
C) the goods offered by the different sellers are unique. 
D) accounting profit is driven to zero as firms freely enter and exit the market. 
A) no single buyer or seller can influence the price of the product. 
B) there are only a small number of sellers. 
C) the goods offered by the different sellers are unique. 
D) accounting profit is driven to zero as firms freely enter and exit the market.

Question 16

When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit

Accepted Answer

A) is negative. 
B) is at least zero. 
C) is also zero. 
D) could be positive, negative or zero. 
A) is negative. 
B) is at least zero. 
C) is also zero. 
D) could be positive, negative or zero.

Question 17

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing

Accepted Answer

A) a violation of conventional market forces. 
B) over-investment. 
C) the entry of new firms. 
D) too few firms in the market. 
A) a violation of conventional market forces. 
B) over-investment. 
C) the entry of new firms. 
D) too few firms in the market.

Question 18

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 19

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has earned $4,500 in monthly revenue. In the short run, Susan should

Accepted Answer

A) shut down her business, and in the long run she should exit the industry. 
B) continue to operate her business, but in the long run she should exit the industry. 
C) continue to operate her business, but in the long run she will probably face competition from newly entering firms. 
D) continue to operate her business, and she is also in long-run equilibrium. 
A) shut down her business, and in the long run she should exit the industry. 
B) continue to operate her business, but in the long run she should exit the industry. 
C) continue to operate her business, but in the long run she will probably face competition from newly entering firms. 
D) continue to operate her business, and she is also in long-run equilibrium.

Question 20

In a competitive market, no single producer can influence the market price because

Accepted Answer

A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price. 
A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price.

Exam 14: Firms in Competitive Markets

​In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.

When price is greater than marginal cost for a firm in a competitive 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 profit

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above

A restaurant that has market power can

In a market with a fixed number of firms, as long as price is above average

A firm sells 100 units of output and its total revenue is $800. The firm's average revenue amounts to __________.

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. For this firm, the average revenue from selling 3 units is

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

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 the marginal revenue of the 4th unit?

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. Firms would be encouraged to enter this market for all prices that exceed

In a competitive market,

When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing

In a competitive market, no single producer can influence the market price because

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

Filters

In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.