Question 1

If marginal cost exceeds marginal revenue, the firm

Accepted Answer

A) is most likely to be at a profit-maximizing level of output. 
B) should increase the level of production to maximize its profit. 
C) should reduce its average fixed cost in order to lower its marginal cost. 
D) may still be earning a positive accounting profit. 
A) is most likely to be at a profit-maximizing level of output. 
B) should increase the level of production to maximize its profit. 
C) should reduce its average fixed cost in order to lower its marginal cost. 
D) may still be earning a positive accounting profit.

Question 2

For a competitive firm,

Accepted Answer

A) total revenue equals average revenue. 
B) total revenue equals marginal revenue. 
C) total cost equals marginal revenue. 
D) average revenue equals marginal revenue. 
A) total revenue equals average revenue. 
B) total revenue equals marginal revenue. 
C) total cost equals marginal revenue. 
D) average revenue equals marginal revenue.

Question 3

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A) Profit = MR - MC 
B) Profit = MR - TC 
C) Profit = (P - M
C)  × Q 
D) Profit = (P - AT
C)  × Q 
A) Profit = MR - MC 
B) Profit = MR - TC 
C) Profit = (P - M
C)  × Q 
D) Profit = (P - AT
C)  × Q

Question 4

Figure 14-7  
-Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Accepted Answer

A) $75. 
B) $85. 
C) $95. 
D) All of the above are correct. 
A) $75. 
B) $85. 
C) $95. 
D) All of the above are correct.

Question 5

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:  
-Refer to Table 14-11. The marginal revenue from producing the 5th unit equals
(i) $6.
(ii) the price.
(iii) the marginal cost.

Accepted Answer

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

Question 6

Figure 14-7  
-Refer to Figure 14-7. In the short run, the firm's maximum profit (or minimum loss) is the same at which of the following pairs of prices?

Accepted Answer

A) $65 and $75 
B) $75 and $85 
C) $80 and $100 
D) $125 and $175 
A) $65 and $75 
B) $75 and $85 
C) $80 and $100 
D) $125 and $175

Question 7

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P

Question 8

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Accepted Answer

A) should exit the industry unless her economic profits are positive. 
B) will earn zero accounting profits but positive economic profits. 
C) will earn zero economic profits but positive accounting profits. 
D) should ignore opportunity costs because they are a type of sunk cost that disappears in the long run. 
A) should exit the industry unless her economic profits are positive. 
B) will earn zero accounting profits but positive economic profits. 
C) will earn zero economic profits but positive accounting profits. 
D) should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.

Question 9

A firm in a competitive market has the following cost structure:
Output
ATC
0
--
1
$10
2
$8
3
$7
4
$8
5
$10
If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm 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 10

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Accepted Answer

A) to produce the quantity at which average variable cost is minimized. 
B) to produce the quantity at which average fixed cost is minimized. 
C) the quantity at which market price is equal to Mr. McDonald's marginal cost of production. 
D) the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount. 
A) to produce the quantity at which average variable cost is minimized. 
B) to produce the quantity at which average fixed cost is minimized. 
C) the quantity at which market price is equal to Mr. McDonald's marginal cost of production. 
D) the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount.

Question 11

When total revenue is less than variable costs, a firm in a competitive market will

Accepted Answer

A) continue to operate as long as average revenue exceeds marginal cost. 
B) continue to operate as long as average revenue exceeds average fixed cost. 
C) shut down. 
D) raise its price. 
A) continue to operate as long as average revenue exceeds marginal cost. 
B) continue to operate as long as average revenue exceeds average fixed cost. 
C) shut down. 
D) raise its price.

Question 12

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Regardless of the cost structure of firms in a competitive market, in the long run

Accepted Answer

A) firms will experience rising demand for their products. 
B) the marginal firm will earn zero economic profit. 
C) firms will experience a less competitive market environment. 
D) exit and entry is likely to lead to a horizontal long-run supply curve. 
A) firms will experience rising demand for their products. 
B) the marginal firm will earn zero economic profit. 
C) firms will experience a less competitive market environment. 
D) exit and entry is likely to lead to a horizontal long-run supply curve.

Question 14

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized. 
A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized.

Question 15

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Accepted Answer

A) True 
 B)False

Question 16

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 Q1?

Accepted Answer

A) 10,000 
B) 20,000 
C) 50,000 
D) 150,000 
A) 10,000 
B) 20,000 
C) 50,000 
D) 150,000

Question 17

When new firms have an incentive to enter a competitive market, their entry will

Accepted Answer

A) increase the price of the product. 
B) drive down profits of existing firms in the market. 
C) shift the market supply curve to the left. 
D) increase demand for the product. 
A) increase the price of the product. 
B) drive down profits of existing firms in the market. 
C) shift the market supply curve to the left. 
D) increase demand for the product.

Question 18

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 19

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not choose the

Accepted Answer

A) quantity of butter to produce. 
B) price at which it sells its butter. 
C) profits it earns. 
D) All of the above are correct. 
A) quantity of butter to produce. 
B) price at which it sells its butter. 
C) profits it earns. 
D) All of the above are correct.

Question 20

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Accepted Answer

A) price is less than average total cost. 
B) marginal revenue exceeds the marginal cost. 
C) price is greater than average variable cost. 
D) price is greater than average fixed cost but less than average variable cost. 
A) price is less than average total cost. 
B) marginal revenue exceeds the marginal cost. 
C) price is greater than average variable cost. 
D) price is greater than average fixed cost but less than average variable cost.

Exam 14: Firms in Competitive Markets

If marginal cost exceeds marginal revenue, the firm

For a competitive firm,

Which of the following could be used to calculate the profit for a firm?

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6. (ii) the price. (iii) the marginal cost.

Figure 14-7 -Refer to Figure 14-7. In the short run, the firm's maximum profit (or minimum loss) is the same at which of the following pairs of prices?

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

A firm in a competitive market has the following cost structure: Output ATC 0 -- 1 $10 2 $8 3 $7 4 $8 5 $10 If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

When total revenue is less than variable costs, a firm in a competitive market will

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Regardless of the cost structure of firms in a competitive market, in the long run

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

When new firms have an incentive to enter a competitive market, their entry will

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

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not choose the

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

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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A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.