Question 1

We can measure the profits earned by a firm in a competitive industry as

Accepted Answer

A) (P - AT
C)  × Q. 
B) (P - M
C)  × Q. 
C) MR × MC. 
D) (MC - AT
C)  × Q. 
A) (P - AT
C)  × Q. 
B) (P - M
C)  × Q. 
C) MR × MC. 
D) (MC - AT
C)  × Q.

Question 2

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

Accepted Answer

The answer of A firm maximizes its profit by selling...

Question 3

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical. 
A) downward sloping. 
B) upward sloping. 
C) horizontal. 
D) vertical.

Question 4

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Accepted Answer

A) $24,970. 
B) $24,975. 
C) $24,980. 
D) $25,025. 
A) $24,970. 
B) $24,975. 
C) $24,980. 
D) $25,025.

Question 5

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Accepted Answer

Profit is zero for a

Question 6

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. If the market price is Pa, in the short run the firm will earn

Accepted Answer

A) positive economic profits. 
B) negative economic profits but will try to remain open. 
C) negative economic profits and will shut down. 
D) zero economic profits. 
A) positive economic profits. 
B) negative economic profits but will try to remain open. 
C) negative economic profits and will shut down. 
D) zero economic profits.

Question 7

In a competitive market, the actions of any single buyer or seller will

Accepted Answer

A) have a negligible impact on the market price. 
B) have little effect on market equilibrium quantity but will affect market equilibrium price. 
C) affect marginal revenue and average revenue but not price. 
D) adversely affect the profitability of more than one firm in the market. 
A) have a negligible impact on the market price. 
B) have little effect on market equilibrium quantity but will affect market equilibrium price. 
C) affect marginal revenue and average revenue but not price. 
D) adversely affect the profitability of more than one firm in the market.

Question 8

Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

Accepted Answer

A) more firms will enter the market. 
B) some firms will exit from the market. 
C) the equilibrium price per unit will rise. 
D) average total costs will fall. 
A) more firms will enter the market. 
B) some firms will exit from the market. 
C) the equilibrium price per unit will rise. 
D) average total costs will fall.

Question 9

Scenario 14-1. A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23.
-Refer to Scenario 14-1. Calculate the firm's fixed cost at 200 units of output.

Accepted Answer

The answer of Scenario 14-1. A competitive firm sells its...

Question 10

Which of the following is a characteristic of a competitive market?

Accepted Answer

A) There are many buyers but few sellers. 
B) Many firms have market power because they own patents. 
C) Buyers and sellers are price takers. 
D) Firms sell differentiated products. 
A) There are many buyers but few sellers. 
B) Many firms have market power because they own patents. 
C) Buyers and sellers are price takers. 
D) Firms sell differentiated products.

Question 11

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

Accepted Answer

A) The firm increases its output above 500 doorknobs. 
B) The firm decreases its output below 500 doorknobs. 
C) The market price of doorknobs rises above $10. 
D) The market price of doorknobs falls below $10. 
A) The firm increases its output above 500 doorknobs. 
B) The firm decreases its output below 500 doorknobs. 
C) The market price of doorknobs rises above $10. 
D) The market price of doorknobs falls below $10.

Question 12

A sunk cost is one that

Accepted Answer

A) changes as the level of output changes in the short run. 
B) was paid in the past and will not change regardless of the present decision. 
C) should determine the rational course of action in the future. 
D) has the most impact on profit-making decisions. 
A) changes as the level of output changes in the short run. 
B) was paid in the past and will not change regardless of the present decision. 
C) should determine the rational course of action in the future. 
D) has the most impact on profit-making decisions.

Question 13

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Accepted Answer

A) True 
 B)False

Question 14

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur

Question 15

Which of the following statements is correct?

Accepted Answer

A) For all firms, marginal revenue equals the price of the good. 
B) Only for competitive firms does average revenue equal the price of the good. 
C) Marginal revenue can be calculated as total revenue divided by the quantity sold. 
D) Only for competitive firms does average revenue equal marginal revenue. 
A) For all firms, marginal revenue equals the price of the good. 
B) Only for competitive firms does average revenue equal the price of the good. 
C) Marginal revenue can be calculated as total revenue divided by the quantity sold. 
D) Only for competitive firms does average revenue equal marginal revenue.

Question 16

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

Accepted Answer

A) $0 
B) $200 
C) $250 
D) $450 
A) $0 
B) $200 
C) $250 
D) $450

Question 17

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 700 identical firms in this market, what is the value of Q2?

Accepted Answer

A) 140,000 
B) 210,000 
C) 280,000 
D) 420,000 
A) 140,000 
B) 210,000 
C) 280,000 
D) 420,000

Question 18

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Accepted Answer

A) above $6.30. 
B) less than $6.30 but more than $4.50. 
C) less than $4.50. 
D) exactly $6.30. 
A) above $6.30. 
B) less than $6.30 but more than $4.50. 
C) less than $4.50. 
D) exactly $6.30.

Question 20

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 production will the firm maximize profit?

Accepted Answer

A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units 
A) 3 units 
B) 4 units 
C) 5 units 
D) 6 units

Exam 14: Firms in Competitive Markets

We can measure the profits earned by a firm in a competitive industry as

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

If a competitive firm is operating at its efficient scale, then is the firm's profit positive, zero, or negative?

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pa, in the short run the firm will earn

In a competitive market, the actions of any single buyer or seller will

Willie's Wading Adventures sells hip waders for fishing and duck hunting in a perfectly competitive market. If hip waders sell for $100 each and average total cost per unit is $95 at the profit-maximizing output level, then in the long run

Scenario 14-1. A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23. -Refer to Scenario 14-1. Calculate the firm's fixed cost at 200 units of output.

Which of the following is a characteristic of a competitive market?

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

A sunk cost is one that

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Which of the following statements is correct?

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

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 production will the firm maximize profit?

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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