Question 1

In a market with 1,000 identical firms, the short-run market supply is the

Accepted Answer

A) marginal cost curve above average variable cost for a typical firm in the market. 
B) quantity supplied by the typical firm in the market at each price. 
C) sum of the prices charged by each of the 1,000 individual firms at each quantity. 
D) sum of the quantities supplied by each of the 1,000 individual firms at each price. 
A) marginal cost curve above average variable cost for a typical firm in the market. 
B) quantity supplied by the typical firm in the market at each price. 
C) sum of the prices charged by each of the 1,000 individual firms at each quantity. 
D) sum of the quantities supplied by each of the 1,000 individual firms at each price.

Question 2

In the transition from the short run to the long run, the number of firms in a competitive industry is

Accepted Answer

A) fixed. 
B) increasing at a constant rate. 
C) decreasing. 
D) able to adjust to market conditions. 
A) fixed. 
B) increasing at a constant rate. 
C) decreasing. 
D) able to adjust to market conditions.

Question 3

When determining whether to shut down in the short run, a competitive firm should ignore
(i)fixed costs.
(ii)variable costs.
(iii)sunk costs.

Accepted Answer

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

Question 4

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn

Accepted Answer

A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down. 
A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down.

Question 5

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. Which level of production in the table has the lowest average variable cost?

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 6

Total profit for a firm is calculated as

Accepted Answer

A) marginal revenue minus average total cost. 
B) average revenue minus average total cost. 
C) marginal revenue minus marginal cost. 
D) (price minus average cost) times quantity of output. 
A) marginal revenue minus average total cost. 
B) average revenue minus average total cost. 
C) marginal revenue minus marginal cost. 
D) (price minus average cost) times quantity of output.

Question 7

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Accepted Answer

A) Pa 
B) Pb 
C) Pc 
D) Pd 
A) Pa 
B) Pb 
C) Pc 
D) Pd

Question 8

Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $28. At this output, average total cost is minimized and equals $25. Given this information, what should the firm do?

Accepted Answer

A) ​Continue to produce 200 units, since costs per unit are minimized 
B) ​Increase output beyond 200 units, since this higher output will yield the profit maximizing output level. 
C) ​Decrease output below 200 units, since this lower output will result in the profit maximizing output level. 
D) ​More information is needed to determine the firm's next step. 
A) ​Continue to produce 200 units, since costs per unit are minimized 
B) ​Increase output beyond 200 units, since this higher output will yield the profit maximizing output level. 
C) ​Decrease output below 200 units, since this lower output will result in the profit maximizing output level. 
D) ​More information is needed to determine the firm's next step.

Question 9

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-3. If the market price is $10, what is the firm's short-run economic profit?

Accepted Answer

A) $9 
B) $15 
C) $30 
D) $50 
A) $9 
B) $15 
C) $30 
D) $50

Question 10

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Accepted Answer

A) rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. 
B) rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. 
C) fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D) not rise in the short run because firms will enter to maintain the price. 
A) rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. 
B) rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. 
C) fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. 
D) not rise in the short run because firms will enter to maintain the price.

Question 11

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 P2 to P3, the firm finds that

Accepted Answer

A) marginal cost exceeds marginal revenue at a production level of Q2. 
B) if it produces at output level Q3 it will earn a positive profit. 
C) expanding output to Q4 would leave the firm with losses. 
D) it could increase profits by lowering output from Q3 to Q2. 
A) marginal cost exceeds marginal revenue at a production level of Q2. 
B) if it produces at output level Q3 it will earn a positive profit. 
C) expanding output to Q4 would leave the firm with losses. 
D) it could increase profits by lowering output from Q3 to Q2.

Question 12

For a firm operating in a competitive industry, which of the following statements is not correct?

Accepted Answer

A) Price equals average revenue. 
B) Price equals marginal revenue. 
C) Total revenue is constant. 
D) Marginal revenue is constant. 
A) Price equals average revenue. 
B) Price equals marginal revenue. 
C) Total revenue is constant. 
D) Marginal revenue is constant.

Question 13

A competitive firm sells 100 units of output for $5 per unit. The firm's marginal revenue amounts to __________.

Accepted Answer

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

Question 14

Figure 14-14    
-Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

Accepted Answer

A) more firms in the industry but lower levels of output for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point X in panel (b). 
D) lower prices once the new long-run equilibrium is reached. 
A) more firms in the industry but lower levels of output for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point X in panel (b). 
D) lower prices once the new long-run equilibrium is reached.

Question 15

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Accepted Answer

The firm could not sell any more of its

Question 16

Under what condition is the long-run market supply curve for a competitive market perfectly elastic?

Accepted Answer

There must exist a l

Question 17

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-10. The marginal cost of producing the 4th unit is

Accepted Answer

A) $7. 
B) $8. 
C) $10. 
D) $23. 
A) $7. 
B) $8. 
C) $10. 
D) $23.

Question 18

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A) the position of the marginal cost curve determines the price for which the firm should sell its product. 
B) among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C) the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D) the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. 
A) the position of the marginal cost curve determines the price for which the firm should sell its product. 
B) among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C) the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D) the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Question 19

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 $5, it should

Accepted Answer

A) reduce fixed costs by lowering production. 
B) increase production to maximize profit. 
C) decrease production to maximize profit. 
D) maintain its current level of production to maximize profit. 
A) reduce fixed costs by lowering production. 
B) increase production to maximize profit. 
C) decrease production to maximize profit. 
D) maintain its current level of production to maximize profit.

Question 20

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

Accepted Answer

A) (P4 - P2) × Q2. 
B) (P2 - P1) × (Q2-Q1). 
C) At a market price of P2, the firm earns profits, not losses. 
D) At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses. 
A) (P4 - P2) × Q2. 
B) (P2 - P1) × (Q2-Q1). 
C) At a market price of P2, the firm earns profits, not losses. 
D) At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

Exam 14: Firms in Competitive Markets

In a market with 1,000 identical firms, the short-run market supply is the

In the transition from the short run to the long run, the number of firms in a competitive industry is

When determining whether to shut down in the short run, a competitive firm should ignore (i)fixed costs. (ii)variable costs. (iii)sunk costs.

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. Which level of production in the table has the lowest average variable cost?

Total profit for a firm is calculated as

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $28. At this output, average total cost is minimized and equals $25. Given this information, what should the firm do?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's short-run economic profit?

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

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 P2 to P3, the firm finds that

For a firm operating in a competitive industry, which of the following statements is not correct?

A competitive firm sells 100 units of output for $5 per unit. The firm's marginal revenue amounts to __________.

Figure 14-14 -Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel (b), a decrease in demand will ultimately lead to

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Under what condition is the long-run market supply curve for a competitive market perfectly elastic?

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. The marginal cost of producing the 4th unit is

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

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 $5, it should

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

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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