Question 1

Figure 14-14    
-Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b). An increase in demand from D0 to D1 will result in

Accepted Answer

A) a new market equilibrium at point X. 
B) an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z. 
C) rising prices and falling profits for existing firms in the market. 
D) falling prices and falling profits for existing firms in the market. 
A) a new market equilibrium at point X. 
B) an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z. 
C) rising prices and falling profits for existing firms in the market. 
D) falling prices and falling profits for existing firms in the market.

Question 2

A competitive market begins in a situation of long-run equilibrium. Then, there is an increase in demand. Describe the process that eventually leads to a new long-run equilibrium.

Accepted Answer

The increase in demand results in firms

Question 3

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:  
-Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run?

Accepted Answer

A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. 
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. 
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. 
D) Because the price is below the firm's average variable costs, the firms will shut down. 
A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. 
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. 
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. 
D) Because the price is below the firm's average variable costs, the firms will shut down.

Question 4

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?
(i)Marginal revenue equals $5.
(ii)Average revenue equals $5.
(iii)Price equals $5.

Accepted Answer

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

Question 5

Because nothing can be done about sunk costs, they are irrelevant to decisions about business strategy.

Accepted Answer

A) True 
 B)False

Question 6

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 7

Table 14-12  
-Refer to Table 14-12. What is the total revenue from selling 4 units?

Accepted Answer

A) $80 
B) $137 
C) $320 
D) $480 
A) $80 
B) $137 
C) $320 
D) $480

Question 8

​Firms operating in a perfectly competitive market have an incentive to advertise their products since this will increase the demand for their products.

Accepted Answer

A) True 
 B)False

Question 9

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Accepted Answer

A competitive firm has the abi

Question 10

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn

Accepted Answer

A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits in the short run and shut down. 
D) zero economic profits in the short run. 
A) positive economic profits in the short run. 
B) negative economic profits in the short run but remain in business. 
C) negative economic profits in the short run and shut down. 
D) zero economic profits in the short run.

Question 11

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 variable costs.

Accepted Answer

A) True 
 B)False

Question 12

In the long run, a firm will enter a competitive industry if

Accepted Answer

A) total revenue exceeds total cost. 
B) the price exceeds average total cost. 
C) the firm can earn economic profits. 
D) All of the above are correct. 
A) total revenue exceeds total cost. 
B) the price exceeds average total cost. 
C) the firm can earn economic profits. 
D) All of the above are correct.

Question 13

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:  
-Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

Accepted Answer

A) is greater than marginal revenue. 
B) equals marginal revenue. 
C) is less than marginal revenue. 
D) is minimized. 
A) is greater than marginal revenue. 
B) equals marginal revenue. 
C) is less than marginal revenue. 
D) is minimized.

Question 14

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 positive 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 15

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down?

Accepted Answer

A) ABCD 
B) BCD 
C) CD 
D) AB 
A) ABCD 
B) BCD 
C) CD 
D) AB

Question 16

When it produces and sells 90 units of output, a competitive firm's average total cost is $42 and its profit is $360. What is the firm's marginal revenue if it sells 100 units of output?

Accepted Answer

At @#IMG-DLM& , profit is @#IMG-DLM& , s

Question 17

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 Pb, 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 18

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

Accepted Answer

A) decreases in production costs resulting from more firms coming into the market. 
B) a breakdown of the "free entry and exit" feature of competition. 
C) a breakdown of the "price taking" feature of competition. 
D) the fact that a resource used in the production of the good is available only in limited quantities. 
A) decreases in production costs resulting from more firms coming into the market. 
B) a breakdown of the "free entry and exit" feature of competition. 
C) a breakdown of the "price taking" feature of competition. 
D) the fact that a resource used in the production of the good is available only in limited quantities.

Question 19

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 total revenue, total cost, and profit at 200 units of output.

Accepted Answer

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

Question 20

Which of the following characteristics of competitive markets is necessary for firms to be price takers?
(i)There are many sellers.
(ii)Firms can freely enter or exit the market.
(iii)Goods offered for sale are largely the same.

Accepted Answer

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

Exam 14: Firms in Competitive Markets

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b). An increase in demand from D0 to D1 will result in

A competitive market begins in a situation of long-run equilibrium. Then, there is an increase in demand. Describe the process that eventually leads to a new long-run equilibrium.

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run?

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i)Marginal revenue equals $5. (ii)Average revenue equals $5. (iii)Price equals $5.

Because nothing can be done about sunk costs, they are irrelevant to decisions about business strategy.

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Table 14-12 -Refer to Table 14-12. What is the total revenue from selling 4 units?

​Firms operating in a perfectly competitive market have an incentive to advertise their products since this will increase the demand for their products.

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn

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 variable costs.

In the long run, a firm will enter a competitive industry if

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

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 positive economic profits in the short run?

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down?

When it produces and sells 90 units of output, a competitive firm's average total cost is $42 and its profit is $360. What is the firm's marginal revenue if it sells 100 units of output?

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 Pb, in the short run the firm will earn

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i)There are many sellers. (ii)Firms can freely enter or exit the market. (iii)Goods offered for sale are largely the same.

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

Firms operating in a perfectly competitive market have an incentive to advertise their products since this will increase the demand for their products.