Question 1

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 2

When new firms enter a perfectly competitive market,

Accepted Answer

A) economic profits of existing firms will continue to be zero. 
B) entering firms will earn zero economic profit upon entry into the market. 
C) existing firms may see their costs rise if more firms compete for limited resources. 
D) prices will rise as existing firms raise prices to keep new firms out of the market. 
A) economic profits of existing firms will continue to be zero. 
B) entering firms will earn zero economic profit upon entry into the market. 
C) existing firms may see their costs rise if more firms compete for limited resources. 
D) prices will rise as existing firms raise prices to keep new firms out of the market.

Question 3

For an individual firm operating in a competitive market, marginal revenue equals

Accepted Answer

A) average revenue and the price for all levels of output. 
B) average revenue, which is greater than the price for all levels of output. 
C) average revenue, the price, and marginal cost for all levels of output. 
D) marginal cost, which is greater than average revenue for all levels of output. 
A) average revenue and the price for all levels of output. 
B) average revenue, which is greater than the price for all levels of output. 
C) average revenue, the price, and marginal cost for all levels of output. 
D) marginal cost, which is greater than average revenue for all levels of output.

Question 4

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Accepted Answer

A) True 
 B)False

Question 5

Who is a price taker in a competitive market?

Accepted Answer

A) Buyers only 
B) Sellers only 
C) Neither buyers nor sellers 
D) Both buyers and sellers 
A) Buyers only 
B) Sellers only 
C) Neither buyers nor sellers 
D) Both buyers and sellers

Question 6

A competitive firm's short-run supply curve intersects its average-total-cost curve at the point (Q = 450, P = $22). What is the value of marginal cost at Q = 450?

Accepted Answer

The firm's

Question 7

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $5. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 8

For a firm, marginal revenue minus marginal cost is equal to

Accepted Answer

A) profit. 
B) average total cost. 
C) change in profit. 
D) change in average revenue. 
A) profit. 
B) average total cost. 
C) change in profit. 
D) change in average revenue.

Question 9

The stable, long-run equilibrium in a competitive market occurs when the market price equals the lowest point on a firm's average total cost curve.

Accepted Answer

A) True 
 B)False

Question 10

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) $2. 
B) $4. 
C) $6. 
D) $13. 
A) $2. 
B) $4. 
C) $6. 
D) $13.

Question 11

A competitive firm is maximizing its profit by selling 150 units of output. The firm's marginal cost is $8 and its average total cost is $6. The firm's profit amounts to __________.

Accepted Answer

The answer of A competitive firm is maximizing its profit...

Question 12

Suppose a firm is considering producing zero units of output. We call this exiting an industry in the short run and shutting down in the long run.

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

Scenario 14-2
The information below applies to a competitive firm that sells its output for $45 per unit.
• When the firm produces and sells 120 units of output, its average total cost is $23.5.
• When the firm produces and sells 121 units of output, its average total cost is $23.65.
-Refer to Scenario 14-2. Suppose the firm is currently producing and selling 120 units of output. Should the firm increase its output to 121 units?

Accepted Answer

A) Yes, because the marginal revenue exceeds the marginal cost. 
B) Yes, because the marginal revenue exceeds the average total cost. 
C) No, because the marginal cost exceeds the marginal revenue. 
D) No, because the average total cost exceeds the marginal revenue. 
A) Yes, because the marginal revenue exceeds the marginal cost. 
B) Yes, because the marginal revenue exceeds the average total cost. 
C) No, because the marginal cost exceeds the marginal revenue. 
D) No, because the average total cost exceeds the marginal revenue.

Question 16

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.) amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should

Accepted Answer

A) drop the flight immediately. 
B) continue the flight. 
C) continue flying until the lease expires and then drop the run. 
D) drop the flight now but renew the lease if conditions improve. 
A) drop the flight immediately. 
B) continue the flight. 
C) continue flying until the lease expires and then drop the run. 
D) drop the flight now but renew the lease if conditions improve.

Question 17

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

Accepted Answer

A) less than triple. 
B) more than triple. 
C) exactly triple. 
D) be reduced by one third. 
A) less than triple. 
B) more than triple. 
C) exactly triple. 
D) be reduced by one third.

Question 18

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 19

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Accepted Answer

A) True 
 B)False

Question 20

If a firm can influence the market price of the good it sells, then it is said to have __________.

Accepted Answer

The answer of If a firm can influence the market...

Exam 14: Firms in Competitive Markets

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

When new firms enter a perfectly competitive market,

For an individual firm operating in a competitive market, marginal revenue equals

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Who is a price taker in a competitive market?

A competitive firm's short-run supply curve intersects its average-total-cost curve at the point (Q = 450, P = $22). What is the value of marginal cost at Q = 450?

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $5. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

For a firm, marginal revenue minus marginal cost is equal to

The stable, long-run equilibrium in a competitive market occurs when the market price equals the lowest point on a firm's average total cost curve.

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 competitive firm is maximizing its profit by selling 150 units of output. The firm's marginal cost is $8 and its average total cost is $6. The firm's profit amounts to __________.

Suppose a firm is considering producing zero units of output. We call this exiting an industry in the short run and shutting down in the long run.

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

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.

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

If a firm can influence the market price of the good it sells, then it is said to have __________.

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 Nations 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

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