Question 1

​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 2

Ms. Joplin sells colored pencils. The colored-pencil industry is competitive. Ms. Joplin hires a business consultant to analyze her company's financial records. The consultant recommends that Ms. Joplin increase her production. The consultant must have concluded that, at her current level of production, Ms. Joplin's

Accepted Answer

A) total revenues equal her total economic costs. 
B) marginal revenue exceeds her total cost. 
C) marginal revenue exceeds her marginal cost. 
D) marginal cost exceeds her marginal revenue. 
A) total revenues equal her total economic costs. 
B) marginal revenue exceeds her total cost. 
C) marginal revenue exceeds her marginal cost. 
D) marginal cost exceeds her marginal revenue.

Question 3

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

Accepted Answer

A) True 
 B)False

Question 4

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Accepted Answer

A) True 
 B)False

Question 5

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether an individual firm will shut down in the short run, or choose to remain in the market. Explain your answer.

Accepted Answer

The losses and revenues are identified o

Question 6

Firms operating in perfectly competitive markets try to maximize profits.

Accepted Answer

A) True 
 B)False

Question 7

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:   ​
-Refer to Figure 14-1. The firm should shut down if the market price is

Accepted Answer

A) above $13. 
B) above $6 but less than $13. 
C) above $13 but less than $20. 
D) less than $6. 
A) above $13. 
B) above $6 but less than $13. 
C) above $13 but less than $20. 
D) less than $6.

Question 8

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 9

If there is an increase in market demand in a perfectly competitive market, then in the short run

Accepted Answer

A) there will be no change in the demand curves faced by individual firms in the market. 
B) the demand curves facing firms will shift downward. 
C) the demand curves facing firms will become more elastic. 
D) profits will rise. 
A) there will be no change in the demand curves faced by individual firms in the market. 
B) the demand curves facing firms will shift downward. 
C) the demand curves facing firms will become more elastic. 
D) profits will rise.

Question 10

​In the long run, if we observe firms in a competitive market earning economic profits, we know that this market is in long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 11

Figure 14-7
​
  
-Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

Accepted Answer

A) Point W is a long-run equilibrium point. 
B) Points W, Y, and Z are short-run equilibria points. 
C) Point Y is a long-run equilibrium point. 
D) Point Z is a long-run equilibrium point. 
A) Point W is a long-run equilibrium point. 
B) Points W, Y, and Z are short-run equilibria points. 
C) Point Y is a long-run equilibrium point. 
D) Point Z is a long-run equilibrium point.

Question 12

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 13

A competitive firm sells 500 units of output and its marginal revenue at 500 units of output is $35. The firm's total revenue amounts to __________.

Accepted Answer

The answer of A competitive firm sells 500 units of...

Question 14

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. When the firm produces 120 units of output, its total cost is

Accepted Answer

A) $5,400.00. 
B) $1,064.25. 
C) $2,820.00. 
D) $2,838.00. 
A) $5,400.00. 
B) $1,064.25. 
C) $2,820.00. 
D) $2,838.00.

Question 15

A competitive firm sells its output for $10 per unit. Is the firm's average revenue less than, equal to, or greater than $10?

Accepted Answer

For a competitive firm, price

Question 16

The short-run supply curve in a competitive market must be more elastic than the long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 17

Explain the difference between the short run and the long run in terms of the number of firms in a competitive market.

Accepted Answer

In the short run, the number o

Question 18

A competitive firm is producing 500 units of output and its efficient scale is 400 units of output. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

Accepted Answer

No, the market cannot be in a

Question 19

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Accepted Answer

A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue. 
A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue.

Question 20

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

A) Less than $2.50 
B) More than $2.50 
C) Exactly $2.50 
D) The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. 
A) Less than $2.50 
B) More than $2.50 
C) Exactly $2.50 
D) The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.

Exam 14: Firms in Competitive Markets

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

For a firm operating in a competitive market, both marginal revenue and average revenue exceed the market price.

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Firms operating in perfectly competitive markets try to maximize profits.

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. The firm should shut down if the market price is

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.

If there is an increase in market demand in a perfectly competitive market, then in the short run

​In the long run, if we observe firms in a competitive market earning economic profits, we know that this market is in long-run equilibrium.

Figure 14-7 ​ -Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

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?

A competitive firm sells 500 units of output and its marginal revenue at 500 units of output is $35. The firm's total revenue amounts to __________.

A competitive firm sells its output for $10 per unit. Is the firm's average revenue less than, equal to, or greater than $10?

The short-run supply curve in a competitive market must be more elastic than the long-run supply curve.

Explain the difference between the short run and the long run in terms of the number of firms in a competitive market.

A competitive firm is producing 500 units of output and its efficient scale is 400 units of output. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

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

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

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm should shut down if the market price is

In the long run, if we observe firms in a competitive market earning economic profits, we know that this market is in long-run equilibrium.

Figure 14-7 -Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D₀ to D₁. Which of the following statements is not correct?