Question 1

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1. To maximize its profit, the firm should

Accepted Answer

A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output but continue to produce. 
D) shut down. 
A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output but continue to produce. 
D) shut down.

Question 3

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized. 
A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized.

Question 4

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided

Question 5

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Accepted Answer

A) to produce the quantity at which average variable cost is minimized. 
B) to produce the quantity at which average fixed cost is minimized. 
C) the quantity at which market price is equal to Mr.McDonald's marginal cost of production. 
D) the quantity at which market price exceeds Mr.McDonald's marginal cost of production by the greatest amount. 
A) to produce the quantity at which average variable cost is minimized. 
B) to produce the quantity at which average fixed cost is minimized. 
C) the quantity at which market price is equal to Mr.McDonald's marginal cost of production. 
D) the quantity at which market price exceeds Mr.McDonald's marginal cost of production by the greatest amount.

Question 6

A competitive firm currently produces and sells 500 units of output. Its total revenue is $3,500; the marginal cost of producing the 500th unit of output is $5.75; and the average total cost of producing the 500th unit of output is $4.00. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

Accepted Answer

For this firm, price = margina

Question 7

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Accepted Answer

A) True 
 B)False

Question 8

When a firm produces 2,000 units of output, its average total cost is $3.00 and its average revenue is $2.90. What is the firm's profit or loss?

Accepted Answer

The firm's profit is

Question 9

A competitive firm currently produces and sells 500 units of output. Its total revenue is $6,000; the marginal cost of producing the 500th unit of output is $14.50; and the average total cost of producing the 500th unit of output is $9.50. Is the firm maximizing its profit, or should it increase or decrease output in order to increase its profit?

Accepted Answer

For this firm, price = margina

Question 10

Which of the following statements regarding a competitive firm is correct?

Accepted Answer

A) Because each firm faces a downward sloping demand, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. 
B) If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. 
C) By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price. 
D) For all firms, average revenue equals the price of the good. 
A) Because each firm faces a downward sloping demand, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. 
B) If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. 
C) By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price. 
D) For all firms, average revenue equals the price of the good.

Question 11

​In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 12

A competitive firm maximizes its profit by producing output up to the point at which price is equal to ______.

Accepted Answer

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

Question 13

Figure 14-4
In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms.
​
  
-Refer to Figure 14-4. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00?

Accepted Answer

A) 300 
B) 6,000 
C) 30,000 
D) 60,000 
A) 300 
B) 6,000 
C) 30,000 
D) 60,000

Question 14

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output

Accepted Answer

A) is less than 1,000 pounds. 
B) is still 1,000 pounds. 
C) is more than 1,000 pounds. 
D) becomes zero. 
A) is less than 1,000 pounds. 
B) is still 1,000 pounds. 
C) is more than 1,000 pounds. 
D) becomes zero.

Question 15

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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 rises above $13, 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 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 and shut down. 
D) zero economic profits in the short run.

Question 18

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 19

Scenario 14-4
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 14-4. Calculate the firm's fixed cost at 200 units of output.

Accepted Answer

FC = (ATC - AVC) X Q

Question 20

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

Accepted Answer

No, the firm should shut down,

Exam 14: Firms in Competitive Markets

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. To maximize its profit, the firm should

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

When a firm produces 2,000 units of output, its average total cost is $3.00 and its average revenue is $2.90. What is the firm's profit or loss?

Which of the following statements regarding a competitive firm is correct?

​In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.

A competitive firm maximizes its profit by producing output up to the point at which price is equal to ______.

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

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.

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 rises above $13, the firm will earn

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Scenario 14-4 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 14-4. Calculate the firm's fixed cost at 200 units of output.

A competitive firm currently produces and sells 800 units of output at a price of $10 per unit. The firm's fixed cost is $4,000 and its variable cost is $8,300. In the short run, should the firm continue to operate?

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

In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run.

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 rises above $13, the firm will earn