Question 1

All competitive firms earn zero economic profit in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

TR = $20 X 200 = $4,

Question 3

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell

Question 4

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 $10, what is the firm's total revenue?

Accepted Answer

A) $15 
B) $30 
C) $35 
D) $50 
A) $15 
B) $30 
C) $35 
D) $50

Question 5

Which of the following statements is correct?

Accepted Answer

A) For all firms, marginal revenue equals the price of the good. 
B) Only for competitive firms does average revenue equal the price of the good. 
C) Marginal revenue can be calculated as total revenue divided by the quantity sold. 
D) Only for competitive firms does average revenue equal marginal revenue. 
A) For all firms, marginal revenue equals the price of the good. 
B) Only for competitive firms does average revenue equal the price of the good. 
C) Marginal revenue can be calculated as total revenue divided by the quantity sold. 
D) Only for competitive firms does average revenue equal marginal revenue.

Question 6

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 $10, what is the firm's total cost?

Accepted Answer

A) $15 
B) $30 
C) $35 
D) $50 
A) $15 
B) $30 
C) $35 
D) $50

Question 7

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 8

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 9

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. At Q = 1,000, the firm's profits equal

Accepted Answer

A) −$200. 
B) $1,000. 
C) $3,000. 
D) $4,000. 
A) −$200. 
B) $1,000. 
C) $3,000. 
D) $4,000.

Question 10

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

Accepted Answer

There must exist a l

Question 11

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A) Mineral mining 
B) Electricity 
C) Fashion jewelry 
D) Satellite radio 
A) Mineral mining 
B) Electricity 
C) Fashion jewelry 
D) Satellite radio

Question 13

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

Figure 14-7
​
  
-Refer to Figure 14-7. If the market starts in equilibrium at point Z in graph (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 graph (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 graph (b). 
D) lower prices once the new long-run equilibrium is reached.

Question 15

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

Table 14-6
Suppose that a firm in a competitive market faces the following revenues and costs:
​
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 0 & 3 \
\hline 1 & 6 & 5 \
\hline 2 & 12 & 8 \
\hline 3 & 18 & 12 \
\hline 4 & 24 & 17 \
\hline 5 & 30 & 23 \
\hline 6 & 36 & 30 \
\hline 7 & 42 & 38 \
\hline
\end{array}$$ ​
-Refer to Table 14-6. In order to maximize profits, the firm will produce

Accepted Answer

A) 1 unit of output because marginal cost is minimized. 
B) 4 units of output because marginal revenue exceeds marginal cost. 
C) 5 units of output because marginal revenue equals marginal cost. 
D) 7 units of output because total revenue is maximized. 
A) 1 unit of output because marginal cost is minimized. 
B) 4 units of output because marginal revenue exceeds marginal cost. 
C) 5 units of output because marginal revenue equals marginal cost. 
D) 7 units of output because total revenue is maximized.

Question 17

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-3. 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 18

A firm that shuts down temporarily has to pay

Accepted Answer

A) its variable costs but not its fixed costs. 
B) its fixed costs but not its variable costs. 
C) both its variable costs and its fixed costs. 
D) neither its variable costs nor its fixed costs. 
A) its variable costs but not its fixed costs. 
B) its fixed costs but not its variable costs. 
C) both its variable costs and its fixed costs. 
D) neither its variable costs nor its fixed costs.

Question 19

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

Accepted Answer

A) True 
 B)False

Question 20

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. 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

Exam 14: Firms in Competitive Markets

All competitive firms earn zero economic profit in both the short run and the long run.

List and describe the characteristics of a perfectly competitive market.

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 $10, what is the firm's total revenue?

Which of the following statements is correct?

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 $10, what is the firm's total cost?

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost.

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. At Q = 1,000, the firm's profits equal

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

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Which of the following industries is most likely to exhibit the characteristic of free entry?

Firms in competitive markets can only earn economic profits in the long run, once the market is in equilibrium.

Figure 14-7 ​ -Refer to Figure 14-7. If the market starts in equilibrium at point Z in graph (b), a decrease in demand will ultimately lead to

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is P4, individual firms in a competitive industry will earn

A firm that shuts down temporarily has to pay

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

A competitive firm is producing 1,000 units of output with average total cost equal to $35 and marginal cost equal to $40. Can the market in which this firm operates be in a long-run equilibrium? Briefly explain.

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 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

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 $10, what is the firm's total cost?

Figure 14-7 -Refer to Figure 14-7. If the market starts in equilibrium at point Z in graph (b), a decrease in demand will ultimately lead to

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is P₄, individual firms in a competitive industry will earn