Question 1

A firm lacks market power if it cannot influence __________.

Accepted Answer

the price

Question 2

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

Accepted Answer

A) explicit costs. 
B) implicit costs. 
C) sunk costs. 
D) opportunity costs. 
A) explicit costs. 
B) implicit costs. 
C) sunk costs. 
D) opportunity costs.

Question 3

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 4

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollarsper unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 1 \
\hline 5 & 2 \
\hline 5 & 3 \
\hline 5 & 4 \
\hline 5 & 5 \
\hline
\end{array}$$
-Refer to Table 14-2. This firm maximizes total revenue by producing

Accepted Answer

A) 1 unit. 
B) 3 units. 
C) 5 units. 
D) as many units as possible. 
A) 1 unit. 
B) 3 units. 
C) 5 units. 
D) as many units as possible.

Question 5

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

Accepted Answer

A) less than $12. 
B) more than $12. 
C) $12. 
D) zero. 
A) less than $12. 
B) more than $12. 
C) $12. 
D) zero.

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 short-run economic profit?

Accepted Answer

A) $9 
B) $15 
C) $30 
D) $50 
A) $9 
B) $15 
C) $30 
D) $50

Question 7

In a shopping mall in a large city, the Rudolph the Reindeer store sells only merchandise for the Christmas holiday season. Most of the store's revenue and profit are attributable to the months of October, November, and December. However, the store is open throughout the year. If the owner of the store is rational, what criterion does he or she use in deciding to keep the store open year-round?

Accepted Answer

The owner has determined that

Question 8

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

Accepted Answer

Profit = $20,000 = (

Question 9

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

What does it mean for a buyer or seller to be a price taker?

Accepted Answer

A buyer or seller is a price t

Question 11

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

Accepted Answer

The decrease in demand results in firms

Question 12

Robin owns a horse stable and riding academy and gives riding lessons for children at "pony camp." His business operates in a competitive industry. Robin gives riding lessons to 20 children per month. His monthly total revenue is $4,000. The marginal cost of pony camp is $250 per child. In order to maximize profits, Robin should

Accepted Answer

A) give riding lessons to more than 20 children per month. 
B) give riding lessons to fewer than 20 children per month. 
C) continue to give riding lessons to 20 children per month. 
D) We do not have enough information to answer the question. 
A) give riding lessons to more than 20 children per month. 
B) give riding lessons to fewer than 20 children per month. 
C) continue to give riding lessons to 20 children per month. 
D) We do not have enough information to answer the question.

Question 13

The marginal firm in a competitive market will earn zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 14

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. Compare the firm's profit or loss at 200 units of output with its profit or loss if it were to shut down.

Accepted Answer

At Q = 200, Profit = ($20 - $2

Question 15

The expression "Let bygones be bygones" is associated with what type of cost?

Accepted Answer

The expres

Question 16

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 17

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 but greater than the firm's average fixed cost.

Accepted Answer

A) True 
 B)False

Question 18

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Accepted Answer

The answer of In the long-run equilibrium of a competitive...

Question 19

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed might not?

Accepted Answer

A) Restaurants and smartphones 
B) Electricity and natural gas 
C) Rice and satellite radio 
D) Rice and soybeans 
A) Restaurants and smartphones 
B) Electricity and natural gas 
C) Rice and satellite radio 
D) Rice and soybeans

Exam 14: Firms in Competitive Markets

A firm lacks market power if it cannot influence __________.

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. Firms would be encouraged to enter this market for all prices that exceed

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. ​ ​ Price (Dollarsper unit) Quantity Demanded (Units) 5 0 5 1 5 2 5 3 5 4 5 5 -Refer to Table 14-2. This firm maximizes total revenue by producing

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

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 short-run economic profit?

When it produces 500 units of output, a firm earns a profit of $20,000. If the firm sells its output for $65 per unit, then what is its average total cost?

All firms maximize profits by producing an output level where marginal revenue equals marginal cost; for firms operating in perfectly competitive industries, maximizing profits also means producing an output level where price equals marginal cost.

What does it mean for a buyer or seller to be a price taker?

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

The marginal firm in a competitive market will earn zero economic profit in the long run.

The expression "Let bygones be bygones" is associated with what type of cost?

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.

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 but greater than the firm's average fixed cost.

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production.

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed might not?

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

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. Price (Dollarsper unit) Quantity Demanded (Units) 5 0 5 1 5 2 5 3 5 4 5 5 -Refer to Table 14-2. This firm maximizes total revenue by producing

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 short-run economic profit?