Question 1

Who is a price taker in a competitive market?

Accepted Answer

A)  buyers only 
B)  sellers only 
C)  both buyers and sellers 
D)  neither buyers nor sellers 
A)  buyers only 
B)  sellers only 
C)  both buyers and sellers 
D)  neither buyers nor sellers

Question 2

In the long run,a firm will exit a competitive industry if

Accepted Answer

A)  total revenue exceeds total cost. 
B)  the price exceeds average total cost. 
C)  average total cost exceeds the price. 
D)  Both a and b are correct. 
A)  total revenue exceeds total cost. 
B)  the price exceeds average total cost. 
C)  average total cost exceeds the price. 
D)  Both a and b are correct.

Question 3

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 4

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 5

Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct?
(i)Marginal revenue equals $5.
(ii)Average revenue equals $5.
(iii)Price equals $5.

Accepted Answer

A)  (i) only 
B)  (iii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) only 
B)  (iii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii)

Question 6

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A)  the position of the marginal cost curve determines the price for which the firm should sell its product. 
B)  among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C)  the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D)  the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. 
A)  the position of the marginal cost curve determines the price for which the firm should sell its product. 
B)  among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C)  the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D)  the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Question 7

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)  earning small but positive economic profits. 
B)  facing the prospect of future losses. 
C)  operating at the efficient scale. 
D)  that work together to raise market prices. 
A)  earning small but positive economic profits. 
B)  facing the prospect of future losses. 
C)  operating at the efficient scale. 
D)  that work together to raise market prices.

Question 8

Table 14-12
Bill's Birdhouses
  
-Refer to Table 14-12.What is the marginal cost of the 5th unit?

Accepted Answer

A)  $55 
B)  $60 
C)  $68 
D)  $80 
A)  $55 
B)  $60 
C)  $68 
D)  $80

Question 9

Firms that operate in perfectly competitive markets try to

Accepted Answer

A)  maximize revenues. 
B)  maximize profits. 
C)  equate marginal revenue with average total cost. 
D)  All of the above are correct. 
A)  maximize revenues. 
B)  maximize profits. 
C)  equate marginal revenue with average total cost. 
D)  All of the above are correct.

Question 10

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A)  fixed cost. 
B)  variable cost. 
C)  total cost. 
D)  revenue. 
A)  fixed cost. 
B)  variable cost. 
C)  total cost. 
D)  revenue.

Question 11

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 12

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.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 14

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

Accepted Answer

A)  cable television 
B)  satellite radio 
C)  mineral mining 
D)  t-shirt silkscreening 
A)  cable television 
B)  satellite radio 
C)  mineral mining 
D)  t-shirt silkscreening

Question 15

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 = 999,the firm's total costs equal

Accepted Answer

A)  $10,985. 
B)  $10,990. 
C)  $10,995. 
D)  $10,999. 
A)  $10,985. 
B)  $10,990. 
C)  $10,995. 
D)  $10,999.

Question 16

When a profit-maximizing firm is earning profits,those profits can be identified by

Accepted Answer

A)  P * Q. 
B)  (MC - AV
C)  * Q. 
C)  (P - AT
C)  * Q. 
D)  (P - AV
C)  * Q. 
A)  P * Q. 
B)  (MC - AV
C)  * Q. 
C)  (P - AT
C)  * Q. 
D)  (P - AV
C)  * Q.

Question 17

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.At Q = 999,the firm's total costs equal

Accepted Answer

A)  $24,970. 
B)  $24,975. 
C)  $24,980. 
D)  $25,025. 
A)  $24,970. 
B)  $24,975. 
C)  $24,980. 
D)  $25,025.

Question 18

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)  $1. 
B)  $3. 
C)  $4.50. 
D)  $6.30. 
A)  $1. 
B)  $3. 
C)  $4.50. 
D)  $6.30.

Question 19

Table 14-15
  
-Refer to Table 14-15.What is the lowest price at which this firm would operate in the short run?

Accepted Answer

A)  $3. 
B)  $4. 
C)  $5. 
D)  $6. 
A)  $3. 
B)  $4. 
C)  $5. 
D)  $6.

Question 20

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
  
-Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

Accepted Answer

A)  P7 * Q5. 
B)  P7 * Q3. 
C)  (P7 - P5) * Q3. 
D)  We are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph. 
A)  P7 * Q5. 
B)  P7 * Q3. 
C)  (P7 - P5) * Q3. 
D)  We are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph.

Exam 14: Firms in Competitive Markets.

Who is a price taker in a competitive market?

In the long run,a firm will exit a competitive industry if

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

Which of the following statements is correct?

Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct? (i)Marginal revenue equals $5. (ii)Average revenue equals $5. (iii)Price equals $5.

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the marginal cost of the 5th unit?

Firms that operate in perfectly competitive markets try to

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

A competitive market will typically experience entry and exit until accounting profits are zero.

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2.To maximize its profit,the firm should

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

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 = 999,the firm's total costs equal

When a profit-maximizing firm is earning profits,those profits can be identified by

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2.At Q = 999,the firm's total costs equal

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

Table 14-15 -Refer to Table 14-15.What is the lowest price at which this firm would operate in the short run?

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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