Question 1

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Accepted Answer

A)  total revenue. 
B)  marginal revenue. 
C)  average revenue. 
D)  All of the above are correct. 
A)  total revenue. 
B)  marginal revenue. 
C)  average revenue. 
D)  All of the above are correct.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)  total revenue must equal total cost for each firm. 
B)  economic profits must be zero. 
C)  price must equal the minimum of marginal cost for each firm. 
D)  Both a and b are correct. 
A)  total revenue must equal total cost for each firm. 
B)  economic profits must be zero. 
C)  price must equal the minimum of marginal cost for each firm. 
D)  Both a and b are correct.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

When price is below average variable cost,a firm in a competitive market will

Accepted Answer

A)  shut down and incur fixed costs. 
B)  shut down and incur both variable and fixed costs. 
C)  continue to operate as long as average revenue exceeds marginal cost. 
D)  continue to operate as long as average revenue exceeds average fixed cost. 
A)  shut down and incur fixed costs. 
B)  shut down and incur both variable and fixed costs. 
C)  continue to operate as long as average revenue exceeds marginal cost. 
D)  continue to operate as long as average revenue exceeds average fixed cost.

Question 6

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 fixed costs.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that firms in a competitive industry are earning positive economic profits.All else equal,in the long run,we would expect the number of firms in the industry to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  We do not have enough information with which to answer this question. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  We do not have enough information with which to answer this question.

Question 8

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-9.If the firm's marginal cost is $5,it should

Accepted Answer

A)  reduce fixed costs by lowering production. 
B)  increase production to maximize profit. 
C)  decrease production to maximize profit. 
D)  maintain its current level of production to maximize profit. 
A)  reduce fixed costs by lowering production. 
B)  increase production to maximize profit. 
C)  decrease production to maximize profit. 
D)  maintain its current level of production to maximize profit.

Question 9

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Accepted Answer

A) True 
 B)False

Question 10

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
  
-Refer to Figure 14-2.Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

Accepted Answer

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

Question 11

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Accepted Answer

A)  $9 
B)  $10 
C)  $11 
D)  $12 
A)  $9 
B)  $10 
C)  $11 
D)  $12

Question 12

Why does a firm in a competitive industry charge the market price?

Accepted Answer

A)  If a firm charges less than the market price, it loses potential revenue. 
B)  If a firm charges more than the market price, it loses all its customers to other firms. 
C)  The firm can sell as many units of output as it wants to at the market price. 
D)  All of the above are correct. 
A)  If a firm charges less than the market price, it loses potential revenue. 
B)  If a firm charges more than the market price, it loses all its customers to other firms. 
C)  The firm can sell as many units of output as it wants to at the market price. 
D)  All of the above are correct.

Question 13

The exit of existing firms from a competitive market will

Accepted Answer

A)  increase market supply and increase market price. 
B)  increase market supply and decrease market price. 
C)  decrease market supply and increase market price. 
D)  decrease market supply and decrease market price. 
A)  increase market supply and increase market price. 
B)  increase market supply and decrease market price. 
C)  decrease market supply and increase market price. 
D)  decrease market supply and decrease market price.

Question 14

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

Accepted Answer

A)  opportunity costs. 
B)  fixed costs. 
C)  variable costs. 
D)  total costs. 
A)  opportunity costs. 
B)  fixed costs. 
C)  variable costs. 
D)  total costs.

Question 15

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A)  the New York Yankees 
B)  Apple, Inc. 
C)  DeBeers diamond wholesalers 
D)  a wheat farmer in Kansas 
A)  the New York Yankees 
B)  Apple, Inc. 
C)  DeBeers diamond wholesalers 
D)  a wheat farmer in Kansas

Question 16

If marginal cost exceeds marginal revenue,the firm

Accepted Answer

A)  is most likely to be at a profit-maximizing level of output. 
B)  should increase the level of production to maximize its profit. 
C)  should reduce its average fixed cost in order to lower its marginal cost. 
D)  may still be earning a positive accounting profit. 
A)  is most likely to be at a profit-maximizing level of output. 
B)  should increase the level of production to maximize its profit. 
C)  should reduce its average fixed cost in order to lower its marginal cost. 
D)  may still be earning a positive accounting profit.

Question 17

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure:  
The long-run supply curve for this market is

Accepted Answer

A)  positively sloped. 
B)  horizontal at a price of $3.33. 
C)  horizontal at a price of $5. 
D)  horizontal at a price of $7. 
A)  positively sloped. 
B)  horizontal at a price of $3.33. 
C)  horizontal at a price of $5. 
D)  horizontal at a price of $7.

Question 18

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-10.This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Accepted Answer

A)  $3. 
B)  $5. 
C)  $7. 
D)  $9. 
A)  $3. 
B)  $5. 
C)  $7. 
D)  $9.

Question 19

Table 14-5
  
-Refer to Table 14-5.The marginal revenue of the 12th unit is

Accepted Answer

A)  $9. 
B)  $10. 
C)  $11 
D)  The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold. 
A)  $9. 
B)  $10. 
C)  $11 
D)  The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold.

Question 20

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

Accepted Answer

A)  production of the 100th unit of output increases the firm's profit by $3. 
B)  production of the 100th unit of output increases the firm's average total cost by $7. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 99th unit of output must increase the firm's profit by less than $3. 
A)  production of the 100th unit of output increases the firm's profit by $3. 
B)  production of the 100th unit of output increases the firm's average total cost by $7. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 99th unit of output must increase the firm's profit by less than $3.

Exam 14: Firms in Competitive Markets.

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

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

When firms are neither entering nor exiting a perfectly competitive market,

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

When price is below average variable cost,a firm in a competitive market will

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 fixed costs.

Suppose that firms in a competitive industry are earning positive economic profits.All else equal,in the long run,we would expect the number of firms in the industry to

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9.If the firm's marginal cost is $5,it should

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Why does a firm in a competitive industry charge the market price?

The exit of existing firms from a competitive market will

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

Which of the following firms is the closest to being a perfectly competitive firm?

If marginal cost exceeds marginal revenue,the firm

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure: The long-run supply curve for this market is

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Table 14-5 -Refer to Table 14-5.The marginal revenue of the 12th unit is

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

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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