Question 1

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

Accepted Answer

A)  price is less than average total cost. 
B)  price is greater than average total cost. 
C)  average revenue is greater than average fixed cost. 
D)  average revenue is greater than marginal cost. 
A)  price is less than average total cost. 
B)  price is greater than average total cost. 
C)  average revenue is greater than average fixed cost. 
D)  average revenue is greater than marginal cost.

Question 2

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Accepted Answer

A)  rise. 
B)  remain unchanged at the minimum of average total cost. 
C)  fall. 
D)  remain unchanged at the minimum of marginal cost. 
A)  rise. 
B)  remain unchanged at the minimum of average total cost. 
C)  fall. 
D)  remain unchanged at the minimum of marginal cost.

Question 3

A long-run supply curve is flatter than a short-run supply curve because

Accepted Answer

A)  firms can enter and exit a market more easily in the long run than in the short run. 
B)  long-run supply curves are sometimes downward sloping. 
C)  competitive firms have more control over demand in the long run. 
D)  firms in a competitive market face identical cost structures. 
A)  firms can enter and exit a market more easily in the long run than in the short run. 
B)  long-run supply curves are sometimes downward sloping. 
C)  competitive firms have more control over demand in the long run. 
D)  firms in a competitive market face identical cost structures.

Question 4

In a perfectly competitive market,the market supply curve is

Accepted Answer

A)  the marginal cost curve above average total cost for a representative firm. 
B)  the horizontal sum of all the individual firms' supply curves. 
C)  the vertical sum of all the individual firms' supply curves. 
D)  always a horizontal line. 
A)  the marginal cost curve above average total cost for a representative firm. 
B)  the horizontal sum of all the individual firms' supply curves. 
C)  the vertical sum of all the individual firms' supply curves. 
D)  always a horizontal line.

Question 5

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Figure 14-7
Suppose a firm operating in a competitive market has the following cost curves:
  
-Refer to Figure 14-7.Which segment of the supply curve represents the firm shutting down?

Accepted Answer

A)  ABCD 
B)  BCD 
C)  CD 
D)  AB 
A)  ABCD 
B)  BCD 
C)  CD 
D)  AB

Question 7

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
  
-Refer to Figure 14-5.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 8

Table 14-3
  
-Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Accepted Answer

A)  $0. 
B)  $7. 
C)  $14. 
D)  $21. 
A)  $0. 
B)  $7. 
C)  $14. 
D)  $21.

Question 9

Suppose that a competitive market is initially in equilibrium.Then demand increases.If some resources used in production are not available in sufficient quantities for entering firms,

Accepted Answer

A)  the long-run market supply curve will be upward sloping. 
B)  the long-run market supply curve will be perfectly elastic. 
C)  in the long run firms will suffer economic losses, leading them to exit the industry. 
D)  the number of firms will decrease, and the market will become a monopoly. 
A)  the long-run market supply curve will be upward sloping. 
B)  the long-run market supply curve will be perfectly elastic. 
C)  in the long run firms will suffer economic losses, leading them to exit the industry. 
D)  the number of firms will decrease, and the market will become a monopoly.

Question 10

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
  
-Refer to Figure 14-5.In the short run,if the market price is higher than P1 but less than 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 11

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 12

A profit-maximizing firm will shut down in the short run when

Accepted Answer

A)  price is less than average variable cost. 
B)  price is less than average total cost. 
C)  average revenue is greater than marginal cost. 
D)  average revenue is greater than average fixed cost. 
A)  price is less than average variable cost. 
B)  price is less than average total cost. 
C)  average revenue is greater than marginal cost. 
D)  average revenue is greater than average fixed cost.

Question 13

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are

Question 14

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Accepted Answer

A)  more than triple. 
B)  less than triple. 
C)  exactly triple. 
D)  Any of the above may be true depending on the firm's labor productivity. 
A)  more than triple. 
B)  less than triple. 
C)  exactly triple. 
D)  Any of the above may be true depending on the firm's labor productivity.

Question 15

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 positive economic profits in the short run?

Accepted Answer

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

Question 16

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 is $4.00,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 17

In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

Accepted Answer

A)  should exit the industry unless her economic profits are positive. 
B)  will earn zero accounting profits but positive economic profits. 
C)  will earn zero economic profits but positive accounting profits. 
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run. 
A)  should exit the industry unless her economic profits are positive. 
B)  will earn zero accounting profits but positive economic profits. 
C)  will earn zero economic profits but positive accounting profits. 
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.

Question 18

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-10.The marginal cost of producing the 4th unit is

Accepted Answer

A)  $7. 
B)  $8. 
C)  $10. 
D)  $23. 
A)  $7. 
B)  $8. 
C)  $10. 
D)  $23.

Question 19

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

Accepted Answer

A)  quantity of output is higher than it was previously. 
B)  average total cost is higher than it was previously. 
C)  marginal revenue is higher than it was previously. 
D)  All of the above are correct. 
A)  quantity of output is higher than it was previously. 
B)  average total cost is higher than it was previously. 
C)  marginal revenue is higher than it was previously. 
D)  All of the above are correct.

Question 20

When a competitive firm doubles the quantity of output it sells,its

Accepted Answer

A)  total revenue doubles. 
B)  average revenue doubles. 
C)  marginal revenue doubles. 
D)  profits must increase. 
A)  total revenue doubles. 
B)  average revenue doubles. 
C)  marginal revenue doubles. 
D)  profits must increase.

Exam 14: Firms in Competitive Markets.

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

A long-run supply curve is flatter than a short-run supply curve because

In a perfectly competitive market,the market supply curve is

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Figure 14-7 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-7.Which segment of the supply curve represents the firm shutting down?

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.In the short run,if the market price is P4,individual firms in a competitive industry will earn

Table 14-3 -Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Suppose that a competitive market is initially in equilibrium.Then demand increases.If some resources used in production are not available in sufficient quantities for entering firms,

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

A profit-maximizing firm will shut down in the short run when

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

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 positive economic profits in the short 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 is $4.00,the firm will earn

In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.The marginal cost of producing the 4th unit is

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

When a competitive firm doubles the quantity of output it sells,its

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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