Question 1

Table 14-13
Diana's Dress Emporium
  
-Refer to Table 14-13.What is the marginal cost of the 8th unit?

Accepted Answer

A)  $0 
B)  $100 
C)  $120 
D)  $140 
A)  $0 
B)  $100 
C)  $120 
D)  $140

Question 2

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A)  Firms are price takers. 
B)  Firms can freely enter the market. 
C)  Many firms have market power. 
D)  Goods offered for sale are largely the same. 
A)  Firms are price takers. 
B)  Firms can freely enter the market. 
C)  Many firms have market power. 
D)  Goods offered for sale are largely the same.

Question 3

Suppose that a competitive market is initially in equilibrium.Then demand increases.If entering firms face the same costs as existing firms and sufficient resources are available 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 4

Which of the following characteristics of competitive markets is necessary for firms to be price takers?
(i)There are many sellers.
(ii)Firms can freely enter or exit the market.
(iii)Goods offered for sale are largely the same.

Accepted Answer

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

Question 5

For a firm operating in a competitive market,both marginal revenue and average revenue exceed the market price.

Accepted Answer

A) True 
 B)False

Question 6

Figure 14-12

-Refer to Figure 14-12.If the figure in panel (a)reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b)most likely reflects

Accepted Answer

A)  perfectly inelastic long-run market supply. 
B)  perfectly elastic long-run market supply. 
C)  the entry of firms into the industry when some resources used in production are available only in limited quantities. 
D)  the fact that zero profits cannot be sustained in the long run. 
A)  perfectly inelastic long-run market supply. 
B)  perfectly elastic long-run market supply. 
C)  the entry of firms into the industry when some resources used in production are available only in limited quantities. 
D)  the fact that zero profits cannot be sustained in the long run.

Question 7

Competitive markets are characterized by

Accepted Answer

A)  a small number of buyers and sellers. 
B)  unique products. 
C)  the interdependence of firms. 
D)  free entry and exit by firms. 
A)  a small number of buyers and sellers. 
B)  unique products. 
C)  the interdependence of firms. 
D)  free entry and exit by firms.

Question 8

The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien,Wisconsin.Because the market for milk is generally considered to be competitive,the Doris Dairy Farm does not

Accepted Answer

A)  choose the quantity of milk to produce. 
B)  choose the price at which it sells its milk. 
C)  have any fixed costs of production. 
D)  set marginal revenue equal to marginal cost to maximize profit. 
A)  choose the quantity of milk to produce. 
B)  choose the price at which it sells its milk. 
C)  have any fixed costs of production. 
D)  set marginal revenue equal to marginal cost to maximize profit.

Question 9

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses,and many sellers have left the industry.Economic theory suggests that these conditions will

Accepted Answer

A)  shift the demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so that they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses. 
A)  shift the demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so that they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

In the long run the market supply

Accepted Answer

A)  must always be horizontal. 
B)  could be upward sloping if the cost of production falls as new firms enter the market. 
C)  could be upward sloping if the cost of production rises as new firms enter the market. 
D)  could be upward sloping if technological improvements lower the cost of producing in the market. 
A)  must always be horizontal. 
B)  could be upward sloping if the cost of production falls as new firms enter the market. 
C)  could be upward sloping if the cost of production rises as new firms enter the market. 
D)  could be upward sloping if technological improvements lower the cost of producing in the market.

Question 12

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
  
-Refer to Table 14-14.When Bob produces and sells the profit-maximizing quantity,how much profit does he earn?

Accepted Answer

A)  $0.25 
B)  $2.75 
C)  $4.00 
D)  $5.25 
A)  $0.25 
B)  $2.75 
C)  $4.00 
D)  $5.25

Question 13

Which of the following statements is not correct?

Accepted Answer

A)  In a long-run equilibrium, marginal firms make zero economic profit. 
B)  To maximize profit, firms should produce at a level of output where price equals average variable cost. 
C)  The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping. 
D)  Long-run supply curves are typically more elastic than short-run supply curves. 
A)  In a long-run equilibrium, marginal firms make zero economic profit. 
B)  To maximize profit, firms should produce at a level of output where price equals average variable cost. 
C)  The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping. 
D)  Long-run supply curves are typically more elastic than short-run supply curves.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $300.In order to maximize profits,Laura should

Accepted Answer

A)  make more than 20 wedding cakes per month. 
B)  make fewer than 20 wedding cakes per month. 
C)  continue to make 20 wedding cakes per month. 
D)  We do not have enough information with which to answer the question. 
A)  make more than 20 wedding cakes per month. 
B)  make fewer than 20 wedding cakes per month. 
C)  continue to make 20 wedding cakes per month. 
D)  We do not have enough information with which to answer the question.

Question 16

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each.Which of the following statements is correct?
(i)Marginal revenue equals $3.
(ii)Average revenue equals $600.
(iii)Average revenue exceeds marginal revenue,but we don't know by how much.

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 17

Table 14-4
  
-Refer to Table 14-4.For a firm operating in a competitive market,the average revenue is

Accepted Answer

A)  $45. 
B)  $30. 
C)  $15. 
D)  $0. 
A)  $45. 
B)  $30. 
C)  $15. 
D)  $0.

Question 18

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 19

Comparing marginal revenue to marginal cost
(i)reveals the contribution of the last unit of production to total profit.
(ii)is helpful in making profit-maximizing production decisions.
(iii)tells a firm whether its fixed costs are too high.

Accepted Answer

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

Question 20

Table 14-5
  
-Refer to Table 14-5.The average revenue when 14 units are produced and sold is

Accepted Answer

A)  $9. 
B)  $11. 
C)  $13. 
D)  $15. 
A)  $9. 
B)  $11. 
C)  $13. 
D)  $15.

Exam 14: Firms in Competitive Markets.

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13.What is the marginal cost of the 8th unit?

Which of the following is not a characteristic of a perfectly competitive market?

Suppose that a competitive market is initially in equilibrium.Then demand increases.If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i)There are many sellers. (ii)Firms can freely enter or exit the market. (iii)Goods offered for sale are largely the same.

For a firm operating in a competitive market,both marginal revenue and average revenue exceed the market price.

Figure 14-12 -Refer to Figure 14-12.If the figure in panel (a)reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,the figure in panel (b)most likely reflects

Competitive markets are characterized by

The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien,Wisconsin.Because the market for milk is generally considered to be competitive,the Doris Dairy Farm does not

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses,and many sellers have left the industry.Economic theory suggests that these conditions will

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

In the long run the market supply

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14.When Bob produces and sells the profit-maximizing quantity,how much profit does he earn?

Which of the following statements is not correct?

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

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $300.In order to maximize profits,Laura should

Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each.Which of the following statements is correct? (i)Marginal revenue equals $3. (ii)Average revenue equals $600. (iii)Average revenue exceeds marginal revenue,but we don't know by how much.

Table 14-4 -Refer to Table 14-4.For a firm operating in a competitive market,the average revenue is

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Comparing marginal revenue to marginal cost (i)reveals the contribution of the last unit of production to total profit. (ii)is helpful in making profit-maximizing production decisions. (iii)tells a firm whether its fixed costs are too high.

Table 14-5 -Refer to Table 14-5.The average revenue when 14 units are produced and sold is

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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