Question 1

In a perfectly competitive market,

Accepted Answer

A)  no one seller can influence the price of the product. 
B)  price exceeds marginal revenue for each unit sold. 
C)  average revenue exceeds marginal revenue for each unit sold. 
D)  All of the above are correct. 
A)  no one seller can influence the price of the product. 
B)  price exceeds marginal revenue for each unit sold. 
C)  average revenue exceeds marginal revenue for each unit sold. 
D)  All of the above are correct.

Question 2

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 produces 4 units of output,

Accepted Answer

A)  marginal cost is $4. 
B)  total revenue is greater than variable cost. 
C)  marginal revenue is less than marginal cost. 
D)  the firm is maximizing profit. 
A)  marginal cost is $4. 
B)  total revenue is greater than variable cost. 
C)  marginal revenue is less than marginal cost. 
D)  the firm is maximizing profit.

Question 3

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold.What is the average revenue per unit,and how many units were sold?

Accepted Answer

A)  $5 and 50 units 
B)  $5 and 100 units 
C)  $10 and 50 units 
D)  $10 and 100 units 
A)  $5 and 50 units 
B)  $5 and 100 units 
C)  $10 and 50 units 
D)  $10 and 100 units

Question 4

Shrimp Galore,a shrimp harvesting business in the Pacific Northwest,has a 30-year loan on its shrimp harvesting boat.The annual loan payment is $25,000 and the boat has a market (salvage)value that exceeds its outstanding loan balance.Prior to the 2010 shrimp harvesting season,Shrimp Galore's accountant predicted that at expected market prices for shrimp,Shrimp Galore would have a net loss of $75,000 dollars after paying all 2010 expenses (including the annual loan payment).In this case,Shrimp Galore should

Accepted Answer

A)  produce nothing and experience a loss of $25,000. 
B)  produce nothing and experience a loss of $75,000. 
C)  continue to operate because expected profits will rise in the future. 
D)  continue to operate even though it predicts a loss of $75,000. 
A)  produce nothing and experience a loss of $25,000. 
B)  produce nothing and experience a loss of $75,000. 
C)  continue to operate because expected profits will rise in the future. 
D)  continue to operate even though it predicts a loss of $75,000.

Question 5

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
  
-Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

Accepted Answer

A)  more units of output because its marginal revenue is greater than its marginal cost. 
B)  fewer units of output because its marginal revenue is less than its marginal cost. 
C)  more units of output because its marginal revenue is less than its marginal cost. 
D)  fewer units of output because its marginal revenue is greater than its marginal cost. 
A)  more units of output because its marginal revenue is greater than its marginal cost. 
B)  fewer units of output because its marginal revenue is less than its marginal cost. 
C)  more units of output because its marginal revenue is less than its marginal cost. 
D)  fewer units of output because its marginal revenue is greater than its marginal cost.

Question 6

In a perfectly competitive market,the process of entry and exit will end when

Accepted Answer

A)  price equals minimum marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  economic profits are zero. 
D)  accounting profits are zero. 
A)  price equals minimum marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  economic profits are zero. 
D)  accounting profits are zero.

Question 7

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

Accepted Answer

A)  $2 
B)  $4 
C)  $6 
D)  $8 
A)  $2 
B)  $4 
C)  $6 
D)  $8

Question 8

A firm has market power if it can

Accepted Answer

A)  maximize profits. 
B)  minimize costs. 
C)  influence the market price of the good it sells. 
D)  hire as many workers as it needs at the prevailing wage rate. 
A)  maximize profits. 
B)  minimize costs. 
C)  influence the market price of the good it sells. 
D)  hire as many workers as it needs at the prevailing wage rate.

Question 9

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 100th unit for $4.75.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 10

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants,which of the following is most likely to arise?

Accepted Answer

A)  The long-run market supply curve will be upward sloping. 
B)  The condition of free entry into the market will be violated. 
C)  Producer profits will fall in the long run. 
D)  The long-run market supply curve will be horizontal as new firms enter and drive the price downward. 
A)  The long-run market supply curve will be upward sloping. 
B)  The condition of free entry into the market will be violated. 
C)  Producer profits will fall in the long run. 
D)  The long-run market supply curve will be horizontal as new firms enter and drive the price downward.

Question 11

Figure 14-11
  
-Refer to Figure 14-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve?

Accepted Answer

A)  A only 
B)  A and C only 
C)  B only 
D)  B and D only 
A)  A only 
B)  A and C only 
C)  B only 
D)  B and D only

Question 12

Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

-Refer to Figure 14-9.If there are 400 identical firms in this market,what is the value of Q2?

Accepted Answer

A)  4,000 
B)  8,000 
C)  40,000 
D)  80,000 
A)  4,000 
B)  8,000 
C)  40,000 
D)  80,000

Question 13

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

Accepted Answer

A) True 
 B)False

Question 14

The two characteristics of a competitive market are 1)many buyers and sellers in the market and 2)the goods offered by the various sellers are highly differentiated.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a firm in each of the two markets listed below were to increase its price by 20 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 would not?

Accepted Answer

A)  corn and soybeans 
B)  gasoline and restaurants 
C)  water and cable television 
D)  spiral notebooks and college textbooks 
A)  corn and soybeans 
B)  gasoline and restaurants 
C)  water and cable television 
D)  spiral notebooks and college textbooks

Question 16

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
  
-Refer to Figure 14-1.The firm should shut down if the market price is

Accepted Answer

A)  above $8. 
B)  above $6.30 but less than $8. 
C)  above $4.50 but less than $6.30. 
D)  less than $4.50. 
A)  above $8. 
B)  above $6.30 but less than $8. 
C)  above $4.50 but less than $6.30. 
D)  less than $4.50.

Question 17

Competitive firms that earn a loss in the short run should

Accepted Answer

A)  shut down if P < AVC. 
B)  raise their price. 
C)  lower their output. 
D)  All of the above are correct. 
A)  shut down if P < AVC. 
B)  raise their price. 
C)  lower their output. 
D)  All of the above are correct.

Question 18

Susan quit her job as a teacher,which paid her $36,000 per year,in order to start her own catering business.She spent $12,000 of her savings,which had been earning 10 percent interest per year,on equipment for her business.She also borrowed $12,000 from her bank at 10 percent interest,which she also spent on equipment.For the past several months she has spent $1,000 per month on ingredients and other variable costs.Also for the past several months she has taken in $3,500 in monthly revenue.

Accepted Answer

A)  In the short run, Susan should shut down her business, and in the long run she should exit the industry. 
B)  In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. 
C)  In the short run, Susan should continue to operate her business, but in the long run she will probably face competition from newly entering firms. 
D)  In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium. 
A)  In the short run, Susan should shut down her business, and in the long run she should exit the industry. 
B)  In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. 
C)  In the short run, Susan should continue to operate her business, but in the long run she will probably face competition from newly entering firms. 
D)  In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.

Question 19

Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

-Refer to Figure 14-9.If there are 200 identical firms in this market,what level of output will be supplied to the market when price is $2.00?

Accepted Answer

A)  2,000 
B)  10,000 
C)  20,000 
D)  40,000 
A)  2,000 
B)  10,000 
C)  20,000 
D)  40,000

Question 20

Because nothing can be done about sunk costs,they are irrelevant to decisions about business strategy.

Accepted Answer

A) True 
 B)False

In a perfectly competitive market,

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 produces 4 units of output,

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold.What is the average revenue per unit,and how many units were sold?

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

In a perfectly competitive market,the process of entry and exit will end when

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

A firm has market power if it can

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 100th unit for $4.75.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants,which of the following is most likely to arise?

Figure 14-11 -Refer to Figure 14-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve?

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

The two characteristics of a competitive market are 1)many buyers and sellers in the market and 2)the goods offered by the various sellers are highly differentiated.

Suppose a firm in each of the two markets listed below were to increase its price by 20 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 would not?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm should shut down if the market price is

Competitive firms that earn a loss in the short run should

Because nothing can be done about sunk costs,they are irrelevant to decisions about business strategy.

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.

Filters

Exam 14: Firms in Competitive Markets.

In a perfectly competitive market,

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 produces 4 units of output,

Suppose a firm in a competitive market earned $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold.What is the average revenue per unit,and how many units were sold?

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.If the firm is producing 5 units of output,it should produce

In a perfectly competitive market,the process of entry and exit will end when

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

A firm has market power if it can

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 100th unit for $4.75.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants,which of the following is most likely to arise?

Figure 14-11 -Refer to Figure 14-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve?

In making a short-run profit-maximizing production decision,the firm must consider both fixed and variable cost.

The two characteristics of a competitive market are 1)many buyers and sellers in the market and 2)the goods offered by the various sellers are highly differentiated.

Suppose a firm in each of the two markets listed below were to increase its price by 20 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 would not?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm should shut down if the market price is

Competitive firms that earn a loss in the short run should

Because nothing can be done about sunk costs,they are irrelevant to decisions about business strategy.

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.

Filters