Question 1

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
  
-Refer to Table 14-4.What is the total revenue from selling 4 units?

Accepted Answer

A) $80 
B) $320 
C) $360 
D) $480 
A) $80 
B) $320 
C) $360 
D) $480

Question 2

Figure 14-7
  
-Refer to Figure 14-7.If the market starts in equilibrium at point C in panel (b),a decrease in demand will ultimately lead to

Accepted Answer

A) more firms in the industry, but lower levels of production for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point D in panel (b). 
D) lower prices once the new long-run equilibrium is reached. 
A) more firms in the industry, but lower levels of production for each firm. 
B) fewer firms in the market. 
C) a new long-run equilibrium at point D in panel (b). 
D) lower prices once the new long-run equilibrium is reached.

Question 3

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
  
-Refer to Table 14-4.What is the total revenue from selling 7 units?

Accepted Answer

A) $80 
B) $210 
C) $540 
D) $560 
A) $80 
B) $210 
C) $540 
D) $560

Question 4

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 5

When firms are said to be price takers,it implies that if a firm raises its price,

Accepted Answer

A) buyers will go elsewhere. 
B) buyers will pay the higher price in the short run. 
C) competitors will also raise their prices. 
D) firms in the industry will exercise market power. 
A) buyers will go elsewhere. 
B) buyers will pay the higher price in the short run. 
C) competitors will also raise their prices. 
D) firms in the industry will exercise market power.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

When existing firms in a competitive market are profitable,an incentive exists for

Accepted Answer

A) new firms to seek government subsidies that would allow them to enter the market. 
B) new firms to enter the market, even without government subsidies. 
C) existing firms to raise prices. 
D) existing firms to increase production. 
A) new firms to seek government subsidies that would allow them to enter the market. 
B) new firms to enter the market, even without government subsidies. 
C) existing firms to raise prices. 
D) existing firms to increase production.

Question 8

In a competitive market,no single producer can influence the market price because

Accepted Answer

A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price. 
A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price.

Question 9

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Accepted Answer

A) $0 per unit 
B) $1 per unit 
C) $2 per unit 
D) $3 per unit 
A) $0 per unit 
B) $1 per unit 
C) $2 per unit 
D) $3 per unit

Question 10

Figure 14-5
The figure below depicts the cost structure of a firm in a competitive market.
  
-Refer to Figure 14-5.When market price is P₄,a profit-maximizing firm's total cost can be represented by the area

Accepted Answer

A) P₄ × Q₁ 
B) P₄ × Q₄ 
C) P₂ × Q₄ 
D) Total costs cannot be determined from the information in the figure. 
A) P₄ × Q₁ 
B) P₄ × Q₄ 
C) P₂ × Q₄ 
D) Total costs cannot be determined from the information in the figure.

Question 11

In a market with 1,000 identical firms,the short-run market supply is the

Accepted Answer

A) marginal cost curve (above average variable cost) for a typical firm in the market. 
B) quantity supplied by the typical firm in the market. 
C) sum of the prices charged by each of the 1,000 individual firms. 
D) sum of the quantities supplied by each of the 1,000 individual firms. 
A) marginal cost curve (above average variable cost) for a typical firm in the market. 
B) quantity supplied by the typical firm in the market. 
C) sum of the prices charged by each of the 1,000 individual firms. 
D) sum of the quantities supplied by each of the 1,000 individual firms.

Question 12

Joe's Garage operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

Accepted Answer

A) Joe's Garage is earning a positive economic profit. 
B) Joe's Garage should shut down immediately. 
C) Joe's is losing money in the short run, but should continue to operate. 
D) the market price will rise in the short run to increase profits. 
A) Joe's Garage is earning a positive economic profit. 
B) Joe's Garage should shut down immediately. 
C) Joe's is losing money in the short run, but should continue to operate. 
D) the market price will rise in the short run to increase profits.

Question 13

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Accepted Answer

A) the long-run market supply curve must be horizontal. 
B) the long-run market supply curve must be upward-sloping. 
C) the long-run market supply curve must be downward-sloping. 
D) we can't tell anything about the shape of the long-run market supply curve. 
A) the long-run market supply curve must be horizontal. 
B) the long-run market supply curve must be upward-sloping. 
C) the long-run market supply curve must be downward-sloping. 
D) we can't tell anything about the shape of the long-run market supply curve.

Question 14

When total revenue is less than variable costs,a firm in a competitive market will

Accepted Answer

A) continue to operate as long as average revenue exceeds marginal cost. 
B) continue to operate as long as average revenue exceeds average fixed cost. 
C) shut down. 
D) raise its price. 
A) continue to operate as long as average revenue exceeds marginal cost. 
B) continue to operate as long as average revenue exceeds average fixed cost. 
C) shut down. 
D) raise its price.

Question 15

Which of these curves is the competitive firm's short-run supply curve?

Accepted Answer

A) The average variable cost curve above marginal cost. 
B) The average total cost curve above marginal cost. 
C) The marginal cost curve above average variable cost. 
D) The average fixed cost curve. 
A) The average variable cost curve above marginal cost. 
B) The average total cost curve above marginal cost. 
C) The marginal cost curve above average variable cost. 
D) The average fixed cost curve.

Question 16

For a firm in a perfectly competitive market,the price of the good is always

Accepted Answer

A) equal to marginal revenue. 
B) equal to total revenue. 
C) greater than average revenue. 
D) equal to the firm's efficient scale of output. 
A) equal to marginal revenue. 
B) equal to total revenue. 
C) greater than average revenue. 
D) equal to the firm's efficient scale of output.

Question 17

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

Accepted Answer

A) decide to shut-down. 
B) decide to exit the industry. 
C) decide to stay open because shutting down would be more expensive. 
D) decide to stay open because they are making an economic profit. 
A) decide to shut-down. 
B) decide to exit the industry. 
C) decide to stay open because shutting down would be more expensive. 
D) decide to stay open because they are making an economic profit.

Question 18

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur

Question 19

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average 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 20

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A) Exit if P < MC 
B) Exit if P < FC 
C) Exit if P < ATC 
D) Exit if MR < MC 
A) Exit if P < MC 
B) Exit if P < FC 
C) Exit if P < ATC 
D) Exit if MR < MC

Exam 14: Firms in Competitive Markets

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the total revenue from selling 4 units?

Figure 14-7 -Refer to Figure 14-7.If the market starts in equilibrium at point C in panel (b),a decrease in demand will ultimately lead to

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the total revenue from selling 7 units?

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

When firms are said to be price takers,it implies that if a firm raises its price,

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

When existing firms in a competitive market are profitable,an incentive exists for

In a competitive market,no single producer can influence the market price because

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Figure 14-5 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-5.When market price is P₄,a profit-maximizing firm's total cost can be represented by the area

In a market with 1,000 identical firms,the short-run market supply is the

Joe's Garage operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

When total revenue is less than variable costs,a firm in a competitive market will

Which of these curves is the competitive firm's short-run supply curve?

For a firm in a perfectly competitive market,the price of the good is always

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

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

Which of the following represents the firm's long-run condition for exiting a market?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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