Question 1

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

Accepted Answer

A) the production of the 100th unit of output increases the firm's profit by $3. 
B) the production of the 100th unit of output increases the firm's average total cost by $7. 
C) the firm's profit-maximizing level of output is less than 100 units. 
D) the production of the 110th unit of output must increase the firm's profit by less than $3. 
A) the production of the 100th unit of output increases the firm's profit by $3. 
B) the production of the 100th unit of output increases the firm's average total cost by $7. 
C) the firm's profit-maximizing level of output is less than 100 units. 
D) the production of the 110th unit of output must increase the firm's profit by less than $3.

Question 2

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Accepted Answer

A) 200 units 
B) 300 units 
C) 400 units 
D) 500 units 
A) 200 units 
B) 300 units 
C) 400 units 
D) 500 units

Question 3

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
  
-Refer to Table 14-3.If this firm chooses to maximize profit it will choose a level of output where marginal revenue is equal to

Accepted Answer

A) 6 
B) 7 
C) 8 
D) 9 
A) 6 
B) 7 
C) 8 
D) 9

Question 4

In a competitive market with identical firms,

Accepted Answer

A) an increase in demand in the short run will result in a new price above the minimum of average total cost allowing firms to earn a positive economic profit in the long run. 
B) firms cannot earn positive economic profit in either the short run or long run. 
C) firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping. 
D) free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run. 
A) an increase in demand in the short run will result in a new price above the minimum of average total cost allowing firms to earn a positive economic profit in the long run. 
B) firms cannot earn positive economic profit in either the short run or long run. 
C) firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping. 
D) free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

Question 5

Which of the following statements best reflects a price-taking firm?

Accepted Answer

A) If the firm were to charge more than the going price, it would sell none of its goods. 
B) The firm has an incentive to charge less than the market price to earn higher revenue. 
C) The firm can sell only a limited amount of output at the market price before the market price will fall. 
D) Price-taking firms maximize profits by charging a price above marginal cost. 
A) If the firm were to charge more than the going price, it would sell none of its goods. 
B) The firm has an incentive to charge less than the market price to earn higher revenue. 
C) The firm can sell only a limited amount of output at the market price before the market price will fall. 
D) Price-taking firms maximize profits by charging a price above marginal cost.

Question 6

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell

Question 7

The assumption of free entry and exit is necessary for firms in a competitive market to be price takers.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Accepted Answer

By selecting the level of outp

Question 10

Firms in competitive markets are said to be price takers.

Accepted Answer

A) True 
 B)False

Question 11

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

Accepted Answer

If the selling price is not su

Question 12

Table 14-2
The following table presents cost and revenue information for Soper's Port Vineyard.
  
-Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the marginal cost of the 1st unit?

Accepted Answer

A) $50 
B) $75 
C) $80 
D) $150 
A) $50 
B) $75 
C) $80 
D) $150

Question 13

A competitive firm's short-run supply curve is part of which of the following curves?

Accepted Answer

A) Marginal revenue 
B) Average variable cost 
C) Average total cost 
D) Marginal cost 
A) Marginal revenue 
B) Average variable cost 
C) Average total cost 
D) Marginal cost

Question 14

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses.Identify costs,revenue,and the economic losses on your graph.Using your graph,determine whether this firm will shut down in the short run,or choose to remain in the market.Explain your answer.

Accepted Answer

The loss and revenue are identified on t

Question 15

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A) certain outlays of money by the firm. 
B) implicit costs. 
C) operating costs. 
D) fixed costs. 
A) certain outlays of money by the firm. 
B) implicit costs. 
C) operating costs. 
D) fixed costs.

Question 16

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Accepted Answer

A) Sunk costs 
B) Marginal costs 
C) Variable costs 
D) Information costs 
A) Sunk costs 
B) Marginal costs 
C) Variable costs 
D) Information costs

Question 17

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

Accepted Answer

A) marginal revenue exceeds marginal cost. 
B) marginal cost exceeds marginal revenue. 
C) total cost exceeds total revenue. 
D) None of the above is correct. 
A) marginal revenue exceeds marginal cost. 
B) marginal cost exceeds marginal revenue. 
C) total cost exceeds total revenue. 
D) None of the above is correct.

Question 18

A firm that shuts down temporarily

Accepted Answer

A) still has to pay its variable costs, but not its fixed costs. 
B) still has to pay its fixed costs, but not its variable costs. 
C) still has to pay both its variable costs and its fixed costs. 
D) has to pay neither its variable costs nor its fixed costs. 
A) still has to pay its variable costs, but not its fixed costs. 
B) still has to pay its fixed costs, but not its variable costs. 
C) still has to pay both its variable costs and its fixed costs. 
D) has to pay neither its variable costs nor its fixed costs.

Question 19

Figure 14-1
The graph below depicts the cost structure for a firm in a competitive market.
  
-Refer to Figure 14-1.When price rises from P₂ to P₃,the firm finds that

Accepted Answer

A) marginal cost exceeds marginal revenue at a production level of Q₂. 
B) if it produces at output level Q₃ it will earn a positive profit. 
C) expanding output to Q₄ would leave the firm with losses. 
D) it could increase profits by lowering output from Q₃ to Q₂. 
A) marginal cost exceeds marginal revenue at a production level of Q₂. 
B) if it produces at output level Q₃ it will earn a positive profit. 
C) expanding output to Q₄ would leave the firm with losses. 
D) it could increase profits by lowering output from Q₃ to Q₂.

Question 20

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 P₁,a profit-maximizing firm's total profit or loss can be represented by which area?

Accepted Answer

A) P₁ × Q₃; profit 
B) (P₃ - P₁) × Q₂ ; loss 
C) (P₂ - P₁) × Q₁; loss 
D) We can't tell because we don't know fixed costs. 
A) P₁ × Q₃; profit 
B) (P₃ - P₁) × Q₂ ; loss 
C) (P₂ - P₁) × Q₁; loss 
D) We can't tell because we don't know fixed costs.

Exam 14: Firms in Competitive Markets

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

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.If this firm chooses to maximize profit it will choose a level of output where marginal revenue is equal to

In a competitive market with identical firms,

Which of the following statements best reflects a price-taking firm?

List and describe the characteristics of a perfectly competitive market.

The assumption of free entry and exit is necessary for firms in a competitive market to be price takers.

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

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Firms in competitive markets are said to be price takers.

Table 14-2 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the marginal cost of the 1st unit?

A competitive firm's short-run supply curve is part of which of the following curves?

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Which of these types of costs can be ignored when an individual or a firm is making decisions?

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

A firm that shuts down temporarily

Figure 14-1 The graph below depicts the cost structure for a firm in a competitive market. -Refer to Figure 14-1.When price rises from P₂ to P₃,the firm finds that

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 P₁,a profit-maximizing firm's total profit or loss can be represented by which area?

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

Filters