Question 1

Market demand is given as QD = 40 - P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit

Accepted Answer

A) $2.50 
B) $8.00 
C) $12.00 
D) $20.00 
A) $2.50 
B) $8.00 
C) $12.00 
D) $20.00

Question 2

Consider a competitive market with a large number of identical firms.What happens to the price if the demand increases in this market

Accepted Answer

A) Price will increase in the short run then fall back to its original level in the long run. 
B) Price will decrease in the short run then rise to its original level in the long run. 
C) Price will increase in the short run then rise even more in the long run. 
D) Price will decrease in the short run then fall even more in the long run. 
A) Price will increase in the short run then fall back to its original level in the long run. 
B) Price will decrease in the short run then rise to its original level in the long run. 
C) Price will increase in the short run then rise even more in the long run. 
D) Price will decrease in the short run then fall even more in the long run.

Question 3

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

Accepted Answer

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

Question 4

A firm’s short-run supply curve is given in the following table:
 
The firm is selling its product in a perfectly competitive market, where there are 100 identical firms and the market demand curve is given by the table below:
 
What is the market equilibrium price and quantity?

Accepted Answer

Firm supplies at P = MC,the ma

Question 5

Which statement explains the relationship between average revenue,marginal revenue,and price in a competitive market

Accepted Answer

A) Average revenue equals the price of the good, but marginal revenue is different. 
B) Marginal revenue equals the price of the good, but average revenue is different. 
C) Average revenue equals marginal revenue, but the price of the good is different. 
D) Average revenue, marginal revenue, and the price of the good are all equal to one another. 
A) Average revenue equals the price of the good, but marginal revenue is different. 
B) Marginal revenue equals the price of the good, but average revenue is different. 
C) Average revenue equals marginal revenue, but the price of the good is different. 
D) Average revenue, marginal revenue, and the price of the good are all equal to one another.

Question 6

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Accepted Answer

A) True 
 B)False

Question 7

Which business decision best describes the irrelevance of sunk costs

Accepted Answer

A) New airlines enter the market and earn profits. 
B) Airlines continue to sell tickets even though they are reporting large losses. 
C) Airlines exit the market when they report losses. 
D) Airlines raise ticket prices to cover sunk costs. 
A) New airlines enter the market and earn profits. 
B) Airlines continue to sell tickets even though they are reporting large losses. 
C) Airlines exit the market when they report losses. 
D) Airlines raise ticket prices to cover sunk costs.

Question 8

When a profit-maximizing firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs,what should it do in the short run

Accepted Answer

A) It should shut down and incur a loss equal to its fixed costs. 
B) It should shut down until it is able to produce where average revenue exceeds average fixed cost. 
C) It should continue to produce as long as marginal cost is less than average revenue. 
D) It should continue to produce as long as total revenue is sufficient to pay variable costs. 
A) It should shut down and incur a loss equal to its fixed costs. 
B) It should shut down until it is able to produce where average revenue exceeds average fixed cost. 
C) It should continue to produce as long as marginal cost is less than average revenue. 
D) It should continue to produce as long as total revenue is sufficient to pay variable costs.

Question 9

Figure 14-6
  
-Refer to Figure 14-6.When market price is P4,which area represents a profit-maximizing firm's total cost

Accepted Answer

A) P₂ × Q₄ 
B) P4 × Q₁ 
C) P4 × Q₄ 
D) P₂ × Q₁ 
A) P₂ × Q₄ 
B) P4 × Q₁ 
C) P4 × Q₄ 
D) P₂ × Q₁

Question 10

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 11

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 12

When a firm in a competitive market receives $5000 in total revenue,it has a marginal revenue of $100.What is the average revenue,and how many units were sold

Accepted Answer

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

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
 Carefully explain your answer.

Accepted Answer

In a competitive market where firms are

Question 14

Scenario 14-2
As part of an estate settlement, Mary received $1 million.She decided to use the money to purchase a small business.If Mary had invested the $1 million in a risk-free bond fund she could have made $80,000 each year.She also quit her $75,000 per year job to devote all of her time to her new business.
-Refer to Scenario 14-2.How large would Mary's accounting profits need to be to allow her to attain zero economic profit

Accepted Answer

A) $100,000 
B) $125,000 
C) $155,000 
D) $225,000 
A) $100,000 
B) $125,000 
C) $155,000 
D) $225,000

Question 15

A profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost.What should it do

Accepted Answer

A) It should shut down. 
B) It should reduce its output, but continue operating. 
C) It should keep output the same. 
D) It should increase its output. 
A) It should shut down. 
B) It should reduce its output, but continue operating. 
C) It should keep output the same. 
D) It should increase its output.

Question 16

Market demand is given as QD = 250 - P.Market supply is given as QS = 1.5P.Each identical firm has MC = 10Q and ATC = 8Q.What is a firm's profit

Accepted Answer

A) $200 
B) $800 
C) $1000 
D) $1600 
A) $200 
B) $800 
C) $1000 
D) $1600

Question 17

What is one of the most important determinants of the success of free-market capitalism

Accepted Answer

A) enlightened governments selecting firms that should not be allowed to exit a market 
B) free entry and exit in markets 
C) government regulation of market participants 
D) having a few large firms rather than thousands of small ones 
A) enlightened governments selecting firms that should not be allowed to exit a market 
B) free entry and exit in markets 
C) government regulation of market participants 
D) having a few large firms rather than thousands of small ones

Question 18

When a perfectly competitive firm makes a decision to shut down,which is most likely

Accepted Answer

A) Marginal cost is above average variable cost. 
B) Marginal cost is above average total cost. 
C) Price is below the minimum of average variable cost. 
D) Fixed costs exceed variable costs. 
A) Marginal cost is above average variable cost. 
B) Marginal cost is above average total cost. 
C) Price is below the minimum of average variable cost. 
D) Fixed costs exceed variable costs.

Question 19

At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm’s marginal-cost curve crosses the marginal-revenue curve at an output level of 1000 units. What is the firm’s current profit? What is likely to occur in this market, and why?

Accepted Answer

The firm's current profit is $

Question 20

The market for craft art used in home decoration is a very competitive market.In this market,costs vary since some people work faster than others and have more artistic talent in producing craft art.In this competitive market,what would we expect to observe

Accepted Answer

A) firms that are generally unresponsive to change in demand 
B) little exit and entry 
C) a short-run supply curve more elastic than the market's long-run supply curve 
D) an upward-sloping long-run supply curve 
A) firms that are generally unresponsive to change in demand 
B) little exit and entry 
C) a short-run supply curve more elastic than the market's long-run supply curve 
D) an upward-sloping long-run supply curve

Market demand is given as Q_D= 40 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit

Consider a competitive market with a large number of identical firms.What happens to the price if the demand increases in this market

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

A firm’s short-run supply curve is given in the following table: The firm is selling its product in a perfectly competitive market, where there are 100 identical firms and the market demand curve is given by the table below: What is the market equilibrium price and quantity?

Which statement explains the relationship between average revenue,marginal revenue,and price in a competitive market

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Which business decision best describes the irrelevance of sunk costs

When a profit-maximizing firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs,what should it do in the short run

Figure 14-6 -Refer to Figure 14-6.When market price is P4,which area represents a profit-maximizing firm's total cost

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

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

When a firm in a competitive market receives $5000 in total revenue,it has a marginal revenue of $100.What is the average revenue,and how many units were sold

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 Carefully explain your answer.

A profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost.What should it do

Market demand is given as Q_D= 250 - P.Market supply is given as Q_S= 1.5P.Each identical firm has MC = 10Q and ATC = 8Q.What is a firm's profit

What is one of the most important determinants of the success of free-market capitalism

When a perfectly competitive firm makes a decision to shut down,which is most likely

The market for craft art used in home decoration is a very competitive market.In this market,costs vary since some people work faster than others and have more artistic talent in producing craft art.In this competitive market,what would we expect to observe

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 14: Firms in Competitive Markets

Market demand is given as QD = 40 - P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit

Consider a competitive market with a large number of identical firms.What happens to the price if the demand increases in this market

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

A firm’s short-run supply curve is given in the following table: The firm is selling its product in a perfectly competitive market, where there are 100 identical firms and the market demand curve is given by the table below: What is the market equilibrium price and quantity?

Which statement explains the relationship between average revenue,marginal revenue,and price in a competitive market

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Which business decision best describes the irrelevance of sunk costs

When a profit-maximizing firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs,what should it do in the short run

Figure 14-6 -Refer to Figure 14-6.When market price is P4,which area represents a profit-maximizing firm's total cost

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

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

When a firm in a competitive market receives $5000 in total revenue,it has a marginal revenue of $100.What is the average revenue,and how many units were sold

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 Carefully explain your answer.

A profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost.What should it do

Market demand is given as QD = 250 - P.Market supply is given as QS = 1.5P.Each identical firm has MC = 10Q and ATC = 8Q.What is a firm's profit

What is one of the most important determinants of the success of free-market capitalism

When a perfectly competitive firm makes a decision to shut down,which is most likely

The market for craft art used in home decoration is a very competitive market.In this market,costs vary since some people work faster than others and have more artistic talent in producing craft art.In this competitive market,what would we expect to observe

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Market demand is given as Q_D= 40 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit

Market demand is given as Q_D= 250 - P.Market supply is given as Q_S= 1.5P.Each identical firm has MC = 10Q and ATC = 8Q.What is a firm's profit