Question 1

For all positive levels of output,when will a firm shut down in the short run

Accepted Answer

A) when its loss exceeds its average costs 
B) when its total revenue is less than its average variable costs 
C) when the price of its product is less than its average variable cost 
D) when it cannot cover its sunk costs 
A) when its loss exceeds its average costs 
B) when its total revenue is less than its average variable costs 
C) when the price of its product is less than its average variable cost 
D) when it cannot cover its sunk costs

Question 2

When a firm in a competitive market receives $8000 in total revenue,it has a marginal revenue of $20.What is the average revenue,and how many units were sold

Accepted Answer

A) $5 and 1000 units 
B) $10 and 500 units 
C) $20 and 100 units 
D) $20 and 400 units 
A) $5 and 1000 units 
B) $10 and 500 units 
C) $20 and 100 units 
D) $20 and 400 units

Question 3

As a general rule,when accountants calculate profit they account for explicit costs.What do they 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 4

What will entry into a market by new firms do

Accepted Answer

A) It will increase the supply of the good. 
B) It will increase profits of existing firms. 
C) It will increase the price of the good. 
D) It will increase the costs of existing firms. 
A) It will increase the supply of the good. 
B) It will increase profits of existing firms. 
C) It will increase the price of the good. 
D) It will increase the costs of existing firms.

Question 5

Scenario 14-1
Assume a certain firm is producing 1000 units of output (so Q = 1000).At Q = 1000, the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit.
-Refer to Scenario 14-1.At Q = 1000,what is the firm's profit

Accepted Answer

A) -$200 
B) $1000 
C) $3000 
D) $4000 
A) -$200 
B) $1000 
C) $3000 
D) $4000

Question 6

In a market with 1000 identical firms,what is the short-run market supply

Accepted Answer

A) the marginal-cost curve (above average variable cost) 
B) the average-total-cost curve (above average variable cost) 
C) the sum of the prices charged by each of the 1000 individual firms 
D) the sum of the quantities supplied by each of the 1000 individual firms 
A) the marginal-cost curve (above average variable cost) 
B) the average-total-cost curve (above average variable cost) 
C) the sum of the prices charged by each of the 1000 individual firms 
D) the sum of the quantities supplied by each of the 1000 individual firms

Question 7

When firms in a perfectly competitive market face the same costs,how must they be operating in the long run

Accepted Answer

A) under diseconomies of scale 
B) under constant return to scale 
C) at their efficient scale 
D) under economies of scale 
A) under diseconomies of scale 
B) under constant return to scale 
C) at their efficient scale 
D) under economies of scale

Question 8

Figure 14-1
  
-Refer to Figure 14-1.When market price is at P₂,what would a firm producing output level Q₁ experience

Accepted Answer

A) losses, because P₂ < ATC at output level Q₁ 
B) losses equal to (P₂ - P₁) × Q₁ 
C) zero profits 
D) profits equal to (P₂ - P₁) × Q₁ 
A) losses, because P₂ < ATC at output level Q₁ 
B) losses equal to (P₂ - P₁) × Q₁ 
C) zero profits 
D) profits equal to (P₂ - P₁) × Q₁

Question 9

When a resource used in the production of a good sold in a competitive market is available in only limited quantities,the long-run supply curve is likely to be upward sloping.

Accepted Answer

A) True 
 B)False

Question 10

In a competitive market that is characterized by free entry and exit,what will be the result

Accepted Answer

A) All firms will operate at efficient scale in the short run. 
B) All firms will operate at efficient scale in the long run. 
C) The price of the product will differ across firms. 
D) The number of sellers in the market will steadily decrease over time. 
A) All firms will operate at efficient scale in the short run. 
B) All firms will operate at efficient scale in the long run. 
C) The price of the product will differ across firms. 
D) The number of sellers in the market will steadily decrease over time.

Question 11

What does a firm that shuts down temporarily still have to pay

Accepted Answer

A) its variable costs 
B) its fixed costs 
C) its total costs 
D) its marginal costs 
A) its variable costs 
B) its fixed costs 
C) its total costs 
D) its marginal costs

Question 12

When a competitive market experiences an increase in demand that induces an increase in producer costs,which consequence is most likely

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 must fall in the long run. 
D) The long-run market supply remains constant at minimum long-run average cost. 
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 must fall in the long run. 
D) The long-run market supply remains constant at minimum long-run average cost.

Question 13

Which expression is correct for a competitive firm

Accepted Answer

A) Profit = Total revenue - Total variable cost 
B) Marginal revenue = (Change in total revenue) ÷ (Change in quantity of output) 
C) Average revenue = Total revenue ÷ Marginal revenue 
D) Total revenue = Marginal revenue + Average revenue 
A) Profit = Total revenue - Total variable cost 
B) Marginal revenue = (Change in total revenue) ÷ (Change in quantity of output) 
C) Average revenue = Total revenue ÷ Marginal revenue 
D) Total revenue = Marginal revenue + Average revenue

Question 14

Market demand is given as QD = 220 - 3P.Market supply is given as QS = 3P + 40.Each identical firm has MC = 0.3Q and ATC = 0.2Q.What quantity of output will a typical firm produce

Accepted Answer

A) 2 
B) 6 
C) 60 
D) 100 
A) 2 
B) 6 
C) 60 
D) 100

Question 15

What do we know about the short-run supply curve for a firm in a perfectly competitive market

Accepted Answer

A) It is likely to be horizontal. 
B) It is likely to slope downward. 
C) It is determined by forces external to the firm. 
D) It is the same as its marginal-cost curve (above average variable cost). 
A) It is likely to be horizontal. 
B) It is likely to slope downward. 
C) It is determined by forces external to the firm. 
D) It is the same as its marginal-cost curve (above average variable cost).

Question 16

Figure 14-1
  
-Refer to Figure 14-1.When the price is P₂ and the firm maximizes its profit or minimizes its losses,what will occur at the firm

Accepted Answer

A) It will experience a positive profit. 
B) It will experience a zero profit. 
C) It will experience a loss, but continue to operate. 
D) It will shut down. 
A) It will experience a positive profit. 
B) It will experience a zero profit. 
C) It will experience a loss, but continue to operate. 
D) It will shut down.

Question 17

When a profit-maximizing firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at a price that is equal to which cost

Accepted Answer

A) sunk cost 
B) average fixed cost 
C) average variable cost 
D) marginal cost 
A) sunk cost 
B) average fixed cost 
C) average variable cost 
D) marginal cost

Question 18

The marginal firm in a competitive market will earn zero economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 19

When calculating marginal cost,what must the firm know at each level of output

Accepted Answer

A) sunk cost 
B) variable cost 
C) fixed cost 
D) average total cost 
A) sunk cost 
B) variable cost 
C) fixed cost 
D) average total cost

Question 20

Market demand is given as QD = 110 - 2P.Market supply is given as QS = 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's profit

Accepted Answer

A) $15 
B) $20 
C) $30 
D) $40 
A) $15 
B) $20 
C) $30 
D) $40

Exam 14: Firms in Competitive Markets

For all positive levels of output,when will a firm shut down in the short run

When a firm in a competitive market receives $8000 in total revenue,it has a marginal revenue of $20.What is the average revenue,and how many units were sold

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

What will entry into a market by new firms do

Scenario 14-1 Assume a certain firm is producing 1000 units of output (so Q = 1000).At Q = 1000, the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit. -Refer to Scenario 14-1.At Q = 1000,what is the firm's profit

In a market with 1000 identical firms,what is the short-run market supply

When firms in a perfectly competitive market face the same costs,how must they be operating in the long run

Figure 14-1 -Refer to Figure 14-1.When market price is at P₂,what would a firm producing output level Q₁ experience

When a resource used in the production of a good sold in a competitive market is available in only limited quantities,the long-run supply curve is likely to be upward sloping.

In a competitive market that is characterized by free entry and exit,what will be the result

What does a firm that shuts down temporarily still have to pay

When a competitive market experiences an increase in demand that induces an increase in producer costs,which consequence is most likely

Which expression is correct for a competitive firm

Market demand is given as QD = 220 - 3P.Market supply is given as QS = 3P + 40.Each identical firm has MC = 0.3Q and ATC = 0.2Q.What quantity of output will a typical firm produce

What do we know about the short-run supply curve for a firm in a perfectly competitive market

Figure 14-1 -Refer to Figure 14-1.When the price is P₂ and the firm maximizes its profit or minimizes its losses,what will occur at the firm

When a profit-maximizing firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at a price that is equal to which cost

The marginal firm in a competitive market will earn zero economic profits in the long run.

When calculating marginal cost,what must the firm know at each level of output

Market demand is given as QD = 110 - 2P.Market supply is given as QS = 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's profit

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= 220 - 3P.Market supply is given as Q_S= 3P + 40.Each identical firm has MC = 0.3Q and ATC = 0.2Q.What quantity of output will a typical firm produce

Market demand is given as Q_D= 110 - 2P.Market supply is given as Q_S= 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's profit