Question 1

Market demand is given as QD = 200 - 3P.Market supply is given as QS = 2P + 100.Each identical firm has MC = 0.5Q and ATC = 0.25Q.What is each firm's profit

Accepted Answer

A) $0 
B) $25 
C) $50 
D) $100 
A) $0 
B) $25 
C) $50 
D) $100

Question 2

During spring break,four students are planning a trip from Toronto to Montreal (about 1000 km).They are indifferent between taking the bus and driving.The bus tickets for all four of them will cost $400.The cost of driving a car which one of them owns during a typical 10,000 km is as follows:
   
Will they still drive the car?

Accepted Answer

Yes.Most of the costs listed are sunk co

Question 3

Figure 14-9
  
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).What will result from an increase in demand from Demand0 to DemanD₁

Accepted Answer

A) a new market equilibrium at point D 
B) an eventual increase in the number of firms in the market and a new long-run equilibrium at point C 
C) rising prices and falling profits for existing firms in the market 
D) falling prices and falling profits for existing firms in the market 
A) a new market equilibrium at point D 
B) an eventual increase in the number of firms in the market and a new long-run equilibrium at point C 
C) rising prices and falling profits for existing firms in the market 
D) falling prices and falling profits for existing firms in the market

Question 4

Why is a competitive firm's marginal-cost curve regarded as its supply curve

Accepted Answer

A) The position of the marginal-cost curve determines the price for which the firm should sell its product. 
B) Among the various cost curves, the marginal-cost curve is the only one that slopes upward. 
C) The marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D) The firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. 
A) The position of the marginal-cost curve determines the price for which the firm should sell its product. 
B) Among the various cost curves, the marginal-cost curve is the only one that slopes upward. 
C) The marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D) The firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Question 5

Assume that Sarah places a $70 value on seeing her college football team play in the finals.She purchases a ticket to the game for $50 but when she arrives at the game she discovers that her ticket is missing.A ticket scalper outside the stadium is selling tickets for $65 dollars.If Sarah purchases a ticket from one of the scalpers for $65,what principle is she best demonstrating

Accepted Answer

A) Sunk costs are irrelevant to many personal decisions. 
B) The price of tickets cannot be explained by economic principles. 
C) The assumption of rational behaviour does not easily apply to the purchase of college football game tickets. 
D) The lost ticket is the opportunity cost of the game. 
A) Sunk costs are irrelevant to many personal decisions. 
B) The price of tickets cannot be explained by economic principles. 
C) The assumption of rational behaviour does not easily apply to the purchase of college football game tickets. 
D) The lost ticket is the opportunity cost of the game.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

What is a characteristic of a perfectly competitive market

Accepted Answer

A) Firms are price setters. 
B) Firms have difficulty entering the market. 
C) There are not many sellers in the market. 
D) Goods offered for sale are largely the same. 
A) Firms are price setters. 
B) Firms have difficulty entering the market. 
C) There are not many sellers in the market. 
D) Goods offered for sale are largely the same.

Question 8

For a firm in a competitive market,marginal revenue is always equal to average revenue.

Accepted Answer

A) True 
 B)False

Question 9

When a competitive firm triples the amount of output it sells,what is the result

Accepted Answer

A) Its total revenue triples. 
B) Its average revenue triples. 
C) Its marginal revenue triples. 
D) Its selling price triples. 
A) Its total revenue triples. 
B) Its average revenue triples. 
C) Its marginal revenue triples. 
D) Its selling price triples.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Figure 14-6
  
-Refer to Figure 14-6.When a profit-maximizing firm is earning profits,what can identify those profits

Accepted Answer

A) P x Q 
B) (MC - AV
C)  × Q 
C) (P - AT
C)  × Q 
D) (P - AV
C)  × Q 
A) P x Q 
B) (MC - AV
C)  × Q 
C) (P - AT
C)  × Q 
D) (P - AV
C)  × Q

Question 12

Which of these curves is the competitive firm's 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 13

Market demand is given as QD = 300 - 5P.Market supply is given as QS = 5P.Each identical firm has MC = 6Q and ATC = 4Q.What quantity of output will a typical firm produce

Accepted Answer

A) 5 
B) 10 
C) 30 
D) 60 
A) 5 
B) 10 
C) 30 
D) 60

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If a firm in a competitive market reduces its output by 30 percent,what is the price of its output likely to do

Accepted Answer

A) decrease by more than 30 percent 
B) decrease by less than 30 percent 
C) remain unchanged 
D) increase 
A) decrease by more than 30 percent 
B) decrease by less than 30 percent 
C) remain unchanged 
D) increase

Question 16

To answer the question,"How much revenue does the farm receive for the typical litre of milk
" a dairy farmer must be able to calculate sunk cost.

Accepted Answer

A) True 
 B)False

Question 17

All of the following conditions are consistent with a firm's decision to shut down: TR < VC,TR/Q < VC/Q,and P < MR.(TR = total revenue,VC = variable cost,Q = level of production,P = price,and MR = marginal revenue.)

Accepted Answer

A) True 
 B)False

Question 18

When fixed costs are ignored because they are irrelevant to a business's production decision,what are they called

Accepted Answer

A) explicit costs 
B) implicit costs 
C) sunk costs 
D) opportunity costs 
A) explicit costs 
B) implicit costs 
C) sunk costs 
D) opportunity costs

Question 19

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective.What do we assume the objective to be

Accepted Answer

A) maximization of total revenue 
B) maximization of profit 
C) minimization of variable cost 
D) minimization of average total cost 
A) maximization of total revenue 
B) maximization of profit 
C) minimization of variable cost 
D) minimization of average total cost

Question 20

When some resources used in production are only available in limited quantities,what is the likely shape of the long-run supply curve in a competitive market

Accepted Answer

A) downward sloping 
B) upward sloping 
C) horizontal 
D) vertical 
A) downward sloping 
B) upward sloping 
C) horizontal 
D) vertical

Market demand is given as Q_D= 200 - 3P.Market supply is given as Q_S= 2P + 100.Each identical firm has MC = 0.5Q and ATC = 0.25Q.What is each firm's profit

Figure 14-9 -Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).What will result from an increase in demand from Demand0 to DemanD₁

Why is a competitive firm's marginal-cost curve regarded as its supply curve

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

What is a characteristic of a perfectly competitive market

For a firm in a competitive market,marginal revenue is always equal to average revenue.

When a competitive firm triples the amount of output it sells,what is the result

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

Figure 14-6 -Refer to Figure 14-6.When a profit-maximizing firm is earning profits,what can identify those profits

Which of these curves is the competitive firm's supply curve

Market demand is given as Q_D= 300 - 5P.Market supply is given as Q_S= 5P.Each identical firm has MC = 6Q and ATC = 4Q.What quantity of output will a typical firm produce

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

If a firm in a competitive market reduces its output by 30 percent,what is the price of its output likely to do

To answer the question,"How much revenue does the farm receive for the typical litre of milk " a dairy farmer must be able to calculate sunk cost.

All of the following conditions are consistent with a firm's decision to shut down: TR < VC,TR/Q < VC/Q,and P < MR.(TR = total revenue,VC = variable cost,Q = level of production,P = price,and MR = marginal revenue.)

When fixed costs are ignored because they are irrelevant to a business's production decision,what are they called

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective.What do we assume the objective to be

When some resources used in production are only available in limited quantities,what is the likely shape of the long-run supply curve in a competitive 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 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 = 200 - 3P.Market supply is given as QS = 2P + 100.Each identical firm has MC = 0.5Q and ATC = 0.25Q.What is each firm's profit

Figure 14-9 -Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b).What will result from an increase in demand from Demand0 to DemanD₁

Why is a competitive firm's marginal-cost curve regarded as its supply curve

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

What is a characteristic of a perfectly competitive market

For a firm in a competitive market,marginal revenue is always equal to average revenue.

When a competitive firm triples the amount of output it sells,what is the result

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

Figure 14-6 -Refer to Figure 14-6.When a profit-maximizing firm is earning profits,what can identify those profits

Which of these curves is the competitive firm's supply curve

Market demand is given as QD = 300 - 5P.Market supply is given as QS = 5P.Each identical firm has MC = 6Q and ATC = 4Q.What quantity of output will a typical firm produce

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

If a firm in a competitive market reduces its output by 30 percent,what is the price of its output likely to do

To answer the question,"How much revenue does the farm receive for the typical litre of milk " a dairy farmer must be able to calculate sunk cost.

All of the following conditions are consistent with a firm's decision to shut down: TR < VC,TR/Q < VC/Q,and P < MR.(TR = total revenue,VC = variable cost,Q = level of production,P = price,and MR = marginal revenue.)

When fixed costs are ignored because they are irrelevant to a business's production decision,what are they called

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective.What do we assume the objective to be

When some resources used in production are only available in limited quantities,what is the likely shape of the long-run supply curve in a competitive 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 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= 200 - 3P.Market supply is given as Q_S= 2P + 100.Each identical firm has MC = 0.5Q and ATC = 0.25Q.What is each firm's profit

Market demand is given as Q_D= 300 - 5P.Market supply is given as Q_S= 5P.Each identical firm has MC = 6Q and ATC = 4Q.What quantity of output will a typical firm produce