Question 1

What does a firm that exits its market still have to pay

Accepted Answer

A) its variable costs 
B) its fixed costs 
C) its marginal costs 
D) no costs 
A) its variable costs 
B) its fixed costs 
C) its marginal costs 
D) no costs

Question 2

Figure 14-2
  
-Refer to Figure 14-2.Which statement best reflects the situation faced by the firm when price falls from P4 to P₂

Accepted Answer

A) The firm will suffer a loss equal to (P4 - P₂) × Q₂. 
B) The firm will earn profit equal to (P4 - P₂) × Q₂. 
C) Marginal revenue is now lower than marginal cost at the previous level of output (Q₄), so it decreases production. 
D) Marginal revenue is now higher than marginal cost at the previous level of output (Q₄), so it increases production. 
A) The firm will suffer a loss equal to (P4 - P₂) × Q₂. 
B) The firm will earn profit equal to (P4 - P₂) × Q₂. 
C) Marginal revenue is now lower than marginal cost at the previous level of output (Q₄), so it decreases production. 
D) Marginal revenue is now higher than marginal cost at the previous level of output (Q₄), so it increases production.

Question 3

Table 14-1
 
-Refer to Table 14-1.If the firm doubles its output from 3 to 6 units,what will happen to total revenue

Accepted Answer

A) It will increase by less than $45. 
B) It will increase by exactly $45. 
C) It will decrease by exactly $45. 
D) It will decrease by less than $45. 
A) It will increase by less than $45. 
B) It will increase by exactly $45. 
C) It will decrease by exactly $45. 
D) It will decrease by less than $45.

Question 4

Figure 14-1
  
-Refer to Figure 14-1.When price is equal to P₃,at what level of output will the profit-maximizing firm produce

Accepted Answer

A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄

Question 5

The supply curve of a firm in a competitive market is the average-variable-cost curve,above the minimum of marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Market demand is given as QD = 140 - 4P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 2Q.What is a firm's average total cost

Accepted Answer

A) $5 
B) $8 
C) $15 
D) $20 
A) $5 
B) $8 
C) $15 
D) $20

Question 7

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 = 999,what is the firm's total cost

Accepted Answer

A) $10,985 
B) $10,990 
C) $10,995 
D) $10,999 
A) $10,985 
B) $10,990 
C) $10,995 
D) $10,999

Question 8

What will happen when new firms enter a perfectly competitive market

Accepted Answer

A) Profits of existing firms will fall. 
B) Entering firms will earn zero profit as soon as they enter. 
C) Existing firms will see their costs rise. 
D) Consumers will likely observe increasing prices. 
A) Profits of existing firms will fall. 
B) Entering firms will earn zero profit as soon as they enter. 
C) Existing firms will see their costs rise. 
D) Consumers will likely observe increasing prices.

Question 9

Table 14-3
  
-Refer to Table 14-3.If this firm chooses to maximize profit,it will choose a level of output where marginal cost is equal to what dollar amount

Accepted Answer

A) $18 
B) $20 
C) $22 
D) $24 
A) $18 
B) $20 
C) $22 
D) $24

Question 10

Market demand is given as QD = 75 - 2P.Market supply is given as QS = 2P + 15.Each identical firm has MC = 3Q and ATC = 2Q.What is a firm's average total cost

Accepted Answer

A) $4.50 
B) $5.00 
C) $10.00 
D) $15.00 
A) $4.50 
B) $5.00 
C) $10.00 
D) $15.00

Question 11

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 is a firm's profit

Accepted Answer

A) $25 
B) $50 
C) $100 
D) $150 
A) $25 
B) $50 
C) $100 
D) $150

Question 12

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

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 13

Market demand is given as QD = 60 - P.Market supply is given as QS = 3P.Each identical firm has MC = 3Q and ATC = 1.5Q.What is a firm's average total cost

Accepted Answer

A) $1.50 
B) $5.00 
C) $7.50 
D) $15.00 
A) $1.50 
B) $5.00 
C) $7.50 
D) $15.00

Question 14

When price is below average variable cost in the short run,what will a firm in a competitive market do

Accepted Answer

A) It will shut down and incur fixed costs. 
B) It will shut down and incur both variable and fixed costs. 
C) It will continue to operate as long as average revenue exceeds marginal cost. 
D) It will continue to operate as long as average revenue exceeds average fixed cost. 
A) It will shut down and incur fixed costs. 
B) It will shut down and incur both variable and fixed costs. 
C) It will continue to operate as long as average revenue exceeds marginal cost. 
D) It will continue to operate as long as average revenue exceeds average fixed cost.

Question 15

Table 14-1
 
-Refer to Table 14-1.What is the marginal revenue

Accepted Answer

A) $0 
B) $9 
C) $15 
D) $126 
A) $0 
B) $9 
C) $15 
D) $126

Question 16

The intersection of a firm's marginal-revenue and marginal-cost curves determines the level of output such that which of the following is the case

Accepted Answer

A) Profit is maximized where total revenue is equal to variable cost. 
B) Profit is maximized where the difference between marginal revenue and marginal cost is the largest. 
C) Profit is maximized where total revenue is equal to total cost. 
D) Profit is maximized where the difference between total revenue and total cost is the largest. 
A) Profit is maximized where total revenue is equal to variable cost. 
B) Profit is maximized where the difference between marginal revenue and marginal cost is the largest. 
C) Profit is maximized where total revenue is equal to total cost. 
D) Profit is maximized where the difference between total revenue and total cost is the largest.

Question 17

What are the relationships between price and quantity if ABC Company sells its product in a competitive market

Accepted Answer

A) The price of that product depends on the quantity of the product that ABC Company produces and sells. 
B) ABC Company's total revenue is equal to the price of its product multiplied by its quantity of output. 
C) ABC Company's total cost is equal to the price of its product multiplied by its quantity of output. 
D) The quantity of the product that ABC Company produces and sells depends on the price of the product. 
A) The price of that product depends on the quantity of the product that ABC Company produces and sells. 
B) ABC Company's total revenue is equal to the price of its product multiplied by its quantity of output. 
C) ABC Company's total cost is equal to the price of its product multiplied by its quantity of output. 
D) The quantity of the product that ABC Company produces and sells depends on the price of the product.

Question 18

What is likely to happen when firms in a competitive market have different costs

Accepted Answer

A) Free entry and exit in the market is likely to be violated. 
B) The market will no longer be considered competitive. 
C) Long-run market supply will be downward sloping. 
D) Some firms will earn economic profits in the long run. 
A) Free entry and exit in the market is likely to be violated. 
B) The market will no longer be considered competitive. 
C) Long-run market supply will be downward sloping. 
D) Some firms will earn economic profits in the long run.

Question 19

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Accepted Answer

A) True 
 B)False

Question 20

In a competitive market,what impact will the actions of any single buyer or seller have

Accepted Answer

A) They will have a negligible impact on the market price. 
B) They will have little effect on overall production but will ultimately change final product price. 
C) They will cause a noticeable change in overall production and a change in final product price. 
D) They will affect the profitability of other firms and have an impact on the market price. 
A) They will have a negligible impact on the market price. 
B) They will have little effect on overall production but will ultimately change final product price. 
C) They will cause a noticeable change in overall production and a change in final product price. 
D) They will affect the profitability of other firms and have an impact on the market price.

Exam 14: Firms in Competitive Markets

What does a firm that exits its market still have to pay

Figure 14-2 -Refer to Figure 14-2.Which statement best reflects the situation faced by the firm when price falls from P4 to P₂

Table 14-1 -Refer to Table 14-1.If the firm doubles its output from 3 to 6 units,what will happen to total revenue

Figure 14-1 -Refer to Figure 14-1.When price is equal to P₃,at what level of output will the profit-maximizing firm produce

The supply curve of a firm in a competitive market is the average-variable-cost curve,above the minimum of marginal cost.

Market demand is given as QD = 140 - 4P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 2Q.What is a firm's average total cost

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 = 999,what is the firm's total cost

What will happen when new firms enter a perfectly competitive market

Table 14-3 -Refer to Table 14-3.If this firm chooses to maximize profit,it will choose a level of output where marginal cost is equal to what dollar amount

Market demand is given as QD = 75 - 2P.Market supply is given as QS = 2P + 15.Each identical firm has MC = 3Q and ATC = 2Q.What is a firm's average total cost

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 is a firm's profit

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

Market demand is given as QD = 60 - P.Market supply is given as QS = 3P.Each identical firm has MC = 3Q and ATC = 1.5Q.What is a firm's average total cost

When price is below average variable cost in the short run,what will a firm in a competitive market do

Table 14-1 -Refer to Table 14-1.What is the marginal revenue

The intersection of a firm's marginal-revenue and marginal-cost curves determines the level of output such that which of the following is the case

What are the relationships between price and quantity if ABC Company sells its product in a competitive market

What is likely to happen when firms in a competitive market have different costs

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

In a competitive market,what impact will the actions of any single buyer or seller have

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= 140 - 4P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 2Q.What is a firm's average total cost

Market demand is given as Q_D= 75 - 2P.Market supply is given as Q_S= 2P + 15.Each identical firm has MC = 3Q and ATC = 2Q.What is a firm's average total cost

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 is a firm's profit

Market demand is given as Q_D= 60 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 3Q and ATC = 1.5Q.What is a firm's average total cost