Question 1

Which equation is consistent for a competitive firm

Accepted Answer

A) Total revenue = Average revenue 
B) Total revenue = Marginal revenue 
C) Total cost = Marginal revenue 
D) Average revenue = Marginal revenue 
A) Total revenue = Average revenue 
B) Total revenue = Marginal revenue 
C) Total cost = Marginal revenue 
D) Average revenue = Marginal revenue

Question 2

For a firm in a perfectly competitive market,what must the price of the good always be

Accepted Answer

A) equal to marginal revenue 
B) equal to total revenue 
C) greater than average revenue 
D) less than average revenue 
A) equal to marginal revenue 
B) equal to total revenue 
C) greater than average revenue 
D) less than average revenue

Question 3

Are the decisions to shut down and exit a market short-run or long-run decisions

Accepted Answer

A) The decision to shut down and the decision to exit are both short-run decisions. 
B) The decision to shut down and the decision to exit are both long-run decisions. 
C) The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision. 
D) The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision. 
A) The decision to shut down and the decision to exit are both short-run decisions. 
B) The decision to shut down and the decision to exit are both long-run decisions. 
C) The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision. 
D) The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision.

Question 4

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 quantity of output will a typical firm produce

Accepted Answer

A) 2 
B) 4 
C) 10 
D) 40 
A) 2 
B) 4 
C) 10 
D) 40

Question 5

When marginal revenue for a firm equals marginal cost,what can be said about the firm

Accepted Answer

A) It should increase the level of production to maximize its profit. 
B) It may be minimizing its losses, rather than maximizing its profit. 
C) It must be generating economic profits. 
D) It must be generating economic losses. 
A) It should increase the level of production to maximize its profit. 
B) It may be minimizing its losses, rather than maximizing its profit. 
C) It must be generating economic profits. 
D) It must be generating economic losses.

Question 6

Figure 14-7
In the figure, panel (a) depicts the linear marginal cost of a firm in a competitive market and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.
  
-Refer to Figure 14-7.If there are 500 identical firms in this market,what level of output will be supplied to the market when the price is $1.00

Accepted Answer

A) 2000 
B) 5000 
C) 10,000 
D) 50,000 
A) 2000 
B) 5000 
C) 10,000 
D) 50,000

Question 7

Figure 14-9
  
-Refer to Figure 14-9.What would likely cause an increase in market supply from Supply0 to Supply1

Accepted Answer

A) existing firms changing their cost structure 
B) existing firms in the market increasing their level of production beyond Q₁ 
C) the entrance of new firms in the market 
D) existing firms adding new product lines 
A) existing firms changing their cost structure 
B) existing firms in the market increasing their level of production beyond Q₁ 
C) the entrance of new firms in the market 
D) existing firms adding new product lines

Question 8

By comparing the marginal revenue and marginal cost from each unit produced,a firm in a competitive market can determine the profit-maximizing level of production.

Accepted Answer

A) True 
 B)False

Question 9

The competitive firm's long-run supply curve is that portion of the marginal-cost curve that lies above which average cost

Accepted Answer

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

Question 10

Figure 14-2
  
-Refer to Figure 14-2.When price rises from P₂ to P₃,what does the firm find

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 zero profit. 
C) If it produces at output level Q₃ it will earn a positive profit. 
D) Expanding output to Q₃ would leave the firm with losses. 
A) Marginal cost exceeds marginal revenue at a production level of Q₂. 
B) If it produces at output level Q₃ it will earn a zero profit. 
C) If it produces at output level Q₃ it will earn a positive profit. 
D) Expanding output to Q₃ would leave the firm with losses.

Question 11

Which expression calculates the profit of a profit-maximizing firm

Accepted Answer

A) Profit = (Price of output - Average total cost) × Quantity of output 
B) Profit = (Price of output × Quantity of output) -Average total cost 
C) Profit = Total revenue - (Average fixed cost ÷ Quantity of output) 
D) Profit = Total revenue - (Average variable cost × Quantity of output) 
A) Profit = (Price of output - Average total cost) × Quantity of output 
B) Profit = (Price of output × Quantity of output) -Average total cost 
C) Profit = Total revenue - (Average fixed cost ÷ Quantity of output) 
D) Profit = Total revenue - (Average variable cost × Quantity of output)

Question 12

What will happen if new entrants to a competitive market have higher costs than existing firms

Accepted Answer

A) Accounting profits will be the primary signal for entrance. 
B) Sunk costs become an important determinant of short-run entrance strategy. 
C) Market price must be rising. 
D) New firms expect that their costs will decrease very quickly. 
A) Accounting profits will be the primary signal for entrance. 
B) Sunk costs become an important determinant of short-run entrance strategy. 
C) Market price must be rising. 
D) New firms expect that their costs will decrease very quickly.

Question 13

Which curve is a firm's short-run supply curve part of

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

Table 14-3
  
-Refer to Table 14-3.At what quantity of output is marginal revenue equal to marginal cost

Accepted Answer

A) 2 
B) 4 
C) 6 
D) 8 
A) 2 
B) 4 
C) 6 
D) 8

Question 15

Scenario 14-3
In March 2000, a study sponsored by the Food Consumer Safety Board found that consumption of irradiated grapefruit increased the health of laboratory rats.As a result of national press coverage of the report, the demand for irradiated grapefruit increased dramatically.Organic farmers were able to switch from organic production of grapefruit to irradiated production with no additional cost.Assume that the grapefruit market satisfies all of the attributes of perfect competition.
-Refer to Scenario 14-3.As a result of the increase in the demand for grapefruit,what would we predict in the short run

Accepted Answer

A) The production of grapefruit would be at efficient scale. 
B) The price of grapefruit would rise. 
C) The total cost for existing irradiated grapefruit producers must rise. 
D) New producers would enter the market. 
A) The production of grapefruit would be at efficient scale. 
B) The price of grapefruit would rise. 
C) The total cost for existing irradiated grapefruit producers must rise. 
D) New producers would enter the market.

Question 16

Susan quit her job as a teacher,which paid her $48,000 per year,in order to start her own catering business.She spent $12,000 of her savings,which had been earning 10 percent interest per year,on equipment for her business.She also borrowed $12,000 from her bank at 10 percent interest per year,which she also spent on equipment.For the past several months she has spent $1000 per month on ingredients and other variable costs.Also,for the past several months she has taken in $4700 in monthly revenue.What should Susan do in the short run and the long run

Accepted Answer

A) In the short run, Susan should shut down her business, and in the long run, she should exit the industry. 
B) In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. 
C) In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. 
D) In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium. 
A) In the short run, Susan should shut down her business, and in the long run, she should exit the industry. 
B) In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. 
C) In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. 
D) In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.

Question 17

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.What are Mary's opportunity costs of operating her new business

Accepted Answer

A) $25,000 
B) $75,000 
C) $100,000 
D) $155,000 
A) $25,000 
B) $75,000 
C) $100,000 
D) $155,000

Question 18

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.To maximize its profit,what should the firm do

Accepted Answer

A) It should shut down. 
B) It should decrease its output, but continue to produce. 
C) It should continue to produce 1000 units. 
D) It should increase its output. 
A) It should shut down. 
B) It should decrease its output, but continue to produce. 
C) It should continue to produce 1000 units. 
D) It should increase its output.

Question 19

A profit-maximizing firm in a competitive market is currently producing 100 units of output.It has average revenue of $10,and its average total cost is $9.Does the firm have profits or losses

Accepted Answer

A) The firm has a loss of $100. 
B) The firm has a profit of $100. 
C) The firm has a loss of $200. 
D) The firm has a profit of $200. 
A) The firm has a loss of $100. 
B) The firm has a profit of $100. 
C) The firm has a loss of $200. 
D) The firm has a profit of $200.

Question 20

Market demand is given as QD = 200 - P.Market supply is given as QS = 4P + 100.Each identical firm has MC = 4Q and ATC = 2Q.What is a firm's average total cost

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20 
A) 5 
B) 10 
C) 15 
D) 20

Which equation is consistent for a competitive firm

For a firm in a perfectly competitive market,what must the price of the good always be

Are the decisions to shut down and exit a market short-run or long-run decisions

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 quantity of output will a typical firm produce

When marginal revenue for a firm equals marginal cost,what can be said about the firm

Figure 14-9 -Refer to Figure 14-9.What would likely cause an increase in market supply from Supply0 to Supply1

By comparing the marginal revenue and marginal cost from each unit produced,a firm in a competitive market can determine the profit-maximizing level of production.

The competitive firm's long-run supply curve is that portion of the marginal-cost curve that lies above which average cost

Figure 14-2 -Refer to Figure 14-2.When price rises from P₂ to P₃,what does the firm find

Which expression calculates the profit of a profit-maximizing firm

What will happen if new entrants to a competitive market have higher costs than existing firms

Which curve is a firm's short-run supply curve part of

Table 14-3 -Refer to Table 14-3.At what quantity of output is marginal revenue equal to marginal 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.To maximize its profit,what should the firm do

A profit-maximizing firm in a competitive market is currently producing 100 units of output.It has average revenue of $10,and its average total cost is $9.Does the firm have profits or losses

Market demand is given as Q_D= 200 - P.Market supply is given as Q_S= 4P + 100.Each identical firm has MC = 4Q and ATC = 2Q.What is a firm's average total cost

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

Which equation is consistent for a competitive firm

For a firm in a perfectly competitive market,what must the price of the good always be

Are the decisions to shut down and exit a market short-run or long-run decisions

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 quantity of output will a typical firm produce

When marginal revenue for a firm equals marginal cost,what can be said about the firm

Figure 14-9 -Refer to Figure 14-9.What would likely cause an increase in market supply from Supply0 to Supply1

By comparing the marginal revenue and marginal cost from each unit produced,a firm in a competitive market can determine the profit-maximizing level of production.

The competitive firm's long-run supply curve is that portion of the marginal-cost curve that lies above which average cost

Figure 14-2 -Refer to Figure 14-2.When price rises from P₂ to P₃,what does the firm find

Which expression calculates the profit of a profit-maximizing firm

What will happen if new entrants to a competitive market have higher costs than existing firms

Which curve is a firm's short-run supply curve part of

Table 14-3 -Refer to Table 14-3.At what quantity of output is marginal revenue equal to marginal 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.To maximize its profit,what should the firm do

A profit-maximizing firm in a competitive market is currently producing 100 units of output.It has average revenue of $10,and its average total cost is $9.Does the firm have profits or losses

Market demand is given as QD = 200 - P.Market supply is given as QS = 4P + 100.Each identical firm has MC = 4Q and ATC = 2Q.What is a firm's average total cost

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= 110 - 2P.Market supply is given as Q_S= 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What quantity of output will a typical firm produce

Market demand is given as Q_D= 200 - P.Market supply is given as Q_S= 4P + 100.Each identical firm has MC = 4Q and ATC = 2Q.What is a firm's average total cost