Question 1

When new firms have an incentive to enter a competitive market,which effect will their entry have

Accepted Answer

A) It will increase the price of the product. 
B) It will drive down profits of existing firms in the market. 
C) It will shift the market supply curve to the left. 
D) It will increase existing firms' average costs. 
A) It will increase the price of the product. 
B) It will drive down profits of existing firms in the market. 
C) It will shift the market supply curve to the left. 
D) It will increase existing firms' average costs.

Question 2

In the long run,a competitive market with 1000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 3

In a market that allows free entry and exit,when does the process of entry and exit end for the typical firm in the market

Accepted Answer

A) when economic profit is zero 
B) when total revenue is equal to average total cost 
C) when average revenue exceeds marginal cost 
D) when accounting profit is zero 
A) when economic profit is zero 
B) when total revenue is equal to average total cost 
C) when average revenue exceeds marginal cost 
D) when accounting profit is zero

Question 4

Managers of a firm think at the margin and make incremental adjustments to the level of production.For the managers to be satisfied with the correct level of production,what must result

Accepted Answer

A) average variable cost exceeds marginal cost 
B) total cost is less than average revenue 
C) costs are minimized 
D) profit is maximized 
A) average variable cost exceeds marginal cost 
B) total cost is less than average revenue 
C) costs are minimized 
D) profit is maximized

Question 5

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell

Question 6

What will change for a perfectly competitive firm if there are changes in its output without any change in the price of the product

Accepted Answer

A) total revenue 
B) marginal revenue 
C) average revenue 
D) marginal cost 
A) total revenue 
B) marginal revenue 
C) average revenue 
D) marginal cost

Question 7

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided

Question 8

Which statement does NOT reflect a price-taking firm

Accepted Answer

A) If the firm were to charge more than the going price, it would sell none of its goods. 
B) The firm has no incentive to charge less than the going price. 
C) The firm can sell as much as it wants to sell at the going price. 
D) Consumers have a major impact on price, not firms. 
A) If the firm were to charge more than the going price, it would sell none of its goods. 
B) The firm has no incentive to charge less than the going price. 
C) The firm can sell as much as it wants to sell at the going price. 
D) Consumers have a major impact on price, not firms.

Question 9

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 profit

Accepted Answer

A) $0.00 
B) $18.75 
C) $25.00 
D) $50.00 
A) $0.00 
B) $18.75 
C) $25.00 
D) $50.00

Question 10

Figure 14-6
  
-Refer to Figure 14-6.When market price is P₁,which area represents a profit-maximizing firm's total revenue

Accepted Answer

A) P₁ × Q₂ 
B) P₁ × Q₃ 
C) P₂ × Q₂ 
D) P₂ × Q₃ 
A) P₁ × Q₂ 
B) P₁ × Q₃ 
C) P₂ × Q₂ 
D) P₂ × Q₃

Question 11

When firms have an incentive to exit a competitive market,which effect will their exit have

Accepted Answer

A) It will lower market price. 
B) It will necessarily raise the costs of firms that remain in the market. 
C) It will raise profits for firms that remain in the market. 
D) It will shift the market supply curve to the right. 
A) It will lower market price. 
B) It will necessarily raise the costs of firms that remain in the market. 
C) It will raise profits for firms that remain in the market. 
D) It will shift the market supply curve to the right.

Question 12

A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price.

Accepted Answer

A) True 
 B)False

Question 13

Whenever a perfectly competitive firm chooses to change its level of output,holding the price of the product constant,what happens to its marginal revenue

Accepted Answer

A) It increases if MR  ATC. 
B) It does not change. 
C) It increases. 
D) It decreases. 
A) It increases if MR  ATC. 
B) It does not change. 
C) It increases. 
D) It decreases.

Question 14

News reports from Western Canada occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.Assuming that this is rational behaviour by profit-maximizing "firms," explain what economic factors may influence such behaviour.

Accepted Answer

If the selling price is not su

Question 15

A firm's marginal cost has a minimum value of $2; its average variable cost has a minimum value of $5; and its average total cost has a minimum value of $7.At what product price will the firm shut down

Accepted Answer

A) below $5 
B) above $10 
C) above $11 
D) above $12 
A) below $5 
B) above $10 
C) above $11 
D) above $12

Question 16

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 profit

Accepted Answer

A) $4 
B) $32 
C) $48 
D) $80 
A) $4 
B) $32 
C) $48 
D) $80

Question 17

When existing firms in a competitive market are profitable,which of the following has an incentive

Accepted Answer

A) new firms to seek government subsidies that would allow them to enter the market 
B) new firms to enter the market, even without government subsidies 
C) existing firms to raise prices 
D) existing firms to increase production 
A) new firms to seek government subsidies that would allow them to enter the market 
B) new firms to enter the market, even without government subsidies 
C) existing firms to raise prices 
D) existing firms to increase production

Question 18

A firm is selling its product in a perfectly competitive market,and the price for its product is $10.Fill in the following table for the columns of price,total revenue,profit,marginal revenue,and marginal cost.If this firm is maximizing profit,how many units of output should it produce

Accepted Answer

@#IMG-DLM& Since at the profit-maximizin

Question 19

A competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,what can we be certain will happen in the short run

Accepted Answer

A) At least some firms will shut down. 
B) Price will fall below marginal cost. 
C) Price will fall below average total cost. 
D) At least some firms will exit the industry. 
A) At least some firms will shut down. 
B) Price will fall below marginal cost. 
C) Price will fall below average total cost. 
D) At least some firms will exit the industry.

Question 20

When will a profit-maximizing firm shut down in the short run

Accepted Answer

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

Exam 14: Firms in Competitive Markets

When new firms have an incentive to enter a competitive market,which effect will their entry have

In the long run,a competitive market with 1000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

In a market that allows free entry and exit,when does the process of entry and exit end for the typical firm in the market

Managers of a firm think at the margin and make incremental adjustments to the level of production.For the managers to be satisfied with the correct level of production,what must result

List and describe the characteristics of a perfectly competitive market.

What will change for a perfectly competitive firm if there are changes in its output without any change in the price of the product

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Which statement does NOT reflect a price-taking firm

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 profit

Figure 14-6 -Refer to Figure 14-6.When market price is P₁,which area represents a profit-maximizing firm's total revenue

When firms have an incentive to exit a competitive market,which effect will their exit have

A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price.

Whenever a perfectly competitive firm chooses to change its level of output,holding the price of the product constant,what happens to its marginal revenue

A firm's marginal cost has a minimum value of $2; its average variable cost has a minimum value of $5; and its average total cost has a minimum value of $7.At what product price will the firm shut down

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 profit

When existing firms in a competitive market are profitable,which of the following has an incentive

A firm is selling its product in a perfectly competitive market,and the price for its product is $10.Fill in the following table for the columns of price,total revenue,profit,marginal revenue,and marginal cost.If this firm is maximizing profit,how many units of output should it produce

A competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,what can we be certain will happen in the short run

When will a profit-maximizing firm shut down in the short run

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= 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 profit

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 profit