Question 1

A market might have an upward-sloping long-run supply curve if

Accepted Answer

A)  firms have different costs. 
B)  consumers exercise market power over producers. 
C)  all factors of production are essentially available in unlimited supply. 
D)  the entry of new firms into the market has no effect on the cost structure of firms in the market. 
A)  firms have different costs. 
B)  consumers exercise market power over producers. 
C)  all factors of production are essentially available in unlimited supply. 
D)  the entry of new firms into the market has no effect on the cost structure of firms in the market.

Question 2

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

Accepted Answer

A)  increase the price of the product. 
B)  drive down profits of existing firms in the market. 
C)  shift the market supply curve to the left. 
D)  increase demand for the product. 
A)  increase the price of the product. 
B)  drive down profits of existing firms in the market. 
C)  shift the market supply curve to the left. 
D)  increase demand for the product.

Question 3

Figure 14-5  
-Refer to Figure 14-5.Firms will be earn losses in the short run but will remain in business if the market price

Accepted Answer

A)  exceeds P3. 
B)  is less than P1. 
C)  is greater than P1 but less than P3. 
D)  exceeds P2. 
A)  exceeds P3. 
B)  is less than P1. 
C)  is greater than P1 but less than P3. 
D)  exceeds P2.

Question 4

One of the defining characteristics of a perfectly competitive market is

Accepted Answer

A)  a small number of sellers. 
B)  a large number of buyers and a small number of sellers. 
C)  a similar product. 
D)  significant advertising by firms to promote their products. 
A)  a small number of sellers. 
B)  a large number of buyers and a small number of sellers. 
C)  a similar product. 
D)  significant advertising by firms to promote their products.

Question 5

Firms in a competitive market are said to be price takers because there are many sellers in the market and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A)  nuclear power 
B)  municipal water and sewer 
C)  dairy farming 
D)  airport security 
A)  nuclear power 
B)  municipal water and sewer 
C)  dairy farming 
D)  airport security

Question 7

Table 14-6
John's Vineyard
  
-Refer to Table 14-6.What is the marginal revenue from selling the 5th unit?

Accepted Answer

A)  $12 
B)  $68 
C)  $80 
D)  $480 
A)  $12 
B)  $68 
C)  $80 
D)  $480

Question 8

Which of the following statements is not correct?

Accepted Answer

A)  In a long-run equilibrium,firms must be operating at their efficient scale. 
B)  In the short run,the number of firms in an industry may be fixed. 
C)  In the long run,the number of firms can adjust to changing market conditions. 
D)  In the short run,firms must be operating at a level of output where price equals average variable cost. 
A)  In a long-run equilibrium,firms must be operating at their efficient scale. 
B)  In the short run,the number of firms in an industry may be fixed. 
C)  In the long run,the number of firms can adjust to changing market conditions. 
D)  In the short run,firms must be operating at a level of output where price equals average variable cost.

Question 9

Give two reasons why the long-run industry supply curve may slope upward.Use an example to demonstrate your reasons.

Accepted Answer

1)Some resource used in production may b

Question 10

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,which we assume to be

Accepted Answer

A)  maximizing total revenue. 
B)  maximizing profit. 
C)  minimizing variable cost. 
D)  minimizing average total cost. 
A)  maximizing total revenue. 
B)  maximizing profit. 
C)  minimizing variable cost. 
D)  minimizing average total cost.

Question 11

In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

Accepted Answer

A)  should exit the industry unless her economic profits are positive. 
B)  will earn zero accounting profits but positive economic profits. 
C)  will earn zero economic profits but positive accounting profits. 
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run. 
A)  should exit the industry unless her economic profits are positive. 
B)  will earn zero accounting profits but positive economic profits. 
C)  will earn zero economic profits but positive accounting profits. 
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.

Question 12

Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct?

Accepted Answer

A)  i)only 
B)  iii)only 
C)  i)and ii)only 
D)  i),ii),and iii) 
A)  i)only 
B)  iii)only 
C)  i)and ii)only 
D)  i),ii),and iii)

Question 13

Which of the following represents the firm's short-run condition for shutting down?

Accepted Answer

A)  shut down if TR < TC 
B)  shut down if TR < FC 
C)  shut down if P < ATC 
D)  shut down if TR < VC 
A)  shut down if TR < TC 
B)  shut down if TR < FC 
C)  shut down if P < ATC 
D)  shut down if TR < VC

Question 14

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

Accepted Answer

A)  under diseconomies of scale. 
B)  with small,but positive,levels of profit. 
C)  at their efficient scale. 
D)  where price is equal to average fixed cost. 
A)  under diseconomies of scale. 
B)  with small,but positive,levels of profit. 
C)  at their efficient scale. 
D)  where price is equal to average fixed cost.

Question 15

Table 14-4
  
-Refer to Table 14-4.A firm operating in a competitive market and facing the total costs listed in the table will not produce an output level beyond

Accepted Answer

A)  4 units. 
B)  5 units. 
C)  6 units. 
D)  7 units. 
A)  4 units. 
B)  5 units. 
C)  6 units. 
D)  7 units.

Question 16

Figure 14-9    
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b)and that panel (a)illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Accepted Answer

A)  Points A,B,and C represent both short-run and long-run equilibria points. 
B)  Points A,B,C,and D represent short-run equilibria points. 
C)  Points A and B represent long-run equilibria points. 
D)  Points A and C represent long-run equilibria points. 
A)  Points A,B,and C represent both short-run and long-run equilibria points. 
B)  Points A,B,C,and D represent short-run equilibria points. 
C)  Points A and B represent long-run equilibria points. 
D)  Points A and C represent long-run equilibria points.

Question 17

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

Accepted Answer

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

Question 18

In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A)  zero. 
B)  equal to the industry profits. 
C)  the market supply curve. 
D)  a horizontal line. 
A)  zero. 
B)  equal to the industry profits. 
C)  the market supply curve. 
D)  a horizontal line.

Question 19

Figure 14-9    
-Refer to Figure 14-9.When the market is in long-run equilibrium at point A in panel (b),the firm represented in panel (a)will

Accepted Answer

A)  have a zero economic profit. 
B)  have a negative accounting profit. 
C)  exit the market. 
D)  choose to increase production to increase profit. 
A)  have a zero economic profit. 
B)  have a negative accounting profit. 
C)  exit the market. 
D)  choose to increase production to increase profit.

Question 20

In a competitive market with free entry and exit,if all firms have the same cost structure,then

Accepted Answer

A)  all firms will operate at their efficient scale in the short run. 
B)  all firms will operate at their efficient scale in the long run. 
C)  the price of the product will differ across firms. 
D)  Both a and b are correct. 
A)  all firms will operate at their efficient scale in the short run. 
B)  all firms will operate at their efficient scale in the long run. 
C)  the price of the product will differ across firms. 
D)  Both a and b are correct.

Exam 14: Firms in Competitive Markets

A market might have an upward-sloping long-run supply curve if

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

Figure 14-5 -Refer to Figure 14-5.Firms will be earn losses in the short run but will remain in business if the market price

One of the defining characteristics of a perfectly competitive market is

Firms in a competitive market are said to be price takers because there are many sellers in the market and the goods offered by the firms are very similar if not identical.

Which of the following industries is most likely to exhibit the characteristic of free entry?

Table 14-6 John's Vineyard -Refer to Table 14-6.What is the marginal revenue from selling the 5th unit?

Which of the following statements is not correct?

Give two reasons why the long-run industry supply curve may slope upward.Use an example to demonstrate your reasons.

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,which we assume to be

In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

Suppose that a firm operating in perfectly competitive market sells 100 units of output.Its total revenues from the sale are $500.Which of the following statements is correct?

Which of the following represents the firm's short-run condition for shutting down?

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

Table 14-4 -Refer to Table 14-4.A firm operating in a competitive market and facing the total costs listed in the table will not produce an output level beyond

Figure 14-9 -Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b)and that panel (a)illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Figure 14-9 -Refer to Figure 14-9.When the market is in long-run equilibrium at point A in panel (b),the firm represented in panel (a)will

In a competitive market with free entry and exit,if all firms have the same cost structure,then

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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