Question 1

Comparing marginal revenue to marginal cost

Accepted Answer

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

Question 2

Table 14-3
The following table presents cost and revenue information for Soper's Port Vineyard.
  
-Refer to Table 14-3.What is the average revenue when 4 units are sold?

Accepted Answer

A)  $60 
B)  $120 
C)  $125 
D)  $197 
A)  $60 
B)  $120 
C)  $125 
D)  $197

Question 3

For a firm operating in a competitive industry,which of the following statements is not correct?

Accepted Answer

A)  Price equals average revenue. 
B)  Price equals marginal revenue. 
C)  Total revenue is constant. 
D)  Marginal revenue is constant. 
A)  Price equals average revenue. 
B)  Price equals marginal revenue. 
C)  Total revenue is constant. 
D)  Marginal revenue is constant.

Question 4

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Accepted Answer

A)  If marginal revenue is greater than marginal cost,the firm should increase its output. 
B)  If marginal revenue is less than marginal cost,the firm should shut down in the short run. 
C)  If marginal revenue equals marginal cost,the firm should produce exactly one more unit of output. 
D)  All of the above are correct. 
A)  If marginal revenue is greater than marginal cost,the firm should increase its output. 
B)  If marginal revenue is less than marginal cost,the firm should shut down in the short run. 
C)  If marginal revenue equals marginal cost,the firm should produce exactly one more unit of output. 
D)  All of the above are correct.

Question 5

In the long run,each firm in a competitive industry earns

Accepted Answer

A)  zero accounting profits. 
B)  zero economic profits. 
C)  positive economic profits. 
D)  positive,negative,or zero economic profits. 
A)  zero accounting profits. 
B)  zero economic profits. 
C)  positive economic profits. 
D)  positive,negative,or zero economic profits.

Question 6

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

Accepted Answer

A)  production of the 100th unit of output increases the firm's profit by $3. 
B)  production of the 100th unit of output increases the firm's average total cost by $7. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 99th unit of output must increase the firm's profit by less than $3. 
A)  production of the 100th unit of output increases the firm's profit by $3. 
B)  production of the 100th unit of output increases the firm's average total cost by $7. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 99th unit of output must increase the firm's profit by less than $3.

Question 7

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Accepted Answer

A)  is negative. 
B)  is at least zero. 
C)  is also zero. 
D)  could be positive,negative or zero. 
A)  is negative. 
B)  is at least zero. 
C)  is also zero. 
D)  could be positive,negative or zero.

Question 8

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

Accepted Answer

A)  have a negligible impact on the market price. 
B)  have little effect on market equilibrium quantity but will affect market equilibrium price. 
C)  affect marginal revenue and average revenue but not price. 
D)  adversely affect the profitability of more than one firm in the market. 
A)  have a negligible impact on the market price. 
B)  have little effect on market equilibrium quantity but will affect market equilibrium price. 
C)  affect marginal revenue and average revenue but not price. 
D)  adversely affect the profitability of more than one firm in the market.

Question 9

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)  total revenue must equal total cost for each firm. 
B)  economic profits must be zero. 
C)  price must equal the minimum of marginal cost for each firm. 
D)  Both a and b are correct. 
A)  total revenue must equal total cost for each firm. 
B)  economic profits must be zero. 
C)  price must equal the minimum of marginal cost for each firm. 
D)  Both a and b are correct.

Question 10

Figure 14-8
In the figure below,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 14-8.If at a market price of $1.75,52,500 units of output are supplied to this market,how many identical firms are participating in this market?

Accepted Answer

A)  75 
B)  100 
C)  250 
D)  300 
A)  75 
B)  100 
C)  250 
D)  300

Question 11

A competitive market is in long-run equilibrium.If demand increases,we can be certain that price will

Accepted Answer

A)  rise in the short run.Some firms will enter the industry.Price will then rise to reach the new long-run equilibrium. 
B)  rise in the short run.Some firms will enter the industry.Price will then fall to reach the new long-run equilibrium. 
C)  fall in the short run.All,some,or no firms will shut down,and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium. 
D)  not rise in the short run because firms will enter to maintain the price. 
A)  rise in the short run.Some firms will enter the industry.Price will then rise to reach the new long-run equilibrium. 
B)  rise in the short run.Some firms will enter the industry.Price will then fall to reach the new long-run equilibrium. 
C)  fall in the short run.All,some,or no firms will shut down,and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium. 
D)  not rise in the short run because firms will enter to maintain the price.

Question 12

The exit of existing firms from a competitive market will

Accepted Answer

A)  increase market supply and increase market price. 
B)  increase market supply and decrease market price. 
C)  decrease market supply and increase market price. 
D)  decrease market supply and decrease market price. 
A)  increase market supply and increase market price. 
B)  increase market supply and decrease market price. 
C)  decrease market supply and increase market price. 
D)  decrease market supply and decrease market price.

Question 13

When a competitive firm doubles the amount of output it sells,its

Accepted Answer

A)  total revenue doubles. 
B)  average revenue doubles. 
C)  marginal revenue doubles. 
D)  profits must increase. 
A)  total revenue doubles. 
B)  average revenue doubles. 
C)  marginal revenue doubles. 
D)  profits must increase.

Question 14

Table 14-6
John's Vineyard
  
-Refer to Table 14-6.What is the marginal revenue from selling the 1st unit?

Accepted Answer

A)  $30 
B)  $50 
C)  $80 
D)  $160 
A)  $30 
B)  $50 
C)  $80 
D)  $160

Question 15

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

Accepted Answer

A)  shut-down. 
B)  exit the industry. 
C)  stay open because shutting down would be more expensive. 
D)  stay open because the firm is making an economic profit. 
A)  shut-down. 
B)  exit the industry. 
C)  stay open because shutting down would be more expensive. 
D)  stay open because the firm is making an economic profit.

Question 16

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur

Question 17

A firm in a competitive market has the following cost structure:
 
If the firm's fixed cost of production is $3,and the market price is $10,how many units should the firm produce to maximize profit?

Accepted Answer

A)  1 unit 
B)  2 units 
C)  3 units 
D)  4 units 
A)  1 unit 
B)  2 units 
C)  3 units 
D)  4 units

Question 18

In the short run,a firm operating in a competitive industry will shut down if price is

Accepted Answer

A)  less than average total cost. 
B)  less than average variable cost. 
C)  greater than average variable cost but less than average total cost. 
D)  greater than marginal cost. 
A)  less than average total cost. 
B)  less than average variable cost. 
C)  greater than average variable cost but less than average total cost. 
D)  greater than marginal cost.

Question 19

Which of these curves is the competitive firm's short-run 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 20

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

Comparing marginal revenue to marginal cost

Table 14-3 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-3.What is the average revenue when 4 units are sold?

For a firm operating in a competitive industry,which of the following statements is not correct?

Which of the following statements best expresses a firm's profit-maximizing decision rule?

In the long run,each firm in a competitive industry earns

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that the

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

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

When firms are neither entering nor exiting a perfectly competitive market,

A competitive market is in long-run equilibrium.If demand increases,we can be certain that price will

The exit of existing firms from a competitive market will

When a competitive firm doubles the amount of output it sells,its

Table 14-6 John's Vineyard -Refer to Table 14-6.What is the marginal revenue from selling the 1st unit?

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

A firm in a competitive market has the following cost structure: If the firm's fixed cost of production is $3,and the market price is $10,how many units should the firm produce to maximize profit?

In the short run,a firm operating in a competitive industry will shut down if price is

Which of these curves is the competitive firm's short-run supply curve?

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable 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

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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