Question 1

Table 14-5
  
-Refer to Table 14-5.The maximum profit available to this firm is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $4. 
D)  $5. 
A)  $2. 
B)  $3. 
C)  $4. 
D)  $5.

Question 2

Why does a firm in a competitive industry charge the market price?

Accepted Answer

A)  If a firm charges less than the market price,it loses potential revenue. 
B)  If a firm charges more than the market price,it loses all its customers to other firms. 
C)  The firm can sell as many units of output as it want to at the market price. 
D)  All of the above are correct. 
A)  If a firm charges less than the market price,it loses potential revenue. 
B)  If a firm charges more than the market price,it loses all its customers to other firms. 
C)  The firm can sell as many units of output as it want to at the market price. 
D)  All of the above are correct.

Question 3

Table 14-8
The following table presents cost and revenue information for Soper's Port Vineyard.
  
-Refer to Table 14-8.What is the marginal cost of the 8th unit?

Accepted Answer

A)  $0 
B)  $100 
C)  $120 
D)  $140 
A)  $0 
B)  $100 
C)  $120 
D)  $140

Question 4

Figure 14-6  
-Refer to Figure 14-6.Which line segment best reflects the short-run supply curve for this firm?

Accepted Answer

A)  ABCF 
B)  CD 
C)  DF 
D)  BCD 
A)  ABCF 
B)  CD 
C)  DF 
D)  BCD

Question 5

When economists refer to a production cost that has already been committed and cannot be recovered,they use the term

Accepted Answer

A)  implicit cost. 
B)  explicit cost. 
C)  variable cost. 
D)  sunk cost. 
A)  implicit cost. 
B)  explicit cost. 
C)  variable cost. 
D)  sunk cost.

Question 6

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants,which of the following is most likely to arise?

Accepted Answer

A)  The long-run market supply curve will be upward sloping. 
B)  The condition of free entry into the market will be violated. 
C)  Producer profits will fall in the long run. 
D)  The long-run market supply curve will be horizontal as new firms enter and drive the price downward. 
A)  The long-run market supply curve will be upward sloping. 
B)  The condition of free entry into the market will be violated. 
C)  Producer profits will fall in the long run. 
D)  The long-run market supply curve will be horizontal as new firms enter and drive the price downward.

Question 7

Scenario 14-4
A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats.As a result of national press coverage of the report,the demand for irradiated tomatoes increased dramatically.Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost.Assume that the tomato market satisfies all of the assumptions of perfect competition.
-Refer to Scenario 14-4.As a result of the increase in the demand for tomatoes,we would predict that in the short run that the

Accepted Answer

A)  production of tomatoes would be at efficient scale. 
B)  price of tomatoes would rise. 
C)  total cost for existing irradiated tomato producers must rise. 
D)  number of firms in the market would fall as prices fall and firms exit the market. 
A)  production of tomatoes would be at efficient scale. 
B)  price of tomatoes would rise. 
C)  total cost for existing irradiated tomato producers must rise. 
D)  number of firms in the market would fall as prices fall and firms exit the market.

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

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $300.In order to maximize profits,Laura should

Accepted Answer

A)  make more than 20 wedding cakes per month. 
B)  make fewer than 20 wedding cakes per month. 
C)  continue to make 20 wedding cakes per month. 
D)  We do not have enough information with which to answer the question. 
A)  make more than 20 wedding cakes per month. 
B)  make fewer than 20 wedding cakes per month. 
C)  continue to make 20 wedding cakes per month. 
D)  We do not have enough information with which to answer the question.

Question 10

Table 14-7
  
-Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?

Accepted Answer

A)  decrease quantity to 13 units 
B)  increase quantity to 17 units 
C)  continue to operate at 14 units 
D)  increase quantity to 16 units 
A)  decrease quantity to 13 units 
B)  increase quantity to 17 units 
C)  continue to operate at 14 units 
D)  increase quantity to 16 units

Question 11

In the short run,a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Accepted Answer

A) True 
 B)False

Question 12

When a resource used in the production of a good sold in a competitive market is available in only limited quantities,the long-run supply curve is likely to be upward sloping.

Accepted Answer

A) True 
 B)False

Question 13

Table 14-5
  
-Refer to Table 14-5.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A)  $6. 
B)  $7. 
C)  $8. 
D)  $9. 
A)  $6. 
B)  $7. 
C)  $8. 
D)  $9.

Question 14

Suppose that in a competitive market the equilibrium price is $2.50.What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

A)  less than $2.50 
B)  more than $2.50 
C)  exactly $2.50 
D)  The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm. 
A)  less than $2.50 
B)  more than $2.50 
C)  exactly $2.50 
D)  The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.

Question 15

Table 14-2
  
-Refer to Table 14-2.The price and quantity relationship in the table is most likely that faced by a firm in a

Accepted Answer

A)  monopoly. 
B)  concentrated market. 
C)  competitive market. 
D)  strategic market. 
A)  monopoly. 
B)  concentrated market. 
C)  competitive market. 
D)  strategic market.

Question 16

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are

Question 17

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 18

Firms operating in competitive markets produce output levels where marginal revenue equals

Accepted Answer

A)  price. 
B)  average revenue. 
C)  total revenue divided by output. 
D)  All of the above are correct. 
A)  price. 
B)  average revenue. 
C)  total revenue divided by output. 
D)  All of the above are correct.

Question 19

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 20

Figure 14-7  
-Refer to Figure 14-7.Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)  ABCD 
B)  BC 
C)  ABC 
D)  None of the above is correct.We must know the firm's average variable cost. 
A)  ABCD 
B)  BC 
C)  ABC 
D)  None of the above is correct.We must know the firm's average variable cost.

Exam 14: Firms in Competitive Markets

Table 14-5 -Refer to Table 14-5.The maximum profit available to this firm is

Why does a firm in a competitive industry charge the market price?

Table 14-8 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-8.What is the marginal cost of the 8th unit?

Figure 14-6 -Refer to Figure 14-6.Which line segment best reflects the short-run supply curve for this firm?

When economists refer to a production cost that has already been committed and cannot be recovered,they use the term

When a competitive market experiences an increase in demand that increases production costs for existing firms and potential new entrants,which of the following is most likely to arise?

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.

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $300.In order to maximize profits,Laura should

Table 14-7 -Refer to Table 14-7.If the firm is currently producing 14 units,what would you advise the owners?

In the short run,a firm should exit the industry if its marginal cost exceeds its marginal revenue.

When a resource used in the production of a good sold in a competitive market is available in only limited quantities,the long-run supply curve is likely to be upward sloping.

Table 14-5 -Refer to Table 14-5.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

Suppose that in a competitive market the equilibrium price is $2.50.What is marginal revenue for the last unit sold by the typical firm in this market?

Table 14-2 -Refer to Table 14-2.The price and quantity relationship in the table is most likely that faced by a firm in a

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

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

Firms operating in competitive markets produce output levels where marginal revenue equals

A competitive market will typically experience entry and exit until accounting profits are zero.

Figure 14-7 -Refer to Figure 14-7.Which line segment best reflects the long-run supply curve for this firm?

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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