Question 1

Table 14-6
John's Vineyard
  
-Refer to Table 14-6.At what quantity does John's Vineyard maximize profits?

Accepted Answer

A)  3 
B)  6 
C)  7 
D)  8 
A)  3 
B)  6 
C)  7 
D)  8

Question 2

In the short-run,a firm's supply curve is equal to the

Accepted Answer

A)  marginal cost curve above its average variable cost curve. 
B)  marginal cost curve above its average total cost curve. 
C)  average variable cost curve above its marginal cost curve. 
D)  average total cost curve above its marginal cost curve. 
A)  marginal cost curve above its average variable cost curve. 
B)  marginal cost curve above its average total cost curve. 
C)  average variable cost curve above its marginal cost curve. 
D)  average total cost curve above its marginal cost curve.

Question 3

A firm in a competitive market has the following cost structure:
 
If the market price is $8,how many units should the firm produce to maximize profit?

Accepted Answer

A)  5 units 
B)  6 units 
C)  7 units 
D)  8 units 
A)  5 units 
B)  6 units 
C)  7 units 
D)  8 units

Question 4

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $20 and its average total cost equals $25.The firm sells its output for $30 per unit.
-Refer to Scenario 14-2.At Q = 999,the firm's total cost amounts to

Accepted Answer

A)  $24,970. 
B)  $24,975. 
C)  $24,980. 
D)  $25,025. 
A)  $24,970. 
B)  $24,975. 
C)  $24,980. 
D)  $25,025.

Question 5

When buyers in a competitive market take the selling price as given,they are said to be

Accepted Answer

A)  market entrants. 
B)  monopolists. 
C)  free riders. 
D)  price takers. 
A)  market entrants. 
B)  monopolists. 
C)  free riders. 
D)  price takers.

Question 6

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 $200.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 7

A long-run supply curve is flatter than a short-run supply curve because

Accepted Answer

A)  firms can enter and exit a market more easily in the long run than in the short run. 
B)  long-run supply curves are sometimes downward sloping. 
C)  competitive firms have more control over demand in the long run. 
D)  firms in a competitive market face identical cost structures. 
A)  firms can enter and exit a market more easily in the long run than in the short run. 
B)  long-run supply curves are sometimes downward sloping. 
C)  competitive firms have more control over demand in the long run. 
D)  firms in a competitive market face identical cost structures.

Question 8

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

Table 14-3
The following table presents cost and revenue information for Soper's Port Vineyard.
  
-Refer to Table 14-3.What is the total revenue from selling 7 units?

Accepted Answer

A)  $120 
B)  $490 
C)  $562 
D)  $840 
A)  $120 
B)  $490 
C)  $562 
D)  $840

Question 10

When profit-maximizing firms in competitive markets are earning profits,

Accepted Answer

A)  market demand must exceed market supply at the market equilibrium price. 
B)  market supply must exceed market demand at the market equilibrium price. 
C)  new firms will enter the market. 
D)  the most inefficient firms will be encouraged to leave the market. 
A)  market demand must exceed market supply at the market equilibrium price. 
B)  market supply must exceed market demand at the market equilibrium price. 
C)  new firms will enter the market. 
D)  the most inefficient firms will be encouraged to leave the market.

Question 11

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each.Which of the following statements is correct?

Accepted Answer

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

Question 12

Figure 14-7  
-Refer to Figure 14-7.This firm will exit the market for any price on the line segment

Accepted Answer

A)  AB. 
B)  BC. 
C)  CD. 
D)  None of the above is correct. 
A)  AB. 
B)  BC. 
C)  CD. 
D)  None of the above is correct.

Question 13

Figure 14-3  
-Refer to Figure 14-3.When price rises from P2 to P3,the firm finds that

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 positive profit. 
C)  expanding output to Q4 would leave the firm with losses. 
D)  it could increase profits by lowering output from Q3 to Q2. 
A)  marginal cost exceeds marginal revenue at a production level of Q2. 
B)  if it produces at output level Q3 it will earn a positive profit. 
C)  expanding output to Q4 would leave the firm with losses. 
D)  it could increase profits by lowering output from Q3 to Q2.

Question 14

When a perfectly competitive firm decides to shut down,it is most likely that

Accepted Answer

A)  marginal cost is above average variable cost. 
B)  marginal cost is above average total cost. 
C)  price is below the firm's average variable cost. 
D)  fixed costs exceed variable costs. 
A)  marginal cost is above average variable cost. 
B)  marginal cost is above average total cost. 
C)  price is below the firm's average variable cost. 
D)  fixed costs exceed variable costs.

Question 15

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Accepted Answer

A)  $9 
B)  $10 
C)  $11 
D)  $12 
A)  $9 
B)  $10 
C)  $11 
D)  $12

Question 16

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11.It follows that the

Accepted Answer

A)  production of the 100th unit of output increases the firm's profit by $1. 
B)  production of the 100th unit of output increases the firm's average total cost by $1. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 110th unit of output must increase the firm's profit by less than $1. 
A)  production of the 100th unit of output increases the firm's profit by $1. 
B)  production of the 100th unit of output increases the firm's average total cost by $1. 
C)  firm's profit-maximizing level of output is less than 100 units. 
D)  production of the 110th unit of output must increase the firm's profit by less than $1.

Question 17

Free entry means that

Accepted Answer

A)  the government pays any entry costs for individual firms. 
B)  no legal barriers prevent a firm from entering an industry. 
C)  a firm's marginal cost is zero. 
D)  a firm has no fixed costs in the short run. 
A)  the government pays any entry costs for individual firms. 
B)  no legal barriers prevent a firm from entering an industry. 
C)  a firm's marginal cost is zero. 
D)  a firm has no fixed costs in the short run.

Question 18

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 there are 400 identical firms in this market,what is the value of Q2?

Accepted Answer

A)  4,000 
B)  8,000 
C)  40,000 
D)  80,000 
A)  4,000 
B)  8,000 
C)  40,000 
D)  80,000

Question 19

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Accepted Answer

A)  $4 
B)  $8 
C)  $32 
D)  $64 
A)  $4 
B)  $8 
C)  $32 
D)  $64

Question 20

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market,then the individual farmer's elasticity of demand

Accepted Answer

A)  will also be -0.3. 
B)  depends on how large a crop the farmer produces. 
C)  will range between -0.3 and -1.0. 
D)  will be infinite. 
A)  will also be -0.3. 
B)  depends on how large a crop the farmer produces. 
C)  will range between -0.3 and -1.0. 
D)  will be infinite.

Exam 14: Firms in Competitive Markets

Table 14-6 John's Vineyard -Refer to Table 14-6.At what quantity does John's Vineyard maximize profits?

In the short-run,a firm's supply curve is equal to the

A firm in a competitive market has the following cost structure: If the market price is $8,how many units should the firm produce to maximize profit?

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $20 and its average total cost equals $25.The firm sells its output for $30 per unit. -Refer to Scenario 14-2.At Q = 999,the firm's total cost amounts to

When buyers in a competitive market take the selling price as given,they are said to be

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 $200.In order to maximize profits,Laura should

A long-run supply curve is flatter than a short-run supply curve because

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals 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 total revenue from selling 7 units?

When profit-maximizing firms in competitive markets are earning profits,

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each.Which of the following statements is correct?

Figure 14-7 -Refer to Figure 14-7.This firm will exit the market for any price on the line segment

Figure 14-3 -Refer to Figure 14-3.When price rises from P2 to P3,the firm finds that

When a perfectly competitive firm decides to shut down,it is most likely that

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11.It follows that the

Free entry means that

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market,then the individual farmer's elasticity of demand

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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