Question 1

The assumption of a fixed number of firms is appropriate for analysis of

Accepted Answer

A)  the short run but not the long run. 
B)  the long run but not the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run. 
A)  the short run but not the long run. 
B)  the long run but not the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run.

Question 2

Figure 14-4  
-Refer to Figure 14-4.In the short run,if the market price is higher than P4 but less than P6,individual firms in a competitive industry will earn

Accepted Answer

A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down. 
A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down.

Question 3

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses.Identify costs,revenue,and the economic losses on your graph.Using your graph,determine whether an individual firm will shut down in the short run,or choose to remain in the market.Explain your answer.

Accepted Answer

The losses and revenues are identified o

Question 4

Table 14-7
  
-Refer to Table 14-7.If the firm is maximizing profit,how much profit is it earning?

Accepted Answer

A)  $0 
B)  $1 
C)  $10 
D)  There is insufficient data to determine the firm's profit. 
A)  $0 
B)  $1 
C)  $10 
D)  There is insufficient data to determine the firm's profit.

Question 5

In the long run,a profit-maximizing firm will choose to exit a market when

Accepted Answer

A)  average fixed cost is falling. 
B)  variable costs exceed sunk costs. 
C)  marginal cost exceeds marginal revenue at the current level of production. 
D)  total revenue is less than total cost. 
A)  average fixed cost is falling. 
B)  variable costs exceed sunk costs. 
C)  marginal cost exceeds marginal revenue at the current level of production. 
D)  total revenue is less than total cost.

Question 6

Mrs.Smith is operating a firm in a competitive market.The market price is $6.50.At her profit-maximizing level of output,her average total cost of production is $7.00,and her average variable cost of production is $6.00.Which of the following statements about Mrs.Smith's firm is correct?

Accepted Answer

A)  Mrs.Smith is earning a loss and should shut down in the short run. 
B)  Mrs.Smith is earning a loss but should continue to operate in the short run. 
C)  Mrs.Smith is earning a profit since the price is above the average variable cost. 
D)  Without knowing Mrs.Smith's marginal cost,we cannot determine whether she should stay in business or shut down. 
A)  Mrs.Smith is earning a loss and should shut down in the short run. 
B)  Mrs.Smith is earning a loss but should continue to operate in the short run. 
C)  Mrs.Smith is earning a profit since the price is above the average variable cost. 
D)  Without knowing Mrs.Smith's marginal cost,we cannot determine whether she should stay in business or shut down.

Question 7

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.To maximize its profit,the firm should

Accepted Answer

A)  increase its output. 
B)  continue to produce 1,000 units. 
C)  decrease its output but continue to produce. 
D)  shut down. 
A)  increase its output. 
B)  continue to produce 1,000 units. 
C)  decrease its output but continue to produce. 
D)  shut down.

Question 8

Figure 14-1  
-Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning negative economic profits in the short run but trying to remain open?

Accepted Answer

A)  P1 
B)  P2 
C)  P3 
D)  P4 
A)  P1 
B)  P2 
C)  P3 
D)  P4

Question 9

The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 10

The marginal firm in a competitive market will earn zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 11

Figure 14-4  
-Refer to Figure 14-4.In the short run,if the market price is P4,individual firms in a competitive industry will earn

Accepted Answer

A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down. 
A)  positive profits. 
B)  zero profits. 
C)  losses but will remain in business. 
D)  losses and will shut down.

Question 12

Figure 14-1  
-Refer to Figure 14-1.If the market price is P3,in the short run,the perfectly competitive firm will earn

Accepted Answer

A)  positive economic profits. 
B)  negative economic profits but will try to remain open. 
C)  negative economic profits and will shut down. 
D)  zero economic profits. 
A)  positive economic profits. 
B)  negative economic profits but will try to remain open. 
C)  negative economic profits and will shut down. 
D)  zero economic profits.

Question 13

Table 14-4
  
-Refer to Table 14-4.The firm will produce a quantity greater than 4 because at 4 units of output,marginal cost

Accepted Answer

A)  is less than marginal revenue. 
B)  equals marginal revenue. 
C)  is greater than marginal revenue. 
D)  is minimized. 
A)  is less than marginal revenue. 
B)  equals marginal revenue. 
C)  is greater than marginal revenue. 
D)  is minimized.

Question 14

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 15

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Accepted Answer

A)  $0 per unit 
B)  $1 per unit 
C)  $2 per unit 
D)  $3 per unit 
A)  $0 per unit 
B)  $1 per unit 
C)  $2 per unit 
D)  $3 per unit

Question 16

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized. 
A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized.

Question 17

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

Accepted Answer

A)  at least some firms will shut down. 
B)  price will fall below marginal cost for some firms. 
C)  price will fall below average total cost for some firms. 
D)  at least some firms will enter the industry. 
A)  at least some firms will shut down. 
B)  price will fall below marginal cost for some firms. 
C)  price will fall below average total cost for some firms. 
D)  at least some firms will enter the industry.

Question 18

In a competitive market,no single producer can influence the market price because

Accepted Answer

A)  many other sellers are offering a product that is essentially identical. 
B)  consumers have more influence over the market price than producers do. 
C)  government intervention prevents firms from influencing price. 
D)  producers agree not to change the price. 
A)  many other sellers are offering a product that is essentially identical. 
B)  consumers have more influence over the market price than producers do. 
C)  government intervention prevents firms from influencing price. 
D)  producers agree not to change the price.

Question 19

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Accepted Answer

A)  the long-run market supply curve must be horizontal. 
B)  the long-run market supply curve must be upward-sloping. 
C)  the long-run market supply curve must be downward-sloping. 
D)  we can't tell anything about the shape of the long-run market supply curve. 
A)  the long-run market supply curve must be horizontal. 
B)  the long-run market supply curve must be upward-sloping. 
C)  the long-run market supply curve must be downward-sloping. 
D)  we can't tell anything about the shape of the long-run market supply curve.

Question 20

Table 14-1
  
-Refer to Table 14-1.For a firm operating in a competitive market,the marginal revenue is

Accepted Answer

A)  $0. 
B)  $7. 
C)  $14. 
D)  $21. 
A)  $0. 
B)  $7. 
C)  $14. 
D)  $21.

Exam 14: Firms in Competitive Markets

The assumption of a fixed number of firms is appropriate for analysis of

Figure 14-4 -Refer to Figure 14-4.In the short run,if the market price is higher than P4 but less than P6,individual firms in a competitive industry will earn

Table 14-7 -Refer to Table 14-7.If the firm is maximizing profit,how much profit is it earning?

In the long run,a profit-maximizing firm will choose to exit a market when

Mrs.Smith is operating a firm in a competitive market.The market price is $6.50.At her profit-maximizing level of output,her average total cost of production is $7.00,and her average variable cost of production is $6.00.Which of the following statements about Mrs.Smith's firm is correct?

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.To maximize its profit,the firm should

Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning negative economic profits in the short run but trying to remain open?

The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

The marginal firm in a competitive market will earn zero economic profit in the long run.

Figure 14-4 -Refer to Figure 14-4.In the short run,if the market price is P4,individual firms in a competitive industry will earn

Figure 14-1 -Refer to Figure 14-1.If the market price is P3,in the short run,the perfectly competitive firm will earn

Table 14-4 -Refer to Table 14-4.The firm will produce a quantity greater than 4 because at 4 units of output,marginal cost

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

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

In a competitive market,no single producer can influence the market price because

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Table 14-1 -Refer to Table 14-1.For a firm operating in a competitive market,the marginal revenue is

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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