Question 1

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 2

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A)  exit if P < MC 
B)  exit if P < FC 
C)  exit if P < ATC 
D)  exit if MR < MC 
A)  exit if P < MC 
B)  exit if P < FC 
C)  exit if P < ATC 
D)  exit if MR < MC

Question 4

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run.

Accepted Answer

A) True 
 B)False

Question 5

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A)  the position of the marginal cost curve determines the price for which the firm should sell its product. 
B)  among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C)  the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D)  the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. 
A)  the position of the marginal cost curve determines the price for which the firm should sell its product. 
B)  among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C)  the marginal cost curve determines the quantity of output the firm is willing to supply at any price. 
D)  the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Question 6

A seller in a competitive market

Accepted Answer

A)  can sell all he wants at the going price, so he has little reason to charge less. 
B)  will lose all his customers to other sellers if he raises his price. 
C)  considers the market price to be a "take it or leave it" price. 
D)  All of the above are correct. 
A)  can sell all he wants at the going price, so he has little reason to charge less. 
B)  will lose all his customers to other sellers if he raises his price. 
C)  considers the market price to be a "take it or leave it" price. 
D)  All of the above are correct.

Question 7

Table 14-13
Diana's Dress Emporium
  
-Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Accepted Answer

A)  $78 
B)  $243 
C)  $278 
D)  $375 
A)  $78 
B)  $243 
C)  $278 
D)  $375

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

Figure 14-9
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 14-9. If there are 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00?

Accepted Answer

A)  300 
B)  6,000 
C)  30,000 
D)  60,000 
A)  300 
B)  6,000 
C)  30,000 
D)  60,000

Question 10

Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i) New firms will enter the market.
(ii) In the short run, price will rise; in the long run, price will rise further.
(iii) In the long run, all firms will be producing at their efficient scale.

Accepted Answer

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

Question 11

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Accepted Answer

A)  more than double. 
B)  double. 
C)  increase but by less than double. 
D)  may increase or decrease depending on the price elasticity of demand. 
A)  more than double. 
B)  double. 
C)  increase but by less than double. 
D)  may increase or decrease depending on the price elasticity of demand.

Question 12

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-9. 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 13

When a competitive firm doubles the quantity 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

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

Accepted Answer

A)  opportunity costs. 
B)  fixed costs. 
C)  variable costs. 
D)  total costs. 
A)  opportunity costs. 
B)  fixed costs. 
C)  variable costs. 
D)  total costs.

Question 15

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Accepted Answer

A)  fixed costs. 
B)  variable costs. 
C)  total costs. 
D)  The firm must pay all its costs, even if it shuts down. 
A)  fixed costs. 
B)  variable costs. 
C)  total costs. 
D)  The firm must pay all its costs, even if it shuts down.

Question 16

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A)  horizontal. 
B)  likely to slope downward. 
C)  determined by forces external to the firm. 
D)  the portion of its marginal cost curve that lies above its average variable cost. 
A)  horizontal. 
B)  likely to slope downward. 
C)  determined by forces external to the firm. 
D)  the portion of its marginal cost curve that lies above its average variable cost.

Question 17

Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

Accepted Answer

A) True 
 B)False

Question 18

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
  
-Refer to Table 14-3. For this firm, the price is

Accepted Answer

A)  $26. 
B)  $39. 
C)  $13. 
D)  $0. 
A)  $26. 
B)  $39. 
C)  $13. 
D)  $0.

Question 19

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 20

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-10. The marginal cost of producing the 4th unit is

Accepted Answer

A)  $7. 
B)  $8. 
C)  $10. 
D)  $23. 
A)  $7. 
B)  $8. 
C)  $10. 
D)  $23.

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

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Which of the following represents the firm's long-run condition for exiting a market?

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run.

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

A seller in a competitive market

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

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.

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

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

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

The short-run supply curve for a firm in a perfectly competitive market is

Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the price is

The exit of existing firms from a competitive market will

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. The marginal cost of producing the 4th unit 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

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Exam 14: Firms in Competitive Markets

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

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Which of the following represents the firm's long-run condition for exiting a market?

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run.

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

A seller in a competitive market

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

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.

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

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

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

The short-run supply curve for a firm in a perfectly competitive market is

Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the price is

The exit of existing firms from a competitive market will

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. The marginal cost of producing the 4th unit 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

Filters