Question 1

The competitive firm's short-run supply curve is its

Accepted Answer

A)  marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost. 
B)  marginal cost curve. 
C)  marginal cost curve, but only the portion above the minimum of average total cost. 
D)  marginal cost curve, but only the portion above the minimum of average variable cost. 
A)  marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost. 
B)  marginal cost curve. 
C)  marginal cost curve, but only the portion above the minimum of average total cost. 
D)  marginal cost curve, but only the portion above the minimum of average variable cost.

Question 2

Figure 14-7  
-Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Accepted Answer

A)  $5,500, and its profit amounts to $20,375. 
B)  $5,750, and its profit amounts to $20,375 
C)  $5,980, and its profit amounts to $25,750. 
D)  $6,180, and its profit amounts to $25,750. 
A)  $5,500, and its profit amounts to $20,375. 
B)  $5,750, and its profit amounts to $20,375 
C)  $5,980, and its profit amounts to $25,750. 
D)  $6,180, and its profit amounts to $25,750.

Question 3

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:   The long-run supply curve for this market is

Accepted Answer

A)  positively sloped for all prices above $10. 
B)  horizontal at a price of $5. 
C)  horizontal at a price of $6. 
D)  horizontal at a price of $7. 
A)  positively sloped for all prices above $10. 
B)  horizontal at a price of $5. 
C)  horizontal at a price of $6. 
D)  horizontal at a price of $7.

Question 4

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
-When the firm produces and sells 150 units of output, its average total cost is $24.50.
-When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to

Accepted Answer

A)  $16.40. 
B)  $17.00. 
C)  $18.00. 
D)  $19.60. 
A)  $16.40. 
B)  $17.00. 
C)  $18.00. 
D)  $19.60.

Question 5

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

Accepted Answer

A)  Pa 
B)  Pb 
C)  Pc 
D)  Pd 
A)  Pa 
B)  Pb 
C)  Pc 
D)  Pd

Question 6

A firm that shuts down temporarily has to pay

Accepted Answer

A)  its variable costs but not its fixed costs. 
B)  its fixed costs but not its variable costs. 
C)  both its variable costs and its fixed costs. 
D)  neither its variable costs nor its fixed costs. 
A)  its variable costs but not its fixed costs. 
B)  its fixed costs but not its variable costs. 
C)  both its variable costs and its fixed costs. 
D)  neither its variable costs nor its fixed costs.

Question 7

Figure 14-9
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-9. The firm will exit the market for any price on the line segment

Accepted Answer

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

Question 8

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run but trying to remain open?

Accepted Answer

A)  Pa 
B)  Pb 
C)  Pc 
D)  Pd 
A)  Pa 
B)  Pb 
C)  Pc 
D)  Pd

Question 9

Which of the following statements best reflects a price-taking firm?

Accepted Answer

A)  The firm can sell only a limited amount of output at the market price before the market price will fall. 
B)  If the firm were to charge less than the going price, it would maximize its profits and revenues. 
C)  If the firm were to charge more than the going price, it would sell none of its goods. 
D)  Both b and c are correct. 
A)  The firm can sell only a limited amount of output at the market price before the market price will fall. 
B)  If the firm were to charge less than the going price, it would maximize its profits and revenues. 
C)  If the firm were to charge more than the going price, it would sell none of its goods. 
D)  Both b and c are correct.

Question 10

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

Accepted Answer

If the selling price is not su

Question 11

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 12

Because the goods offered for sale in a competitive market are largely the same,

Accepted Answer

A)  there will be few sellers in the market. 
B)  there will be few buyers in the market. 
C)  only a few buyers will have market power. 
D)  sellers will have little reason to charge less than the going market price. 
A)  there will be few sellers in the market. 
B)  there will be few buyers in the market. 
C)  only a few buyers will have market power. 
D)  sellers will have little reason to charge less than the going market price.

Question 13

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

Accepted Answer

A)  under diseconomies of scale. 
B)  with small, but positive, levels of profit. 
C)  at their efficient scale. 
D)  where price is equal to average fixed cost. 
A)  under diseconomies of scale. 
B)  with small, but positive, levels of profit. 
C)  at their efficient scale. 
D)  where price is equal to average fixed cost.

Question 14

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 15

In a perfectly competitive market, the market supply curve is

Accepted Answer

A)  the marginal cost curve above average total cost for a representative firm. 
B)  the horizontal sum of all the individual firms' supply curves. 
C)  the vertical sum of all the individual firms' supply curves. 
D)  always a horizontal line. 
A)  the marginal cost curve above average total cost for a representative firm. 
B)  the horizontal sum of all the individual firms' supply curves. 
C)  the vertical sum of all the individual firms' supply curves. 
D)  always a horizontal line.

Question 16

Free entry means that

Accepted Answer

A)  the government pays any entry costs for individual firms. 
B)  government-funded research lowers the costs of patents and other barriers to entry. 
C)  a firm's marginal cost is zero. 
D)  no legal barriers prevent a firm from entering an industry. 
A)  the government pays any entry costs for individual firms. 
B)  government-funded research lowers the costs of patents and other barriers to entry. 
C)  a firm's marginal cost is zero. 
D)  no legal barriers prevent a firm from entering an industry.

Question 17

Figure 14-10
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 14-10. If there are 700 identical firms in this market, what is the value of Q1?

Accepted Answer

A)  140,000 
B)  210,000 
C)  280,000 
D)  420,000 
A)  140,000 
B)  210,000 
C)  280,000 
D)  420,000

Question 18

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Accepted Answer

A) True 
 B)False

Question 19

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

Accepted Answer

A)  fixed costs decrease as output increases from Q3 to Q4. 
B)  it can earn a positive profit by increasing production to Q4. 
C)  profit is still maximized at a production level of Q3. 
D)  average revenue exceeds marginal revenue at a production level of Q4. 
A)  fixed costs decrease as output increases from Q3 to Q4. 
B)  it can earn a positive profit by increasing production to Q4. 
C)  profit is still maximized at a production level of Q3. 
D)  average revenue exceeds marginal revenue at a production level of Q4.

Question 20

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

Accepted Answer

A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units 
A)  100 units 
B)  200 units 
C)  300 units 
D)  400 units

The competitive firm's short-run supply curve is its

Figure 14-7 -Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: The long-run supply curve for this market is

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

A firm that shuts down temporarily has to pay

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. The firm will exit the market for any price on the line segment

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run but trying to remain open?

Which of the following statements best reflects a price-taking firm?

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

Because the goods offered for sale in a competitive market are largely the same,

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

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

In a perfectly competitive market, the market supply curve is

Free entry means that

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

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

Exam 14: Firms in Competitive Markets

The competitive firm's short-run supply curve is its

Figure 14-7 -Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: The long-run supply curve for this market is

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run and shutting down?

A firm that shuts down temporarily has to pay

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. The firm will exit the market for any price on the line segment

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning negative economic profits in the short run but trying to remain open?

Which of the following statements best reflects a price-taking firm?

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

Because the goods offered for sale in a competitive market are largely the same,

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

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

In a perfectly competitive market, the market supply curve is

Free entry means that

The two characteristics of a competitive market are 1) many buyers and sellers in the market and 2) the goods offered by the various sellers are highly differentiated.

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that

In the short run, a market consists of 100 identical firms. The market price is $6, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

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