Question 1

If a firm in a competitive market is currently producing a quantity where price exceeds the marginal cost,the firm should lower its price.

Accepted Answer

A) True 
 B)False

Question 2

There are currently N identical firms in a market.If it is a perfectly competitive market,the short-run market supply curve at any given price is

Accepted Answer

A) N times the supply of an individual firm. 
B) N - 1 times the supply of an individual firm. 
C) N plus the supply of an individual firm. 
D) It cannot be determined from the information provided. 
A) N times the supply of an individual firm. 
B) N - 1 times the supply of an individual firm. 
C) N plus the supply of an individual firm. 
D) It cannot be determined from the information provided.

Question 3

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

Accepted Answer

A) will not shut down because variable costs are zero. 
B) has no fixed costs. 
C) faces diminishing marginal returns. 
D) can act as a price setter. 
A) will not shut down because variable costs are zero. 
B) has no fixed costs. 
C) faces diminishing marginal returns. 
D) can act as a price setter.

Question 4

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Accepted Answer

A) taxi services are very different. 
B) firms cannot freely enter and exit the market. 
C) transaction costs are high. 
D) the government generates revenue from the licenses. 
A) taxi services are very different. 
B) firms cannot freely enter and exit the market. 
C) transaction costs are high. 
D) the government generates revenue from the licenses.

Question 5

Markets with hit-and-run entry and exit experience

Accepted Answer

A) barriers to entry. 
B) firms entering whenever they can make a profit and exiting when they cannot make a profit. 
C) steady long-run economic profit. 
D) a very steady number of firms. 
A) barriers to entry. 
B) firms entering whenever they can make a profit and exiting when they cannot make a profit. 
C) steady long-run economic profit. 
D) a very steady number of firms.

Question 6

-The above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $11. 
A) $0. 
B) $5. 
C) $10. 
D) $11.

Question 7

A competitive firm's supply curve is identical to its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

Accepted Answer

A) should shut down. 
B) should keep operating. 
C) should sell less. 
D) None of the above. 
A) should shut down. 
B) should keep operating. 
C) should sell less. 
D) None of the above.

Question 9

If a firm operates in a perfectly competitive market,then it will most likely

Accepted Answer

A) advertise its product on television. 
B) settle for whatever price is offered. 
C) have a difficult time obtaining information about the market price. 
D) have an easy time keeping other firms out of the market. 
A) advertise its product on television. 
B) settle for whatever price is offered. 
C) have a difficult time obtaining information about the market price. 
D) have an easy time keeping other firms out of the market.

Question 10

Firms in the sandbox industry have the long-run cost curve
C(q)= F + 6q + 5q2
Where F is a positive constant.The sandbox industry has a market demand of p = 90 - 2q
a.Suppose F=20.What is the competitive equilibrium price,quantity and number of firms?
b.Suppose F is actually an accreditation fee established by the sandbox sellers association.A firm that avoids this fee will not be able to operate in the industry,and is therefore mandatory.How does the equilibrium price and number of firms vary with F? You do not have to use calculus,but explain whether each increases or decreases with F.How does the profit of each firm vary with F?

Accepted Answer

a.Find the minimum AC point:
AC = 20/q +

Question 11

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

Accepted Answer

The long-run market

Question 12

If a firm cannot earn profits in the short run,it will shut down.

Accepted Answer

A) True 
 B)False

Question 13

A horizontal demand curve for a firm implies that

Accepted Answer

A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products. 
A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products.

Question 14

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

Accepted Answer

The residual demand curve is e

Question 15

-The above figure shows the short run cost curves for a typical firm in a competitive market.If price = 8,then the firm

Accepted Answer

A) is earning positive profits. 
B) should produce 50 units. 
C) should shut down. 
D) None of above. 
A) is earning positive profits. 
B) should produce 50 units. 
C) should shut down. 
D) None of above.

Question 16

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

Accepted Answer

When price = 10,p = MC when q

Question 17

Lelu runs a firm that sells multipasses to intergalactic cruises.Her short-run cost function is given by
C(q)= q2 + 25q + 144
a.If the market price is $75/pass,how many units will Lelu produce?
b.At what price will Lelu earn zero profits?
c.If the price is below the level you found in b. ,will Lelu shut down? If so,explain.If not,below what price will she shut down?

Accepted Answer

a.Profit = 75q - C(q)= 75q - q² - 25q - 1

Question 18

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

Accepted Answer

A) $0. 
B) $5. 
C) $10. 
D) $11. 
A) $0. 
B) $5. 
C) $10. 
D) $11.

Question 19

In a perfectly competitive market,

Accepted Answer

A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above. 
A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above.

Question 20

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

Accepted Answer

A) the resulting profits are positive. 
B) marginal cost exceeds marginal revenue for greater levels of output. 
C) the average cost curve lies above the demand curve. 
D) All of the above are required. 
A) the resulting profits are positive. 
B) marginal cost exceeds marginal revenue for greater levels of output. 
C) the average cost curve lies above the demand curve. 
D) All of the above are required.

If a firm in a competitive market is currently producing a quantity where price exceeds the marginal cost,the firm should lower its price.

There are currently N identical firms in a market.If it is a perfectly competitive market,the short-run market supply curve at any given price is

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Markets with hit-and-run entry and exit experience

-The above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

A competitive firm's supply curve is identical to its marginal cost curve.

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

If a firm operates in a perfectly competitive market,then it will most likely

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

If a firm cannot earn profits in the short run,it will shut down.

A horizontal demand curve for a firm implies that

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

-The above figure shows the short run cost curves for a typical firm in a competitive market.If price = 8,then the firm

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

In a perfectly competitive market,

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 8: Competitive Firms and Markets

If a firm in a competitive market is currently producing a quantity where price exceeds the marginal cost,the firm should lower its price.

There are currently N identical firms in a market.If it is a perfectly competitive market,the short-run market supply curve at any given price is

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Markets with hit-and-run entry and exit experience

-The above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

A competitive firm's supply curve is identical to its marginal cost curve.

Suppose the estimated fixed cost of Christmas trees business is $7,000 and not sunk.The estimated variable cost for each tree is $20.According to the forecast,the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.In the long run,the owner

If a firm operates in a perfectly competitive market,then it will most likely

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

If a firm cannot earn profits in the short run,it will shut down.

A horizontal demand curve for a firm implies that

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

-The above figure shows the short run cost curves for a typical firm in a competitive market.If price = 8,then the firm

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

-The above figure shows the cost curves for a competitive firm.The firm will incur economic losses if the price is less than

In a perfectly competitive market,

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters