Question 1

Table 14-13
Diana's Dress Emporium
  
-Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. 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 4

A firm in a competitive market has the following cost structure:   If the market price is $8, how many units of output 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 5

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. If the market price is Pd, in the short run the 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 6

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 7

Table 14-12
 
-Refer to Table 14-12. At what quantity does Bill maximize profits?

Accepted Answer

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

Question 8

Figure 14-7  
-Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 514 units of output, its profit is approximately

Accepted Answer

A)  $24,995. 
B)  $25,550. 
C)  $25,750. 
D)  $26,025. 
A)  $24,995. 
B)  $25,550. 
C)  $25,750. 
D)  $26,025.

Question 9

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Accepted Answer

A) True 
 B)False

Question 10

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  None of the above is correct.

Question 11

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Accepted Answer

A)  can be represented by the area P2 × Q2. 
B)  can be represented by the area P3 × Q2. 
C)  can be represented by the area P3-P2) × Q3. 
D)  are zero. 
A)  can be represented by the area P2 × Q2. 
B)  can be represented by the area P3 × Q2. 
C)  can be represented by the area P3-P2) × Q3. 
D)  are zero.

Question 12

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total revenue

Accepted Answer

A)  can be represented by the area P3 × Q3. 
B)  can be represented by the area P3 × Q2. 
C)  can be represented by the area P3-P2) × Q3. 
D)  is zero. 
A)  can be represented by the area P3 × Q3. 
B)  can be represented by the area P3 × Q2. 
C)  can be represented by the area P3-P2) × Q3. 
D)  is zero.

Question 13

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Accepted Answer

A) True 
 B)False

Question 14

In the long run, each firm in a competitive industry earns

Accepted Answer

A)  zero accounting profits. 
B)  zero economic profits. 
C)  positive economic profits. 
D)  positive, negative, or zero economic profits. 
A)  zero accounting profits. 
B)  zero economic profits. 
C)  positive economic profits. 
D)  positive, negative, or zero economic profits.

Question 15

Scenario 14-5
A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats. As a result of national press coverage of the report, the demand for irradiated tomatoes increased dramatically. Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost. Assume that the tomato market satisfies all of the assumptions of perfect competition.
-Refer to Scenario 14-5. If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market, the

Accepted Answer

A)  short-run market supply curve for irradiated tomatoes would be affected but not the long-run market supply. 
B)  long-run market supply curve for irradiated tomatoes would be perfectly elastic. 
C)  long-run market supply of irradiated tomatoes would be downward sloping. 
D)  long-run market supply of irradiated tomatoes would be upward sloping. 
A)  short-run market supply curve for irradiated tomatoes would be affected but not the long-run market supply. 
B)  long-run market supply curve for irradiated tomatoes would be perfectly elastic. 
C)  long-run market supply of irradiated tomatoes would be downward sloping. 
D)  long-run market supply of irradiated tomatoes would be upward sloping.

Question 16

The term shutdown

Accepted Answer

A)  and the term exit both refer to short-run decisions that a firm might make. 
B)  and the term exit both refer to long-run decisions that a firm might make. 
C)  refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make. 
D)  refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make. 
A)  and the term exit both refer to short-run decisions that a firm might make. 
B)  and the term exit both refer to long-run decisions that a firm might make. 
C)  refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make. 
D)  refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-2. If the market price is Pb, in the short run the 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 20

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A)  the New York Yankees 
B)  Apple, Inc. 
C)  DeBeers diamond wholesalers 
D)  a wheat farmer in Kansas 
A)  the New York Yankees 
B)  Apple, Inc. 
C)  DeBeers diamond wholesalers 
D)  a wheat farmer in Kansas

Exam 13: Firms in Competitive Markets

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

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

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

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

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Table 14-12 -Refer to Table 14-12. At what quantity does Bill maximize profits?

Figure 14-7 -Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 514 units of output, its profit is approximately

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total revenue

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

In the long run, each firm in a competitive industry earns

The term shutdown

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

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

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pb, in the short run the firm will earn

Which of the following firms is the closest to being a perfectly competitive firm?

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 Costs of Production

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters