Question 1

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  
-Refer to Figure 14-1. If the market price is $4.00, the firm will earn

Accepted Answer

A)  positive economic profits in the short run. 
B)  negative economic profits in the short run but remain in business. 
C)  negative economic profits and shut down. 
D)  zero economic profits in the short run. 
A)  positive economic profits in the short run. 
B)  negative economic profits in the short run but remain in business. 
C)  negative economic profits and shut down. 
D)  zero economic profits in the short run.

Question 2

If all firms have the same costs of production, then in long-run equilibrium,

Accepted Answer

A)  price exceeds average total cost for all firms. 
B)  price exceeds marginal cost for all firms. 
C)  some firms may earn positive economic profits. 
D)  all firms have zero economic profits and just cover their opportunity costs. 
A)  price exceeds average total cost for all firms. 
B)  price exceeds marginal cost for all firms. 
C)  some firms may earn positive economic profits. 
D)  all firms have zero economic profits and just cover their opportunity costs.

Question 3

A firm that exits its market 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 4

Competitive markets are characterized by

Accepted Answer

A)  a small number of buyers and sellers. 
B)  unique products. 
C)  the interdependence of firms. 
D)  free entry and exit by firms. 
A)  a small number of buyers and sellers. 
B)  unique products. 
C)  the interdependence of firms. 
D)  free entry and exit by firms.

Question 5

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 6

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)  Profit = MR - MC 
B)  Profit = MR - TC 
C)  Profit = P - M
C)  × Q 
D)  Profit = P - AT
C)  × Q 
A)  Profit = MR - MC 
B)  Profit = MR - TC 
C)  Profit = P - M
C)  × Q 
D)  Profit = P - AT
C)  × Q

Question 7

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Accepted Answer

A)  marginal cost of production. 
B)  fixed cost of production. 
C)  total cost of production. 
D)  average total cost of production. 
A)  marginal cost of production. 
B)  fixed cost of production. 
C)  total cost of production. 
D)  average total cost of production.

Question 8

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

Accepted Answer

A)  $2,000. 
B)  $2,400. 
C)  $4,200. 
D)  We do not have enough information to answer the question. 
A)  $2,000. 
B)  $2,400. 
C)  $4,200. 
D)  We do not have enough information to answer the question.

Question 9

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A)  fixed cost. 
B)  variable cost. 
C)  total cost. 
D)  revenue. 
A)  fixed cost. 
B)  variable cost. 
C)  total cost. 
D)  revenue.

Question 10

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing

Accepted Answer

A)  a violation of conventional market forces. 
B)  over-investment. 
C)  the entry of new firms. 
D)  too few firms in the market. 
A)  a violation of conventional market forces. 
B)  over-investment. 
C)  the entry of new firms. 
D)  too few firms in the market.

Question 11

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 12

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1. At Q = 999, the firm's profits equal

Accepted Answer

A)  $993. 
B)  $997. 
C)  $1,003. 
D)  $1,007. 
A)  $993. 
B)  $997. 
C)  $1,003. 
D)  $1,007.

Question 13

Figure 14-11  
-Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Accepted Answer

A)  A only 
B)  A and C only 
C)  B only 
D)  B and D only 
A)  A only 
B)  A and C only 
C)  B only 
D)  B and D only

Question 14

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 15

Figure 14-9
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)  ABCD 
B)  BC 
C)  ABC 
D)  None of the above is correct. We must know the firm's average variable cost. 
A)  ABCD 
B)  BC 
C)  ABC 
D)  None of the above is correct. We must know the firm's average variable cost.

Question 16

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 17

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 18

A key characteristic of a competitive market is that

Accepted Answer

A)  government antitrust laws regulate competition. 
B)  producers sell nearly identical products. 
C)  firms minimize total costs. 
D)  firms have price setting power. 
A)  government antitrust laws regulate competition. 
B)  producers sell nearly identical products. 
C)  firms minimize total costs. 
D)  firms have price setting power.

Question 19

In a competitive market, firms are unable to differentiate their product from that of other producers.

Accepted Answer

A) True 
 B)False

Question 20

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-9. If the firm produces 3 units of output,

Accepted Answer

A)  marginal cost is $4. 
B)  total revenue is greater than variable cost. 
C)  marginal revenue is less than marginal cost. 
D)  the firm is maximizing profit. 
A)  marginal cost is $4. 
B)  total revenue is greater than variable cost. 
C)  marginal revenue is less than marginal cost. 
D)  the firm is maximizing profit.

Exam 13: Firms in Competitive Markets

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $4.00, the firm will earn

If all firms have the same costs of production, then in long-run equilibrium,

A firm that exits its market has to pay

Competitive markets are characterized by

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

Which of the following could be used to calculate the profit for a firm?

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

When managers of firms in a competitive market observe falling profits, they may infer that the market is experiencing

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

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. At Q = 999, the firm's profits equal

Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

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

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

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?

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

A key characteristic of a competitive market is that

In a competitive market, firms are unable to differentiate their product from that of other producers.

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm produces 3 units of output,

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

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