Question 1

For an individual firm operating in a competitive market, marginal revenue equals

Accepted Answer

A)  average revenue and the price for all levels of output. 
B)  average revenue, which is greater than the price for all levels of output. 
C)  average revenue, the price, and marginal cost for all levels of output. 
D)  marginal cost, which is greater than average revenue for all levels of output. 
A)  average revenue and the price for all levels of output. 
B)  average revenue, which is greater than the price for all levels of output. 
C)  average revenue, the price, and marginal cost for all levels of output. 
D)  marginal cost, which is greater than average revenue for all levels of output.

Question 2

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  horizontal. 
D)  vertical. 
A)  downward sloping. 
B)  upward sloping. 
C)  horizontal. 
D)  vertical.

Question 3

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False

Question 4

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
  
-Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Accepted Answer

A)  $3. 
B)  $5. 
C)  $7. 
D)  $9. 
A)  $3. 
B)  $5. 
C)  $7. 
D)  $9.

Question 5

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? i) Marginal revenue equals $4.
Ii) Average revenue equals $100.
Iii) Total revenue equals $1,600.

Accepted Answer

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

Question 6

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:  
-Refer to Figure 14-4. The firm will earn positive economic profits if the price is i) P4.
Ii) P3.
Iii) P2.
Iv) P1.

Accepted Answer

A)  i) only 
B)  i) or ii) only 
C)  i), ii), or iii) only 
D)  i), ii), iii), and iv) 
A)  i) only 
B)  i) or ii) only 
C)  i), ii), or iii) only 
D)  i), ii), iii), and iv)

Question 7

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 8

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

Accepted Answer

A)  increases in production costs resulting from more firms coming into the market. 
B)  a breakdown of the "free entry and exit" feature of competition. 
C)  a breakdown of the "price taking" feature of competition. 
D)  a stable demand curve for the good, that is, a demand curve that never shifts. 
A)  increases in production costs resulting from more firms coming into the market. 
B)  a breakdown of the "free entry and exit" feature of competition. 
C)  a breakdown of the "price taking" feature of competition. 
D)  a stable demand curve for the good, that is, a demand curve that never shifts.

Question 9

Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  We do not have enough information with which to answer this question. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  We do not have enough information with which to answer this question.

Question 10

Table 14-15-a
  
-Refer to Table 14-15-a. What is the lowest price at which this firm would operate in the short run?

Accepted Answer

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

Question 11

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.

Question 12

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Accepted Answer

A)  In the short run firms will shut down, and in the long run firms will leave the market. 
B)  In the short run firms will continue to operate, but in the long run firms will leave the market. 
C)  New firms will likely enter this market to capture any remaining economic profits. 
D)  The firm will earn zero profits in both the short run and long run. 
A)  In the short run firms will shut down, and in the long run firms will leave the market. 
B)  In the short run firms will continue to operate, but in the long run firms will leave the market. 
C)  New firms will likely enter this market to capture any remaining economic profits. 
D)  The firm will earn zero profits in both the short run and long run.

Question 13

Which of the following expressions is correct for a competitive firm?

Accepted Answer

A)  profit = quantity of output) x price - average total cost) 
B)  marginal revenue = change in total revenue)/quantity of output) 
C)  average total cost = total variable cost/quantity of output 
D)  average revenue = marginal revenue) x quantity of output) 
A)  profit = quantity of output) x price - average total cost) 
B)  marginal revenue = change in total revenue)/quantity of output) 
C)  average total cost = total variable cost/quantity of output 
D)  average revenue = marginal revenue) x quantity of output)

Question 14

Table 14-12
 
-Refer to Table 14-12. What is the marginal cost of the 5th unit?

Accepted Answer

A)  $55 
B)  $60 
C)  $68 
D)  $80 
A)  $55 
B)  $60 
C)  $68 
D)  $80

Question 15

Scenario 14-4
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
-Refer to Scenario 14-4. What is Victor's opportunity costs of operating his new business?

Accepted Answer

A)  $25,000 
B)  $75,000 
C)  $100,000 
D)  $175,000 
A)  $25,000 
B)  $75,000 
C)  $100,000 
D)  $175,000

Question 16

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 17

In the long run the market supply

Accepted Answer

A)  must always be horizontal. 
B)  could be upward sloping if the cost of production falls as new firms enter the market. 
C)  could be upward sloping if the cost of production rises as new firms enter the market. 
D)  could be upward sloping if technological improvements lower the cost of producing in the market. 
A)  must always be horizontal. 
B)  could be upward sloping if the cost of production falls as new firms enter the market. 
C)  could be upward sloping if the cost of production rises as new firms enter the market. 
D)  could be upward sloping if technological improvements lower the cost of producing in the market.

Question 18

The competitive firm's short-run supply curve is that portion of the

Accepted Answer

A)  average variable cost curve that lies above marginal cost. 
B)  average total cost curve that lies above marginal cost. 
C)  marginal cost curve that lies above average variable cost. 
D)  marginal cost curve that lies above average total cost. 
A)  average variable cost curve that lies above marginal cost. 
B)  average total cost curve that lies above marginal cost. 
C)  marginal cost curve that lies above average variable cost. 
D)  marginal cost curve that lies above average total cost.

Question 19

One of the defining characteristics of a perfectly competitive market is

Accepted Answer

A)  a small number of sellers. 
B)  a large number of buyers and a small number of sellers. 
C)  a similar product. 
D)  significant advertising by firms to promote their products. 
A)  a small number of sellers. 
B)  a large number of buyers and a small number of sellers. 
C)  a similar product. 
D)  significant advertising by firms to promote their products.

Question 20

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
  
-Refer to Table 14-2. For this firm, the marginal revenue from selling the 3rd unit is

Accepted Answer

A)  $12. 
B)  $4. 
C)  $3. 
D)  $1. 
A)  $12. 
B)  $4. 
C)  $3. 
D)  $1.

Exam 13: Firms in Competitive Markets

For an individual firm operating in a competitive market, marginal revenue equals

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? i) Marginal revenue equals $4. Ii) Average revenue equals $100. Iii) Total revenue equals $1,600.

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. The firm will earn positive economic profits if the price is i) P4. Ii) P3. Iii) P2. Iv) P1.

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

Suppose the long-run supply curve for a good is upward-sloping. The upward slope could be explained by

Suppose that some firms in a competitive industry are earning zero economic profits, while others are experiencing losses. All else equal, in the long run, we would expect the number of firms in the industry to

Table 14-15-a -Refer to Table 14-15-a. What is the lowest price at which this firm would operate in the short run?

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

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Which of the following expressions is correct for a competitive firm?

Table 14-12 -Refer to Table 14-12. What is the marginal cost of the 5th unit?

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

In the long run the market supply

The competitive firm's short-run supply curve is that portion of the

One of the defining characteristics of a perfectly competitive market is

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. For this firm, the marginal revenue from selling the 3rd 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 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