Question 1

Table 14-5
Suppose that a firm in a competitive market faces the following revenues and costs:
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Marginal Cost } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Marginal Revenue } \
\text { (Dollars) }
\end{array} \
\hline 12 & 5 & 7 \
\hline 13 & 6 & 7 \
\hline 14 & 7 & 7 \
\hline 15 & 8 & 7 \
\hline 16 & 9 & 7 \
\hline 17 & 10 & 7 \
\hline
\end{array}$$
-Refer to Table 14-5. If the firm is maximizing profit, how much profit is it earning?

Accepted Answer

A)  $0.50
B)  $7.50
C)  $10
D)  There is insufficient data to determine the firm's profit.  D

Question 2

​For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Accepted Answer

A) True 
 B)False  False

Question 3

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

Accepted Answer

A)  fall in the short run.All firms will shut down, and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
B)  fall in the short run.No firms will shut down, but some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
C)  fall in the short run.All, some, or no firms will shut down, and some of them will exit the industry.Price will then rise to reach the new long-run equilibrium.
D)  not fall in the short run because firms will exit to maintain the price. C

Question 4

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

The answer of News reports from the western United States...

Question 5

For any competitive market, the supply curve is closely related to the

Accepted Answer

A)  preferences of consumers who purchase products in that market.
B)  firms' costs of production in that market.
C)  income tax rates of consumers in that market.
D)  interest rates on government bonds.

Question 6

A golf course in Fargo, North Dakota - where it is very cold in the winter - is closed between November 1 and April 1. If the owner of the golf course is rational, what criterion does he or she use in deciding to close the course for this extended period of time?

Accepted Answer

The answer of A golf course in Fargo, North Dakota...

Question 7

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Accepted Answer

A)  Shut down the business
B)  Produce more custom-made shoes
C)  Decrease the price
D)  Produce fewer custom-made shoes

Question 8

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

Accepted Answer

A) True 
 B)False

Question 9

What name do economists have for a cost that has already been committed and cannot be recovered?

Accepted Answer

The answer of What name do economists have for a...

Question 10

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Accepted Answer

The answer of "The water that comes out of your...

Question 11

Figure 14-7
​
 
-Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b), the firm represented in graph (a) will

Accepted Answer

A)  have a zero economic profit.
B)  have a negative accounting profit.
C)  exit the market.
D)  choose to increase production to increase profit.

Question 12

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 exactly $13, 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.

Question 13

In a competitive market, is the long-run supply curve typically more elastic than the short-run supply curve, or is it less elastic than the short-run supply curve?

Accepted Answer

The answer of In a competitive market, is the long-run...

Question 14

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:  ​
-Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

Accepted Answer

A)  above $13 but less than $18.
B)  anywhere above $13.
C)  less than $13 but more than $6.
D)  less than $6.

Question 15

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

Accepted Answer

A) True 
 B)False

Question 16

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 17

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

Accepted Answer

A) True 
 B)False

Question 18

Profit-maximizing firms enter a competitive market when existing firms in that market have

Accepted Answer

A)  total revenues that exceed fixed costs.
B)  total revenues that exceed total variable costs.
C)  average total costs that exceed average revenue.
D)  average total costs that are less than market price.

Question 19

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollarsper unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 1 \
\hline 5 & 2 \
\hline 5 & 3 \
\hline 5 & 4 \
\hline 5 & 5 \
\hline
\end{array}$$
-Refer to Table 14-2. For this firm, the marginal revenue from selling the next unit is

Accepted Answer

A)  $12.
B)  $1.
C)  $5.
D)  $0.

Question 20

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

For any competitive market, the supply curve is closely related to the

A golf course in Fargo, North Dakota - where it is very cold in the winter - is closed between November 1 and April 1. If the owner of the golf course is rational, what criterion does he or she use in deciding to close the course for this extended period of time?

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

What name do economists have for a cost that has already been committed and cannot be recovered?

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Figure 14-7 -Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b) , the firm represented in graph (a) will

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 exactly $13, the firm will earn

In a competitive market, is the long-run supply curve typically more elastic than the short-run supply curve, or is it less elastic than the short-run supply curve?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

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

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

Profit-maximizing firms enter a competitive market when existing firms in that market have

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

Exam 14: Firms in Competitive Markets

​For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

For any competitive market, the supply curve is closely related to the

A golf course in Fargo, North Dakota - where it is very cold in the winter - is closed between November 1 and April 1. If the owner of the golf course is rational, what criterion does he or she use in deciding to close the course for this extended period of time?

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

A dairy farmer must be able to calculate sunk costs in order to determine how much revenue the farm receives for the typical gallon of milk.

What name do economists have for a cost that has already been committed and cannot be recovered?

"The water that comes out of your faucets at home is not supplied by a competitive firm." Explain why this statement is correct.

Figure 14-7 ​ -Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b) , the firm represented in graph (a) will

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 exactly $13, the firm will earn

In a competitive market, is the long-run supply curve typically more elastic than the short-run supply curve, or is it less elastic than the short-run supply curve?

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: ​ -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

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

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

Profit-maximizing firms enter a competitive market when existing firms in that market have

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

For firms operating in a perfectly competitive market, price must always be greater than marginal revenue.

Figure 14-7 -Refer to Figure 14-7. When the market is in long-run equilibrium at point W in graph (b) , the firm represented in graph (a) will

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 exactly $13, the firm will earn

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is