Question 1

Figure 14-7
​
 
-Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Accepted Answer

A) Points W, Y, and Z represent both short-run and long-run equilibria. 
B) Points W, Y, Z, and X represent short-run equilibria. 
C) Points W, Y, and Z represent long-run equilibria. 
D) Points W and Z represent long-run equilibria.

Question 2

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

Accepted Answer

The answer of A firm maximizes its profit by selling...

Question 3

What is the relationship between price and marginal revenue for a competitive firm?

Accepted Answer

The answer of What is the relationship between price and...

Question 4

Figure 14-4
In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms.
​
 
-Refer to Figure 14-4. If there are 100 identical firms in this market, what is the value of Q2?

Accepted Answer

A) 10,000 
B) 20,000 
C) 40,000 
D) 80,000

Question 5

Table 14-8
A firm in a competitive market has the following cost structure.
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Average Total Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & - - \
\hline 1 & 10 \
\hline 2 & 8 \
\hline 3 & 7 \
\hline 4 & 8 \
\hline 5 & 10 \
\hline
\end{array}$$
-Refer to Table 14-8. If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Accepted Answer

A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units

Question 6

Table 14-6
Suppose that a firm in a competitive market faces the following revenues and costs:
​
​
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (Dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (Dollars) }
\end{array} \
\hline 0 & 0 & 3 \
\hline 1 & 6 & 5 \
\hline 2 & 12 & 8 \
\hline 3 & 18 & 12 \
\hline 4 & 24 & 17 \
\hline 5 & 30 & 23 \
\hline 6 & 36 & 30 \
\hline 7 & 42 & 38 \
\hline
\end{array}$$ ​
-Refer to Table 14-6. The firm will produce a quantity greater than three because at 3 units of output, marginal cost

Accepted Answer

A) is greater than marginal revenue. 
B) equals marginal revenue. 
C) is less than marginal revenue. 
D) is minimized.

Question 7

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 falls below $6, 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 in the short run and shut down. 
D) zero economic profits in the short run.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

Accepted Answer

A) increases if MR  ATC. 
B) does not change. 
C) always increases. 
D) always decreases.

Question 10

Table 14-1
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} & \begin{array} { c } 
\text { Quantity Demanded } \
\text { (Units) }
\end{array} \
\hline 5 & 0 \
\hline 5 & 2 \
\hline 5 & 4 \
\hline 5 & 6 \
\hline 5 & 8 \
\hline 5 & 10 \
\hline 5 & 12 \
\hline 5 & 14 \
\hline 5 & 16 \
\hline 5 & 18 \
\hline
\end{array}$$
-Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Accepted Answer

A) strategic market. 
B) concentrated market. 
C) competitive market. 
D) monopoly.

Question 11

A competitive firm currently produces and sells 7,500 units of output at a price of $2.50 per unit. The firm's average fixed cost is $0.75 and its average total cost is $2.80. In the short run, should the firm continue to operate?

Accepted Answer

The answer of A competitive firm currently produces and sells...

Question 12

Suppose a firm in a competitive market earned $2,000 in total revenue and had a marginal revenue of $20 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

Accepted Answer

A) $5 and 50 units 
B) $5 and 100 units 
C) $100 and 20 units 
D) $20 and 100 units

Question 13

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.
​

Accepted Answer

A) True 
 B)False

Question 14

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Accepted Answer

A) True 
 B)False

Question 15

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

The answer of At its current level of production a...

Question 16

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 currently producing 14 units, what would you advise the owners?

Accepted Answer

A) Decrease quantity to 13 units 
B) Increase quantity to 15 units 
C) Continue to operate at 14 units 
D) Increase quantity to 16 units

Question 17

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Accepted Answer

A) increase his revenue, since the output decrease leads to a higher market price. 
B) increase his revenue, since Tom's competitors will also decrease their output, so that price rises to offset the drop in Tom's output. 
C) decrease his revenue, since his output has decreased and the price remains the same. 
D) decrease his revenue, since the price falls as competitors increase their output to make up for his decrease in output.

Question 18

Table 14-4
The following table presents cost and revenue information for a firm operating in a competitive industry.
​
​
 
-Refer to Table 14-4. What is the average revenue when 3 units are sold?

Accepted Answer

A) $40 
B) $257 
C) $120 
D) $86

Question 19

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

Accepted Answer

A) positive profits. 
B) zero profits. 
C) losses but will remain in business. 
D) losses and will shut down.

Question 20

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Accepted Answer

A) production of the 100th unit of output increases the firm's profit by $1. 
B) production of the 100th unit of output increases the firm's average total cost by $1. 
C) firm's profit-maximizing level of output is less than 100 units. 
D) production of the 101st unit of output must increase the firm's profit by more than $1.

Exam 14: Firms in Competitive Markets

Figure 14-7 -Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D₀ to D₁. Which of the following statements is correct?

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

What is the relationship between price and marginal revenue for a competitive firm?

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 falls below $6, the firm will earn

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

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

A competitive firm currently produces and sells 7,500 units of output at a price of $2.50 per unit. The firm's average fixed cost is $0.75 and its average total cost is $2.80. In the short run, should the firm continue to operate?

Suppose a firm in a competitive market earned $2,000 in total revenue and had a marginal revenue of $20 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-4. What is the average revenue when 3 units are sold?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is higher than P₄ but less than P₆, individual firms in a competitive industry will earn

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Exam 14: Firms in Competitive Markets

Figure 14-7 ​ -Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

A firm maximizes its profit by selling 2,500 units of output with an average revenue of $6.99. The firm's marginal cost at 2,500 units of output is __________.

What is the relationship between price and marginal revenue for a competitive firm?

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 falls below $6, the firm will earn

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

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

A competitive firm currently produces and sells 7,500 units of output at a price of $2.50 per unit. The firm's average fixed cost is $0.75 and its average total cost is $2.80. In the short run, should the firm continue to operate?

Suppose a firm in a competitive market earned $2,000 in total revenue and had a marginal revenue of $20 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold?

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses. ​

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. ​ ​ -Refer to Table 14-4. What is the average revenue when 3 units are sold?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Figure 14-7 -Refer to Figure 14-7. Assume that the market starts in equilibrium at point W in graph (b) and that graph (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D₀ to D₁. Which of the following statements is correct?

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 falls below $6, the firm will earn

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.

Table 14-4 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-4. What is the average revenue when 3 units are sold?

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. In the short run, if the market price is higher than P₄ but less than P₆, individual firms in a competitive industry will earn