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 falls below $4.50,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 2

Which of the following industries is least likely to exhibit the characteristic of free entry?

Accepted Answer

A)  restaurants 
B)  municipal water and sewer 
C)  soybean farming 
D)  selling running apparel

Question 3

Figure 14-9
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

-Refer to Figure 14-9.If there are 600 identical firms in this market,what is the value of Q1?

Accepted Answer

A)  6,000 
B)  12,000 
C)  60,000 
D)  120,000

Question 4

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

Question 5

Give two reasons why the long-run industry supply curve may slope upward.Use an example to demonstrate your reasons.

Accepted Answer

The answer of Give two reasons why the long-run industry...

Question 6

In calculating accounting profit,accountants typically don't include

Accepted Answer

A)  long-run costs. 
B)  sunk costs. 
C)  explicit costs of production. 
D)  opportunity costs that do not involve an outflow of money.

Question 7

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3.At Q=500,the firm's profits equal

Accepted Answer

A)  $1,000. 
B)  $4,000. 
C)  $7,000. 
D)  $10,000.

Question 8

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.

Question 9

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-4.When price rises from P3 to P4,the firm finds that

Accepted Answer

A)  fixed costs decrease as output increases from Q3 to Q4. 
B)  it can earn a positive profit by increasing production to Q4. 
C)  profit is still maximized at a production level of Q3. 
D)  average revenue exceeds marginal revenue at a production level of Q4.

Question 10

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-10.At which level of production will the firm maximize profit?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 11

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

Accepted Answer

A)  $5 
B)  $30 
C)  $35 
D)  $65

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.

Question 13

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)  total revenue must equal total variable cost for each firm. 
B)  economic profits must be zero. 
C)  price must equal average variable cost for each firm. 
D)  Both a and c are correct.

Question 14

A firm's marginal cost has a minimum value of $2,its average variable cost has a minimum value of $4,and its average total cost has a minimum value of $5.Then the firm will shut down if the price of its product is less than

Accepted Answer

A)  $5 but more than $2. 
B)  $5. 
C)  $4. 
D)  There is not enough information given to answer the question.

Question 15

Figure 14-10
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

-Refer to Figure 14-10.If there are 500 identical firms in this market,what is the value of Q2?

Accepted Answer

A)  12,000 
B)  60,000 
C)  240,000 
D)  300,000

Question 16

In the long run,when price is less than average total cost for all possible levels of production,a firm in a competitive market will choose to exit (or not enter)the market.

Accepted Answer

A) True 
 B)False

Question 17

In a perfectly competitive market,the process of entry and exit will end when
(i)accounting profits are zero.
(ii)economic profits are zero.
(iii)price equals minimum marginal cost.
(iv)price equals minimum average total cost.

Accepted Answer

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

Question 18

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 P4,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.

Question 19

Table 14-4
 
-Refer to Table 14-4.For a firm operating in a competitive market,the marginal revenue is

Accepted Answer

A)  $45. 
B)  $30. 
C)  $15. 
D)  $0.

Question 20

If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then

Accepted Answer

A)  its average revenue is greater than $8. 
B)  its marginal revenue is less than $8. 
C)  its total cost is less than $8,000. 
D)  All of the above are correct.

Exam 14: 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 falls below $4.50,the firm will earn

Which of the following industries is least likely to exhibit the characteristic of free entry?

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

Give two reasons why the long-run industry supply curve may slope upward.Use an example to demonstrate your reasons.

In calculating accounting profit,accountants typically don't include

Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3.At Q=500,the firm's profits equal

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

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4.When price rises from P3 to P4,the firm finds that

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.At which level of production will the firm maximize profit?

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

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

When firms are neither entering nor exiting a perfectly competitive market,

A firm's marginal cost has a minimum value of $2,its average variable cost has a minimum value of $4,and its average total cost has a minimum value of $5.Then the firm will shut down if the price of its product is less than

In the long run,when price is less than average total cost for all possible levels of production,a firm in a competitive market will choose to exit (or not enter)the market.

In a perfectly competitive market,the process of entry and exit will end when (i) accounting profits are zero. (ii) economic profits are zero. (iii) price equals minimum marginal cost. (iv) price equals minimum average total cost.

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 P4,in the short run the firm will earn

Table 14-4 -Refer to Table 14-4.For a firm operating in a competitive market,the marginal revenue is

If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then