Question 1

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $6,and is earning $240 economic profit in the short run.What is the current market price?

Accepted Answer

A)   $0
B)   $6
C)   $10
D)   $12E) A) and B)
F) B) and C)

Question 2

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-8.The firm will produce a quantity greater than 4 because at 4 units of output,marginal cost

Accepted Answer

A)   is less than marginal revenue.
B)   equals marginal revenue.
C)   is greater than marginal revenue.
D)   is minimized.E) C) and D)
F) None of the above

Question 3

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

A)   average revenue is greater than average total cost.
B)   average revenue is equal to marginal cost.
C)   marginal cost is greater than average total cost.
D)   price is above or below marginal cost.E) A) and B)
F) None of the above

Question 4

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.E) All of the above
F) A) and C)

Question 5

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11.The marginal revenue from producing the 4th unit equals
(i) 	$5.
(ii) 	the price.
(iii) 	the marginal cost.

Accepted Answer

A)   (i)  only
B)   (i)  and (ii)  only
C)   (ii)  only
D)   (i) , (ii) , and (iii) E) None of the above
F) A) and D)

Question 6

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)   increases.
D)   decreases.E) A) and B)
F) C) and D)

Question 7

Table 14-3
 
-Refer to Table 14-3.For a firm operating in a competitive market,the price is

Accepted Answer

A)   $0.
B)   $7.
C)   $14.
D)   $21.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A)   nuclear power
B)   municipal water and sewer
C)   dairy farming
D)   airport securityE) None of the above
F) A) and B)

Question 9

Marcia is a fashion designer who runs a small clothing business in a competitive industry.Marcia specializes in making designer dresses.Marcia sells 10 dresses per month.Her monthly total revenue is $5,000.The marginal cost of making a dress is $500.In order to maximize profits,Marcia should

Accepted Answer

A)   make more than 10 dresses per month.
B)   make fewer than 10 dresses per month.
C)   continue to make 10 dresses per month.
D)   We do not have enough information with which to answer the question.E) A) and B)
F) A) and C)

Question 10

Table 14-13
Diana's Dress Emporium
 
-Refer to Table 14-13.What is Diana's economic profit at the profit maximizing point?

Accepted Answer

A)   $78
B)   $243
C)   $278
D)   $375E) C) and D)
F) B) and C)

Question 11

In the long run,a firm should exit the industry if its total costs exceed its total revenues.

Accepted Answer

A) True 
 B)False

Question 12

In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A)   zero.
B)   equal to the industry profits.
C)   the market supply curve.
D)   a horizontal line.E) B) and C)
F) A) and D)

Question 13

We can measure the profits earned by a firm in a competitive industry as

Accepted Answer

A)   (P - AT
C)   * Q.
B)   (P - M
C)   * Q.
C)   MR * MC.
D)   (MC - AT
C)   * Q.E) A) and B)
F) A) and C)

Question 14

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Accepted Answer

A)   increase.
B)   remain unchanged.
C)   decrease by less than 20 percent.
D)   decrease by more than 20 percent.E) A) and B)
F) A) and C)

Question 15

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 $6.30,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.E) B) and C)
F) None of the above

Question 16

When firms in a competitive market have different costs,it is likely that

Accepted Answer

A)   free entry and exit in the market will be violated.
B)   the market will no longer be considered competitive.
C)   long-run market supply will be downward sloping.
D)   some firms will earn positive economic profits in the long run.E) C) and D)
F) None of the above

Question 17

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's marginal cost is $11,it should

Accepted Answer

A)   increase production to maximize profit.
B)   increase the price of the product to maximize profit.
C)   advertise to attract additional buyers to maximize profit.
D)   reduce production to increase profit.E) A) and C)
F) B) and C)

Question 18

In the long-run equilibrium of a competitive market,the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Accepted Answer

A)   average fixed cost for the marginal firm.
B)   marginal cost of the marginal firm.
C)   average total cost of the marginal firm.
D)   average variable cost of the marginal firm.E) A) and D)
F) A) and B)

Question 19

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.E) A) and D)
F) B) and D)

Question 20

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A)   a hot dog vendor in New York
B)   Microsoft Corporation
C)   Ford Motor Company
D)   the campus bookstoreE) C) and D)
F) A) and B)

Exam 14: Firms in Competitive Markets.

A firm that exits its market has to pay

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When firms in a competitive market have different costs,it is likely that

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Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8.The firm will produce a quantity greater than 4 because at 4 units of output,marginal cost

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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

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Table 14-3 -Refer to Table 14-3.For a firm operating in a competitive market,the price is

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Table 14-13 Diana's Dress Emporium -Refer to Table 14-13.What is Diana's economic profit at the profit maximizing point?

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

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A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

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Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average total cost of production equal to $6,and is earning $240 economic profit in the short run.What is the current market price?

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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's marginal cost is $11,it should

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We can measure the profits earned by a firm in a competitive industry as

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Marcia is a fashion designer who runs a small clothing business in a competitive industry.Marcia specializes in making designer dresses.Marcia sells 10 dresses per month.Her monthly total revenue is $5,000.The marginal cost of making a dress is $500.In order to maximize profits,Marcia should

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

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In the long run,a firm should exit the industry if its total costs exceed its total revenues.

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Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

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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 $6.30,the firm will earn

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In the long-run equilibrium of a competitive market,the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

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Which of the following firms is the closest to being a perfectly competitive firm?

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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.The marginal revenue from producing the 4th unit equals (i) $5. (ii) the price. (iii) the marginal cost.

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In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

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