Question 1

Which of the following represents the firm's short-run condition for shutting down?

Accepted Answer

A)   shut down if TR 
B)   shut down if TR 
C)   shut down if P 
D)   shut down if TR < VCE) All of the above
F) A) and B)

Question 2

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.E) A) and D)
F) C) and D)

Question 3

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 4

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 Q1?

Accepted Answer

A)   10,000
B)   20,000
C)   50,000
D)   150,000E) A) and B)
F) None of the above

Question 5

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided...

Question 6

A firm in a competitive market has the following cost structure:  What is the lowest price at which this firm might choose to operate?

Accepted Answer

A)   $2
B)   $3
C)   $4
D)   $5E) C) and D)
F) B) and C)

Question 7

Figure 14-12
-Refer to Figure 14-12. If the figure in panel (a)  reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in panel (b)  most likely reflects

Accepted Answer

A)   perfectly inelastic long-run market supply.
B)   perfectly elastic long-run market supply.
C)   the entry of firms into the industry when some resources used in production are available only in limited quantities.
D)   the fact that zero profits cannot be sustained in the long run.E) A) and B)
F) A) and C)

Question 8

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 9

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.E) A) and B)
F) A) and C)

Question 10

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

Question 11

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Accepted Answer

A)   at least some firms will shut down.
B)   price will fall below marginal cost for some firms.
C)   price will fall below average total cost for some firms.
D)   at least some firms will enter the industry.E) B) and D)
F) B) and C)

Question 12

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 13

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Accepted Answer

A)   $0
B)   $12
C)   $15
D)   $18E) A) and B)
F) C) and D)

Question 14

In a perfectly competitive market,

Accepted Answer

A)   no one seller can influence the price of the product.
B)   price exceeds marginal revenue for each unit sold.
C)   average revenue exceeds marginal revenue for each unit sold.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 15

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 16

In a competitive market the current price is $6. 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 some of the economic profits.
D)   The firm will earn zero profits in both the short run and long run.E) A) and C)
F) A) and B)

Question 17

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

Accepted Answer

A)   increase price in the short run but not in the long run.
B)   increase price in the long run but not in the short run.
C)   increase price both in the short and the long run.
D)   not affect price in either the short or the long run.E) B) and C)
F) B) and D)

Question 18

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. When price falls from P3 to P1, the firm finds that it

Accepted Answer

A)   decreases its fixed costs.
B)   should produce Q1 units of output.
C)   should produce Q3 units of output.
D)   should shut down immediately.E) All of the above
F) A) and B)

Question 19

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 Pb, 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.E) None of the above
F) A) and B)

Question 20

Figure 14-14
 
-Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) . An increase in demand from D0 to D1 will result in

Accepted Answer

A)   a new market equilibrium at point X.
B)   an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.
C)   rising prices and falling profits for existing firms in the market.
D)   falling prices and falling profits for existing firms in the market.E) None of the above
F) A) and B)

Exam 14: Firms in Competitive Markets

Which of the following represents the firm's short-run condition for shutting down?

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) . An increase in demand from D0 to D1 will result in

Correct Answer
verified

A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

Correct Answer
verified

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

Correct Answer
verified

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

Correct Answer
verified

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.

Correct Answer
verified

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Correct Answer
verified

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

Correct Answer
verified

In a competitive market the current price is $6. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Correct Answer
verified

Figure 14-12 -Refer to Figure 14-12. If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in panel (b) most likely reflects

Correct Answer
verified

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

Correct Answer
verified

In a perfectly competitive market,

Correct Answer
verified

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Correct Answer
verified

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 Pb, in the short run the firm will earn

Correct Answer
verified

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Correct Answer
verified
Average revenue is total revenue divided...
View Answer

Correct Answer
verified

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price falls from P3 to P1, the firm finds that it

Correct Answer
verified

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

Correct Answer
verified

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Which of the following represents the firm's short-run condition for shutting down?

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) . An increase in demand from D0 to D1 will result in

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A firm is currently producing 100 units of output per day. The manager reports to the owner that producing the 100th unit costs the firm $5. The firm can sell the 100th unit for $4.75. The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a competitive market the current price is $6. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Correct AnswerverifiedShow Answer

Figure 14-12 -Refer to Figure 14-12. If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market, the figure in panel (b) most likely reflects

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Correct AnswerverifiedShow Answer

In a perfectly competitive market,

Correct AnswerverifiedShow Answer

In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down.

Correct AnswerverifiedShow Answer

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 Pb, in the short run the firm will earn

Correct AnswerverifiedShow Answer

Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?

Correct AnswerverifiedAverage revenue is total revenue divided...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price falls from P3 to P1, the firm finds that it

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Average revenue is total revenue divided...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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