Question 1

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A)   horizontal.
B)   likely to slope downward.
C)   determined by forces external to the firm.
D)   the portion of its marginal cost curve that lies above its average variable cost.E) None of the above
F) A) and B)

Question 2

Figure 14-14

-Refer to Figure 14-14.If the market starts in equilibrium at point C in panel (b) ,a decrease in demand will ultimately lead to

Accepted Answer

A)   more firms in the industry but lower levels of output for each firm.
B)   fewer firms in the market.
C)   a new long-run equilibrium at point D in panel (b) .
D)   lower prices once the new long-run equilibrium is reached.E) C) and D)
F) None of the above

Question 3

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 $10,what is the firm's total cost?

Accepted Answer

A)   $15
B)   $30
C)   $35
D)   $50E) A) and B)
F) A) and C)

Question 4

When economic profits are zero in equilibrium,the firm's revenue must be sufficient to cover all opportunity costs.

Accepted Answer

A) True 
 B)False

Question 5

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

Accepted Answer

A)   to produce the quantity at which average variable cost is minimized.
B)   to produce the quantity at which average fixed cost is minimized.
C)   to sell at a price where marginal cost is equal to average total cost.
D)   the quantity at which market price is equal to Sam's marginal cost of production.E) B) and C)
F) A) and C)

Question 6

Table 14-8
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-8.In order to maximize profits,the firm will produce

Accepted Answer

A)   1 unit of output because marginal cost is minimized.
B)   4 units of output because marginal revenue exceeds marginal cost.
C)   6 units of output because marginal revenue equals marginal cost.
D)   8 units of output because total revenue is maximized.E) A) and C)
F) B) and C)

Question 7

When new firms enter a perfectly competitive market,

Accepted Answer

A)   demand increases.
B)   the short-run market supply curve shifts right.
C)   the short-run market supply curve shifts left.
D)   existing firms will increase prices to keep the new firms from entering.E) B) and C)
F) A) and B)

Question 8

When an individual firm in a competitive market decreases its production,it is likely that the market price will rise.

Accepted Answer

A) True 
 B)False

Question 9

When an individual firm in a competitive market increases its production,it is likely that the market price will fall.

Accepted Answer

A) True 
 B)False

Question 10

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-8.Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)   ABCD
B)   BC
C)   ABC
D)   None of the above is correct. We must know the firm's average variable cost.E) A) and C)
F) B) and C)

Question 11

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Accepted Answer

A)   average revenue exceeds marginal cost.
B)   the firm is earning a positive profit.
C)   decreasing output would increase the firm's profit.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 12

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-2.Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4E) A) and B)
F) A) and C)

Question 13

Figure 14-14

-Refer to Figure 14-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (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.E) A) and B)
F) A) and C)

Question 14

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 15

A profit-maximizing firm in a competitive market is currently producing 200 units of output.It has average revenue of $9 and average total cost of $7.It follows that the firm's

Accepted Answer

A)   average total cost curve intersects the marginal cost curve at an output level of less than 200 units.
B)   average variable cost curve intersects the marginal cost curve at an output level of less than 200 units.
C)   profit is $400.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 16

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-10.Which level of production in the table has the lowest average variable cost?

Accepted Answer

A)   1 unit
B)   2 units
C)   3 units
D)   4 unitsE) C) and D)
F) B) and D)

Question 17

Carol owns a running shoe store that operates in a perfectly competitive market.If running shoes sell for $120 per pair and the average total cost per pair of shoes is $125 at the profit-maximizing output level,then in the long run

Accepted Answer

A)   more firms will enter the market.
B)   some firms will exit from the market.
C)   the equilibrium price per pair of shoes will fall.
D)   average total costs will fall.E) A) and D)
F) B) and D)

Question 18

Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Accepted Answer

The firm selects the level of output at ...

Question 19

When new firms enter a perfectly competitive market,

Accepted Answer

A)   economic profits of existing firms will continue to be zero.
B)   entering firms will earn zero economic profit upon entry into the market.
C)   existing firms may see their costs rise if more firms compete for limited resources.
D)   prices will rise as existing firms raise prices to keep new firms out of the market.E) B) and C)
F) A) and B)

Question 20

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 $10,what is the firm's total revenue?

Accepted Answer

A)   $15
B)   $30
C)   $35
D)   $50E) All of the above
F) B) and D)

Exam 14: Firms in Competitive Markets.

Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8.In order to maximize profits,the firm will produce

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Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow Answer

The short-run supply curve for a firm in a perfectly competitive market is

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The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Correct AnswerverifiedShow Answer

When new firms enter a perfectly competitive market,

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market is currently producing 200 units of output.It has average revenue of $9 and average total cost of $7.It follows that the firm's

Correct AnswerverifiedShow Answer

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

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Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8.Which line segment best reflects the long-run supply curve for this firm?

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Carol owns a running shoe store that operates in a perfectly competitive market.If running shoes sell for $120 per pair and the average total cost per pair of shoes is $125 at the profit-maximizing output level,then in the long run

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Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.Which level of production in the table has the lowest average variable cost?

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If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

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When economic profits are zero in equilibrium,the firm's revenue must be sufficient to cover all opportunity costs.

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When new firms enter a perfectly competitive market,

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Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.Which of the four prices corresponds to a firm earning zero economic profits in the short run?

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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 $10,what is the firm's total cost?

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

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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 $10,what is the firm's total revenue?

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Figure 14-14 -Refer to Figure 14-14.If the market starts in equilibrium at point C in panel (b) ,a decrease in demand will ultimately lead to

Correct AnswerverifiedShow Answer

When an individual firm in a competitive market increases its production,it is likely that the market price will fall.

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When an individual firm in a competitive market decreases its production,it is likely that the market price will rise.

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The firm selects the level of output at ...
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