Question 1

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost but greater than the firm's average fixed cost.

Accepted Answer

A) True 
 B)False

Question 2

A firm that shuts down temporarily 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 B)
F) A) and C)

Question 3

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 4

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A)   exit if P 
B)   exit if P 
C)   exit if P 
D)   exit if MR < MCE) All of the above
F) None of the above

Question 5

Firms operating in perfectly competitive markets try to maximize profits.

Accepted Answer

A) True 
 B)False

Question 6

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market? Quantity
Total Costs
0
$1
1
$7
2
$14
3
$22
4
$31
5
$41

Accepted Answer

A)   200 units
B)   300 units
C)   400 units
D)   500 unitsE) All of the above
F) C) and D)

Question 7

When a perfectly competitive firm decides to shut down,it is most likely that

Accepted Answer

A)   marginal cost is above average variable cost.
B)   marginal cost is above average total cost.
C)   price is below the firm's average variable cost.
D)   fixed costs exceed variable costs.E) A) and C)
F) All of the above

Question 8

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 unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 9

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14.What is Bob's total fixed cost?

Accepted Answer

A)   $0
B)   $3
C)   $5
D)   $9E) None of the above
F) B) and D)

Question 10

A competitive firm sells 100 units of output for $5 per unit.The firm's marginal revenue amounts to __________.

Accepted Answer

The answer of A competitive firm sells 100 units of...

Question 11

The long-run supply curve for a competitive industry may be upward sloping if

Accepted Answer

A)   there are barriers to entry.
B)   firms that enter the industry are able to do so at lower average total costs than the existing firms in the industry.
C)   some resources are available only in limited quantities.
D)   accounting profits are positive.E) C) and D)
F) B) and C)

Question 12

Figure 14-1 
-Refer to Figure 14-1.Suppose the price of the good is $175.If the firm produces and sells 515 units of output,its total revenue is

Accepted Answer

A)   $100,525.
B)   $90,125.
C)   $84,500.
D)   $75,250.E) B) and C)
F) None of the above

Question 13

Under what condition is the long-run market supply curve for a competitive market perfectly elastic?

Accepted Answer

There must exist a l...

Question 14

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price falls to $18,and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price.Once the firm has adjusted,its

Accepted Answer

A)   quantity of output is lower than it was previously.
B)   average total cost is lower than it was previously.
C)   marginal cost is higher than it was previously.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 15

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Accepted Answer

A competitive firm has the abi...

Question 16

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

Accepted Answer

A)   marginal revenue is lower than it was previously.
B)   marginal cost is lower than it was previously.
C)   quantity of output is higher than it was previously.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 17

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses,and many sellers have left the industry.Economic theory suggests that these conditions will

Accepted Answer

A)   shift the demand curve outward so that price will rise to the level of production cost.
B)   cause the remaining firms to collude so that they can produce more efficiently.
C)   cause the market supply to decline and the price of textiles to rise.
D)   cause firms in the textile industry to suffer long-run economic losses.E) All of the above
F) A) and D)

Question 18

Suppose a firm in each of the two markets listed below were to increase its price by 20 percent.In which pair would the firm in the first market listed experience a dramatic decline in sales,but the firm in the second market listed would not?

Accepted Answer

A)   corn and soybeans
B)   gasoline and restaurants
C)   water and cable television
D)   spiral notebooks and college textbooksE) A) and B)
F) B) and C)

Question 19

Suppose that a competitive market is initially in equilibrium.Then demand increases.If some resources used in production are not available in sufficient quantities for entering firms,

Accepted Answer

A)   the long-run market supply curve will be upward sloping.
B)   the long-run market supply curve will be perfectly elastic.
C)   in the long run firms will suffer economic losses,leading them to exit the industry.
D)   the number of firms will decrease,and the market will become a monopoly.E) A) and D)
F) B) and C)

Question 20

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) 
There are many sellers.
(ii) 
Firms can freely enter or exit the market.
(iii) 
Goods offered for sale are largely the same.

Accepted Answer

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

Exam 14: Firms in Competitive Markets

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Correct AnswerverifiedIn a competitive market where firms are ...View AnswerShow Answer

Firms operating in perfectly competitive markets try to maximize profits.

Correct AnswerverifiedShow Answer

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.Suppose the price of the good is $175.If the firm produces and sells 515 units of output,its total revenue is

Correct AnswerverifiedShow Answer

Suppose a firm in each of the two markets listed below were to increase its price by 20 percent.In which pair would the firm in the first market listed experience a dramatic decline in sales,but the firm in the second market listed would not?

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14.What is Bob's total fixed cost?

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive industry may be upward sloping if

Correct AnswerverifiedShow Answer

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses,and many sellers have left the industry.Economic theory suggests that these conditions will

Correct AnswerverifiedShow Answer

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market? Quantity Total Costs 0 $1 1 $7 2 $14 3 $22 4 $31 5 $41

Correct AnswerverifiedShow Answer

A firm that shuts down temporarily has to pay

Correct AnswerverifiedShow Answer

Which of the following represents the firm's long-run condition for exiting a market?

Correct AnswerverifiedShow Answer

A competitive firm sells 100 units of output for $5 per unit.The firm's marginal revenue amounts to __________.

Correct AnswerverifiedShow Answer

Does a competitive firm have the ability to influence the quantity of output it supplies? Does it have the ability to influence its average revenue?

Correct AnswerverifiedA competitive firm has the abi...View AnswerShow Answer

When a perfectly competitive firm decides to shut down,it is most likely that

Correct AnswerverifiedShow Answer

Suppose that a competitive market is initially in equilibrium.Then demand increases.If some resources used in production are not available in sufficient quantities for entering firms,

Correct AnswerverifiedShow Answer

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price falls to $18,and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price.Once the firm has adjusted,its

Correct AnswerverifiedShow Answer

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same.

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 unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Correct AnswerverifiedShow Answer

Under what condition is the long-run market supply curve for a competitive market perfectly elastic?

Correct AnswerverifiedThere must exist a l...View AnswerShow Answer

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average variable cost but greater than the firm's average fixed cost.

Correct AnswerverifiedShow Answer

Correct Answer
verified
In a competitive market where firms are ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A competitive firm has the abi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
There must exist a l...
View Answer

Correct Answer
verified