Question 1

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
 
-Refer to Table 14-6.What is the average revenue when 4 units are sold?

Accepted Answer

A)   $60
B)   $120
C)   $125
D)   $197E) C) and D)
F) None of the above

Question 4

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Accepted Answer

A)   Nothing.The price is consistent with zero economic profits,so there is no incentive for firms to enter or exit the industry.
B)   Individual firms will earn positive economic profits in the short run,which will entice other firms to enter the industry.
C)   Individual firms will earn negative economic profits in the short run,which will cause some firms to exit the industry.
D)   Because the price is below the firm's average variable costs,the firms will shut down.E) A) and C)
F) All of the above

Question 5

When marginal revenue equals marginal cost,the firm

Accepted Answer

A)   should increase the level of production to maximize its profit.
B)   may be minimizing its losses rather than maximizing its profit.
C)   must be generating positive economic profits.
D)   must be generating positive accounting profits.E) A) and B)
F) A) and C)

Question 6

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 7

Figure 14-14  
-Refer to Figure 14-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Accepted Answer

A)   The entry of new firms into the market.
B)   The exit of existing consumers from the market.
C)   An increase in market supply from S0 to S1.
D)   An increase in market demand from D0 to D1.E) All of the above
F) A) and B)

Question 8

Which of the following statements is not correct about competitive firms?

Accepted Answer

A)   In a long-run equilibrium,firms must be operating at their efficient scale.
B)   In the short run,the number of firms in an industry may be fixed.
C)   In the long run,the number of firms can adjust to changing market conditions.
D)   In the short run,firms must be operating at a level of output where price equals average variable cost.E) B) and C)
F) A) and D)

Question 9

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 $5.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 10

In the long run the market supply

Accepted Answer

A)   must always be horizontal.
B)   could be upward sloping if the cost of production falls as new firms enter the market.
C)   could be upward sloping if the cost of production rises as new firms enter the market.
D)   could be upward sloping if technological improvements lower the cost of producing in the market.E) A) and B)
F) A) and C)

Question 11

The long-run market supply curve in a competitive market will

Accepted Answer

A)   always be horizontal.
B)   be the portion of the MC that lies above the minimum of AVC for the marginal firm.
C)   typically be more elastic than the short-run supply curve.
D)   be above the competitive firm's efficient scale.E) B) and C)
F) A) and C)

Question 12

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 at a market price of $1.75,52,500 units of output are supplied to this market,how many identical firms are participating in this market?

Accepted Answer

A)   75
B)   100
C)   250
D)   300E) None of the above
F) A) and B)

Question 13

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Accepted Answer

A) True 
 B)False

Question 14

A competitive market has two basic characteristics.What are those two characteristics?

Accepted Answer

In a competitive market,there ...

Question 15

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Accepted Answer

A)   average total cost curve.
B)   average variable cost curve.
C)   marginal cost curve.
D)   marginal revenue curve.E) A) and B)
F) C) and D)

Question 16

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)   earning small but positive economic profits.
B)   facing the prospect of future losses.
C)   operating at the efficient scale.
D)   that work together to raise market prices.E) All of the above
F) A) and C)

Question 17

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Accepted Answer

A)   is horizontal and equal to the minimum of long-run marginal cost for each firm.
B)   must slope downward.
C)   must slope upward.
D)   is horizontal and equal to the minimum of long-run average cost for each firm.E) All of the above
F) A) and B)

Question 18

For a firm,marginal revenue minus marginal cost is equal to

Accepted Answer

A)   profit.
B)   average total cost.
C)   change in profit.
D)   change in average revenue.E) None of the above
F) B) and D)

Question 19

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

Accepted Answer

A)   $2
B)   $4
C)   $6
D)   $8E) A) and C)
F) All of the above

Question 20

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1.The firm's short-run supply curve is its marginal cost curve above

Accepted Answer

A)   $1.
B)   $3.
C)   $4.50.
D)   $6.30.E) None of the above
F) B) and C)

Exam 14: Firms in Competitive Markets

For a firm,marginal revenue minus marginal cost is equal to

Correct Answer
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Which of the following statements is not correct about competitive firms?

Correct Answer
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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.The firm's short-run supply curve is its marginal cost curve above

Correct Answer
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Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6.What is the average revenue when 4 units are sold?

Correct Answer
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Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Correct Answer
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A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Correct Answer
verified

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

Correct Answer
verified

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct Answer
verified

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

Correct Answer
verified

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Correct Answer
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In the long run the market supply

Correct Answer
verified

When marginal revenue equals marginal cost,the firm

Correct Answer
verified

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Correct Answer
verified

A competitive market has two basic characteristics.What are those two characteristics?

Correct Answer
verified
In a competitive market,there ...
View 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 $5.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Correct Answer
verified

The long-run market supply curve in a competitive market will

Correct Answer
verified

Correct Answer
verified

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Correct Answer
verified

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct Answer
verified

Exam 14: Firms in Competitive Markets

For a firm,marginal revenue minus marginal cost is equal to

Correct AnswerverifiedShow Answer

Which of the following statements is not correct about competitive firms?

Correct AnswerverifiedShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm's short-run supply curve is its marginal cost curve above

Correct AnswerverifiedShow Answer

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6.What is the average revenue when 4 units are sold?

Correct AnswerverifiedShow Answer

Suppose a firm is considering producing zero units of output.We call this shutting down in the short run and exiting an industry in the long run.

Correct AnswerverifiedShow Answer

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Correct AnswerverifiedShow Answer

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.If the firm produces the profit-maximizing level of production,how much profit will the firm earn?

Correct AnswerverifiedShow Answer

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P2 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

In the long run the market supply

Correct AnswerverifiedShow Answer

When marginal revenue equals marginal cost,the firm

Correct AnswerverifiedShow Answer

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Correct AnswerverifiedShow Answer

A competitive market has two basic characteristics.What are those two characteristics?

Correct AnswerverifiedIn a competitive market,there ...View AnswerShow 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 $5.The firm should continue to produce 100 units in order to maximize its profits (or minimize its losses).

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Correct AnswerverifiedShow Answer

The long-run market supply curve in a competitive market will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Correct AnswerverifiedShow Answer

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct AnswerverifiedShow Answer

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In a competitive market,there ...
View Answer

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