Question 1

Figure 14-1 
-Refer to Figure 14-1.If the market price is P2,in the short run,the perfectly competitive 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) C) and D)
F) A) and B)

Question 2

When a firm has little ability to influence market prices it is said to be in a

Accepted Answer

A)   competitive market.
B)   strategic market.
C)   thin market.
D)   power market.E) B) and D)
F) A) and B)

Question 3

Table 14-5
 
-Refer to Table 14-5.At a production level of 4 units which of the following is true?

Accepted Answer

A)   Marginal cost is $4.
B)   Total revenue is greater than variable cost.
C)   Marginal revenue is less than marginal cost.
D)   The firm is maximizing profit.E) B) and C)
F) A) and B)

Question 4

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)   total revenue must equal total variable cost for each firm.
B)   economic profits must be zero.
C)   price must equal average variable cost for each firm.
D)   Both a and c are correct.E) All of the above
F) C) and D)

Question 5

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 6

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)   Profit = MR - MC
B)   Profit = MR - TC
C)   Profit = (P - M
C)  xQ
D)   Profit = (P - AT
C)  xQE) B) and C)
F) A) and C)

Question 8

Shrimp Galore,a shrimp harvesting business in the Pacific Northwest,has a 30-year loan on its shrimp harvesting boat.The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance.Prior to the 2008 shrimp harvesting season,Shrimp Galore's accountant predicted that at expected market prices for shrimp,Shrimp Galore would have a net loss of $75,000 dollars after paying all 2008 expenses (including the annual loan payment) .In this case,Shrimp Galore should

Accepted Answer

A)   produce nothing and experience a loss of $25,000.
B)   produce nothing and experience a loss of $75,000.
C)   continue to operate because expected profits will rise in the future.
D)   continue to operate even though it predicts a loss of $75,000.E) None of the above
F) B) and C)

Question 9

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Accepted Answer

A)   total revenue.
B)   marginal revenue.
C)   average revenue.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 10

Which of the following statements regarding a competitive market is not correct?

Accepted Answer

A)   There are many buyers and many sellers in the market.
B)   Because of firm location or product differences,some firms can charge a higher price than other firms and still maintain their sales volume.
C)   Price and average revenue are equal.
D)   Price and marginal revenue are equal.E) B) and D)
F) A) and C)

Question 11

When new entrants into a competitive market have higher costs than existing firms,

Accepted Answer

A)   accounting profits will be the primary determinant of entry into the market.
B)   sunk costs become an important determinant of the short-run entry strategy.
C)   market price will rise.
D)   long-run supply is constant.E) A) and C)
F) B) and D)

Question 12

Figure 14-9  
-Refer to Figure 14-9.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) A) and C)
F) None of the above

Question 13

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 14

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) A) and D)
F) All of the above

Question 15

When firms have an incentive to exit a competitive market,their exit will

Accepted Answer

A)   lower the market price.
B)   necessarily raise the costs for the firms that remain in the market.
C)   raise the profits for the firms that remain in the market.
D)   shift the demand for the product to the left.E) A) and B)
F) B) and D)

Question 16

Figure 14-9  
-Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from D0 to D1 will result in

Accepted Answer

A)   a new market equilibrium at point D.
B)   an eventual increase in the number of firms in the market and a new long-run equilibrium at point C.
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) B) and D)

Question 17

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Accepted Answer

A)   experience losses but will continue to produce rubber bands.
B)   shut down.
C)   earn both economic and accounting profits.
D)   raise the price of its product.E) A) and D)
F) A) and C)

Question 18

Figure 14-5 
-Refer to Figure 14-5.When market price is P3,a profit-maximizing firm's total costs

Accepted Answer

A)   can be represented by the area P2Q2.
B)   can be represented by the area P3Q2.
C)   can be represented by the area (P3-P2) Q3.
D)   are zero.E) A) and D)
F) All of the above

Question 19

Scenario 14-1
Assume a certain firm 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 total cost amounts to

Accepted Answer

A)   $10,985.
B)   $10,990.
C)   $10,995.
D)   $10,999.E) A) and B)
F) None of the above

Question 20

Suppose that a firm is currently maximizing its short-run profit at an output of 50 units.If the current price is $9,the marginal cost of the 50th unit is $9,and the average total cost of producing 50 units is $4,what is the firm's profit?

Accepted Answer

A)   $0
B)   $200
C)   $250
D)   $450E) None of the above
F) C) and D)

Exam 14: Firms in Competitive Markets

Figure 14-9 -Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from D0 to D1 will result in

Correct Answer
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When new entrants into a competitive market have higher costs than existing firms,

Correct Answer
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Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Correct Answer
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Which of the following could be used to calculate the profit for a firm?

Correct Answer
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A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Correct Answer
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Figure 14-9 -Refer to Figure 14-9.If the market starts in equilibrium at point C in panel (b) ,a decrease in demand will ultimately lead to

Correct Answer
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Figure 14-1 -Refer to Figure 14-1.If the market price is P2,in the short run,the perfectly competitive firm will earn

Correct Answer
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Figure 14-5 -Refer to Figure 14-5.When market price is P3,a profit-maximizing firm's total costs

Correct Answer
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In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

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

Correct Answer
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Table 14-5 -Refer to Table 14-5.At a production level of 4 units which of the following is true?

Correct Answer
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Suppose that a firm is currently maximizing its short-run profit at an output of 50 units.If the current price is $9,the marginal cost of the 50th unit is $9,and the average total cost of producing 50 units is $4,what is the firm's profit?

Correct Answer
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When a firm has little ability to influence market prices it is said to be in a

Correct Answer
verified

Which of the following statements regarding a competitive market is not correct?

Correct Answer
verified

When firms are neither entering nor exiting a perfectly competitive market,

Correct Answer
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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

Scenario 14-1 Assume a certain firm 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 total cost amounts to

Correct Answer
verified

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct Answer
verified

When firms have an incentive to exit a competitive market,their exit will

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Figure 14-9 -Refer to Figure 14-9.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from D0 to D1 will result in

Correct AnswerverifiedShow Answer

When new entrants into a competitive market have higher costs than existing firms,

Correct AnswerverifiedShow Answer

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Correct AnswerverifiedShow Answer

Which of the following could be used to calculate the profit for a firm?

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Correct AnswerverifiedShow Answer

Figure 14-9 -Refer to Figure 14-9.If the market starts in equilibrium at point C in panel (b) ,a decrease in demand will ultimately lead to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.If the market price is P2,in the short run,the perfectly competitive firm will earn

Correct AnswerverifiedShow Answer

Figure 14-5 -Refer to Figure 14-5.When market price is P3,a profit-maximizing firm's total costs

Correct AnswerverifiedShow Answer

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 14-5 -Refer to Table 14-5.At a production level of 4 units which of the following is true?

Correct AnswerverifiedShow Answer

Suppose that a firm is currently maximizing its short-run profit at an output of 50 units.If the current price is $9,the marginal cost of the 50th unit is $9,and the average total cost of producing 50 units is $4,what is the firm's profit?

Correct AnswerverifiedShow Answer

When a firm has little ability to influence market prices it is said to be in a

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive market is not correct?

Correct AnswerverifiedShow Answer

When firms are neither entering nor exiting a perfectly competitive market,

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

Scenario 14-1 Assume a certain firm 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 total cost amounts to

Correct AnswerverifiedShow Answer

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct AnswerverifiedShow Answer

When firms have an incentive to exit a competitive market,their exit will

Correct AnswerverifiedShow Answer

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