Question 1

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) C) and D)
F) B) and C)

Question 2

Table 13-12
Bill's Birdhouses
 
-Refer to Table 13-12.At what quantity does Bill maximize profits?

Accepted Answer

A)   3
B)   6
C)   7
D)   8E) None of the above
F) B) and C)

Question 3

Figure 13-11 
-Refer to Figure 13-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve? Point
Price
Quantity
A
$4
4
B
$4
32
C
$6
6
D
$8
64

Accepted Answer

A)   A only
B)   A and C only
C)   B only
D)   B and D onlyE) B) and C)
F) All of the above

Question 4

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price,what effect would this have on the market?

Accepted Answer

The firm could not sell any more of its ...

Question 5

Suppose that you value a hat from your favorite university at $20.The university bookstore has the hat on sale for $15.You purchase the hat but lose it on the way home.What should you do? Assume that losing the hat does not alter how you value it.

Accepted Answer

A)   Go back to the bookstore and purchase another hat.
B)   Wait until the cost of the hat falls to $15 or less before purchasing another hat.
C)   Wait until the cost of the hat falls to $5 or less before purchasing another hat.
D)   Do not purchase another hat regardless of the price.E) All of the above
F) B) and D)

Question 6

Table 13-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 13-14.What is the marginal revenue of the 4th unit?

Accepted Answer

A)   $2.00
B)   $3.25
C)   $10.00
D)   $13.00E) C) and D)
F) None of the above

Question 7

The firm will make the most profits if it produces the quantity of output at which

Accepted Answer

A)   marginal cost equals average cost.
B)   profit per unit is greatest.
C)   marginal revenue equals total revenue.
D)   marginal revenue equals marginal cost.E) A) and B)
F) A) and C)

Question 8

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A)   the position of the marginal cost curve determines the price for which the firm should sell its product.
B)   among the various cost curves,the marginal cost curve is the only one that slopes upward.
C)   the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
D)   the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.E) A) and D)
F) All of the above

Question 9

Figure 13-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 13-1.The firm will earn a positive economic profit in the short run if the market price is

Accepted Answer

A)   above $6.30.
B)   less than $6.30 but more than $4.50.
C)   less than $4.50.
D)   exactly $6.30.E) B) and C)
F) A) and B)

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)   Firms can freely enter or exit the market.
C)   Price equals average revenue.
D)   Price exceeds marginal revenue.E) A) and B)
F) A) and C)

Question 11

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Accepted Answer

A)   more than double.
B)   double.
C)   increase but by less than double.
D)   may increase or decrease depending on the price elasticity of demand.E) All of the above
F) A) and B)

Question 12

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

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 B)
F) B) and C)

Question 14

If firms are competitive and profit maximizing,the price of a good equals the

Accepted Answer

A)   marginal cost of production.
B)   fixed cost of production.
C)   total cost of production.
D)   average total cost of production.E) C) and D)
F) B) and C)

Question 15

Figure 13-9
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 13-9.If there are 200 identical firms in this market,what level of output will be supplied to the market when price is $2.00?

Accepted Answer

A)   2,000
B)   10,000
C)   20,000
D)   40,000E) B) and C)
F) All of the above

Question 16

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 of the firms that remain in the market.
D)   shift the demand for the product to the left.E) A) and B)
F) A) and C)

Question 17

A book store that has market power can

Accepted Answer

A)   influence the market price for the books it sells.
B)   minimize costs more efficiently than its competitors.
C)   reduce its advertising budget more so than its competitors.
D)   ignore profit-maximizing strategies when setting the price for its books.E) None of the above
F) A) and B)

Question 18

Figure 13-14  
-Refer to Figure 13-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Accepted Answer

A)   Points A,B,and C represent both short-run and long-run equilibria.
B)   Points A,B,C,and D represent short-run equilibria.
C)   Points A and B represent long-run equilibria.
D)   Points A and C represent long-run equilibria.E) B) and C)
F) All of the above

Question 19

A firm in a competitive market has the following cost structure:  If the market price is $8,how many units of output should the firm produce to maximize profit?

Accepted Answer

A)   5 units
B)   6 units
C)   7 units
D)   8 unitsE) A) and B)
F) A) and C)

Question 20

Susan quit her job as a teacher,which paid her $36,000 per year,in order to start her own catering business.She spent $12,000 of her savings,which had been earning 10 percent interest per year,on equipment for her business.She also borrowed $12,000 from her bank at 10 percent interest,which she also spent on equipment.For the past several months she has spent $1,000 per month on ingredients and other variable costs.Also for the past several months she has earned $4,500 in monthly revenue.

Accepted Answer

A)   In the short run,Susan should shut down her business,and in the long run she should exit the industry.
B)   In the short run,Susan should continue to operate her business,but in the long run she should exit the industry.
C)   In the short run,Susan should continue to operate her business,but in the long run she will probably face competition from newly entering firms.
D)   In the short run,Susan should continue to operate her business,and she is also in long-run equilibrium.E) B) and C)
F) A) and B)

Exam 13: Firms in Competitive Markets

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Suppose that you value a hat from your favorite university at $20.The university bookstore has the hat on sale for $15.You purchase the hat but lose it on the way home.What should you do? Assume that losing the hat does not alter how you value it.

Correct Answer
verified

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

Correct Answer
verified

Table 13-12 Bill's Birdhouses -Refer to Table 13-12.At what quantity does Bill maximize profits?

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the market price is $8,how many units of output should the firm produce to maximize profit?

Correct Answer
verified

Figure 13-14 -Refer to Figure 13-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

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

Correct Answer
verified

A book store that has market power can

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The firm will make the most profits if it produces the quantity of output at which

Correct Answer
verified

If firms are competitive and profit maximizing,the price of a good equals the

Correct Answer
verified

Correct Answer
verified

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.The firm will earn a positive economic profit in the short run if the market price is

Correct Answer
verified

Table 13-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 13-14.What is the marginal revenue of the 4th unit?

Correct Answer
verified

Figure 13-11 -Refer to Figure 13-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve? Point Price Quantity A $4 4 B $4 32 C $6 6 D $8 64

Correct Answer
verified

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price,what effect would this have on the market?

Correct Answer
verified
The firm could not sell any more of its ...
View Answer

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

Correct Answer
verified

Correct Answer
verified

Exam 13: Firms in Competitive Markets

If a firm in a competitive market doubles its number of units sold,total revenue for the firm will

Correct AnswerverifiedShow Answer

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Correct AnswerverifiedShow Answer

Suppose that you value a hat from your favorite university at $20.The university bookstore has the hat on sale for $15.You purchase the hat but lose it on the way home.What should you do? Assume that losing the hat does not alter how you value it.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 13-12 Bill's Birdhouses -Refer to Table 13-12.At what quantity does Bill maximize profits?

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the market price is $8,how many units of output should the firm produce to maximize profit?

Correct AnswerverifiedShow Answer

Figure 13-14 -Refer to Figure 13-14.Assume that the market starts in equilibrium at point A in panel (b) and that panel (a) illustrates the cost curves facing individual firms.Suppose that demand increases from D0 to D1.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A book store that has market power can

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The firm will make the most profits if it produces the quantity of output at which

Correct AnswerverifiedShow Answer

If firms are competitive and profit maximizing,the price of a good equals the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.The firm will earn a positive economic profit in the short run if the market price is

Correct AnswerverifiedShow Answer

Table 13-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 13-14.What is the marginal revenue of the 4th unit?

Correct AnswerverifiedShow Answer

Figure 13-11 -Refer to Figure 13-11.The figure above is for a firm operating in a competitive industry.If there were eight identical firms in the industry,which of the following price-quantity combinations would be on the market supply curve? Point Price Quantity A $4 4 B $4 32 C $6 6 D $8 64

Correct AnswerverifiedShow Answer

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price,what effect would this have on the market?

Correct AnswerverifiedThe firm could not sell any more of its ...View AnswerShow Answer

When price exceeds average variable cost in the short run,a competitive firm's marginal cost curve is regarded as its supply curve because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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The firm could not sell any more of its ...
View Answer

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Correct Answer
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