Question 1

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

Question 2

Which of the following industries is least likely to exhibit the characteristic of free entry?

Accepted Answer

A)   ethnic restaurants
B)   municipal water and sewer
C)   corn farming
D)   grocery storesE) B) and D)
F) A) and C)

Question 3

Figure 14-11 
-Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Accepted Answer

A)   A only
B)   A and C only
C)   B only
D)   B and D onlyE) B) and C)
F) A) and D)

Question 4

Profit-maximizing firms in a competitive market produce an output level where

Accepted Answer

A)   marginal cost equals marginal revenue.
B)   marginal cost equals average total cost.
C)   marginal revenue is increasing.
D)   price is less than marginal revenue.E) None of the above
F) A) and B)

Question 5

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-3. For this firm, the marginal revenue is

Accepted Answer

A)   $39.
B)   $26.
C)   $13.
D)   $0.E) None of the above
F) A) and B)

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)   5 units of output because marginal revenue equals marginal cost.
D)   7 units of output because total revenue is maximized.E) A) and C)
F) None of the above

Question 7

In the long run, each firm in a competitive industry earns

Accepted Answer

A)   zero accounting profits.
B)   zero economic profits.
C)   positive economic profits.
D)   Both a and b are correct.E) A) and C)
F) A) and B)

Question 8

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 9

Which of the following statements best reflects a price-taking firm?

Accepted Answer

A)   If the firm were to charge more than the going price, it would sell none of its goods.
B)   The firm has an incentive to charge less than the market price to earn higher revenue.
C)   The firm can sell only a limited amount of output at the market price before the market price will fall.
D)   Price-taking firms maximize profits by charging a price above marginal cost.E) B) and D)
F) B) and C)

Question 10

Table 14-1
 
-Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Accepted Answer

A)   monopoly.
B)   concentrated market.
C)   competitive market.
D)   strategic market.E) None of the above
F) A) and B)

Question 11

For a particular competitive firm, the minimum value of average variable cost AVC)  is $12 and is reached when 200 units of output are produced. For the same firm, the minimum value of average total cost ATC)  is $15 and is reached when 230 units of output are produced. Which of the following statements is correct?

Accepted Answer

A)   In the short run, the firm will shut down if the price of its product is $14.
B)   In the long run, the firm will shut down if the price of its product is $11.
C)   For this firm, the minimum value of variable cost V
C)   is $2,400.
D)   If the firm's fixed cost F
C)   amounts to $500, then the firm cannot earn a positive profit unless the price of its product exceeds $16.E) None of the above
F) All of the above

Question 12

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 13

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 B)
F) B) and D)

Question 14

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald 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)   the quantity at which market price is equal to Mr. McDonald's marginal cost of production.
D)   the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount.E) A) and B)
F) A) and C)

Question 15

Table 14-13
Diana's Dress Emporium
 
-Refer to Table 14-13. What is the marginal cost of the 1st unit?

Accepted Answer

A)   $50
B)   $75
C)   $80
D)   $150E) A) and B)
F) A) and C)

Question 16

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 17

Which of the following statements best expresses a firm's profit­maximizing decision rule?

Accepted Answer

A)   If marginal revenue is greater than marginal cost, the firm should increase its output.
B)   If marginal revenue is less than marginal cost, the firm should decrease its output.
C)   If marginal revenue equals marginal cost, the firm should continue producing its current level of output.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 18

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Accepted Answer

A)   2 units
B)   3 units
C)   4 units
D)   5 unitsE) A) and C)
F) B) and C)

Question 19

At the profit-maximizing level of output,

Accepted Answer

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

Question 20

A competitive firm would benefit from charging a price below the market price because the firm would achieve i)  higher average revenue.
Ii)  higher profits.
Iii)  lower total costs.

Accepted Answer

A)   i)  only
B)   ii)  and iii)  only
C)   i) , ii) , and iii) 
D)   None of the above is correct.E) All of the above
F) B) and D)

Exam 13: Firms in Competitive Markets

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

Correct Answer
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Table 14-1 -Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Correct Answer
verified

Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Correct Answer
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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 Answer
verified

Correct Answer
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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 Answer
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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

Correct Answer
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At the profit-maximizing level of output,

Correct Answer
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Which of the following statements best expresses a firm's profitmaximizing decision rule?

Correct Answer
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Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Correct Answer
verified

In the long run, each firm in a competitive industry earns

Correct Answer
verified

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is the marginal cost of the 1st unit?

Correct Answer
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Profit-maximizing firms in a competitive market produce an output level where

Correct Answer
verified

A competitive firm would benefit from charging a price below the market price because the firm would achieve i) higher average revenue. Ii) higher profits. Iii) lower total costs.

Correct Answer
verified

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Correct Answer
verified

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the marginal revenue is

Correct Answer
verified

Which of the following industries is least likely to exhibit the characteristic of free entry?

Correct Answer
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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
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The firm could not sell any more of its ...
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Which of the following statements best reflects a price-taking firm?

Correct Answer
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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. At which level of output in the table is average variable cost equal to $6?

Correct Answer
verified

Exam 13: Firms in Competitive Markets

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

Correct AnswerverifiedShow Answer

Table 14-1 -Refer to Table 14-1. The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Correct AnswerverifiedShow Answer

Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

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

Correct AnswerverifiedShow 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

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

Correct AnswerverifiedShow Answer

At the profit-maximizing level of output,

Correct AnswerverifiedShow Answer

Which of the following statements best expresses a firm's profit­maximizing decision rule?

Correct AnswerverifiedShow Answer

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Correct AnswerverifiedShow Answer

In the long run, each firm in a competitive industry earns

Correct AnswerverifiedShow Answer

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is the marginal cost of the 1st unit?

Correct AnswerverifiedShow Answer

Profit-maximizing firms in a competitive market produce an output level where

Correct AnswerverifiedShow Answer

A competitive firm would benefit from charging a price below the market price because the firm would achieve i) higher average revenue. Ii) higher profits. Iii) lower total costs.

Correct AnswerverifiedShow Answer

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Correct AnswerverifiedShow Answer

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the marginal revenue is

Correct AnswerverifiedShow Answer

Which of the following industries is least likely to exhibit the characteristic of free entry?

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

Which of the following statements best reflects a price-taking firm?

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. At which level of output in the table is average variable cost equal to $6?

Correct AnswerverifiedShow Answer

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Which of the following statements best expresses a firm's profitmaximizing decision rule?

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

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