Question 1

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Accepted Answer

A)   $7.
B)   $6.
C)   $4.
D)   We do not have enough information to answer the question.E) B) and C)
F) A) and C)

Question 2

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A)   zero.
B)   equal to the industry profits.
C)   the market supply curve.
D)   a horizontal line.E) B) and C)
F) C) and D)

Question 3

Table 14-4
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-4. For this firm, the marginal revenue is

Accepted Answer

A)   $0.
B)   $5.
C)   $10.
D)   $15.E) A) and D)
F) B) and D)

Question 4

In order to maximize profits in the short run, a firm should produce where

Accepted Answer

A)   marginal revenue exceeds marginal cost by the greatest amount.
B)   marginal cost is minimized.
C)   average total cost is minimized.
D)   marginal cost equals marginal revenue.E) A) and B)
F) C) and D)

Question 5

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Accepted Answer

A)   price is less than average total cost.
B)   price is greater than average total cost.
C)   average revenue is greater than average fixed cost.
D)   average revenue is greater than marginal cost.E) A) and B)
F) A) and C)

Question 6

In the long run,

Accepted Answer

A)   competitive firms' profits are zero.
B)   competitive firms' variable costs are zero.
C)   competitive firms' ATC curves shift upward or downward to ensure that all demand is satisfied.
D)   the number of firms in the market is fixed.E) A) and D)
F) A) and C)

Question 7

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

Accepted Answer

A)   shut down.
B)   reduce its output but continue operating.
C)   continue to produce at the current levels.
D)   increase its output.E) None of the above
F) B) and C)

Question 8

Regardless of the cost structure of firms in a competitive market, in the long run

Accepted Answer

A)   firms will experience rising demand for their products.
B)   the marginal firm will earn zero economic profit.
C)   firms will experience a less competitive market environment.
D)   exit and entry is likely to lead to a horizontal long-run supply curve.E) All of the above
F) A) and B)

Question 9

In a market with a fixed number of firms, as long as price is above average

Accepted Answer

A)   variable cost, each firm's marginal­cost curve is its supply curve.
B)   variable cost, each firm's average­total­cost curve is its supply curve.
C)   total cost, each firm's marginal­cost curve is its supply curve.
D)   total cost, each firm's average­total­cost curve is its supply curve.E) A) and C)
F) A) and B)

Question 10

A firm has market power if it can

Accepted Answer

A)   maximize profits.
B)   minimize costs.
C)   influence the market price of the good it sells.
D)   hire as many workers as it needs at the prevailing wage rate.E) A) and B)
F) A) and C)

Question 11

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Accepted Answer

A)   $0
B)   $12
C)   $15
D)   $18E) C) and D)
F) A) and D)

Question 12

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Accepted Answer

A) True 
 B)False

Question 13

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Accepted Answer

A)   first unit.
B)   second unit.
C)   fourth unit.
D)   fifth unit.E) A) and C)
F) B) and C)

Question 14

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 the marginal revenue of the 4th unit?

Accepted Answer

A)   $2.00
B)   $3.25
C)   $10.00
D)   $13.00E) A) and D)
F) B) and C)

Question 15

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

Accepted Answer

A)   under diseconomies of scale.
B)   with small, but positive, levels of profit.
C)   at their efficient scale.
D)   where price is equal to average fixed cost.E) None of the above
F) A) and D)

Question 16

When firms in a competitive market have different costs, it is likely that

Accepted Answer

A)   free entry and exit in the market will be violated.
B)   the market will no longer be considered competitive.
C)   long-run market supply will be downward sloping.
D)   some firms will earn positive economic profits in the long run.E) All of the above
F) A) and C)

Question 17

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as P-...

Question 18

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn

Accepted Answer

A)   positive economic profits in the short run.
B)   negative economic profits in the short run but remain in business.
C)   negative economic profits in the short run and shut down.
D)   zero economic profits in the short run.E) C) and D)
F) B) and D)

Question 19

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75 per loaf. At this new price, what is Bob's profit­maximizing quantity?

Accepted Answer

A)   5 units
B)   6 units
C)   7 units
D)   8 unitsE) All of the above
F) A) and C)

Question 20

Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market.  How many units should a firm in this market produce to maximize profit?

Accepted Answer

A)   1 unit
B)   2 units
C)   3 units
D)   4 unitsE) B) and D)
F) B) and C)

Exam 13: Firms in Competitive Markets

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the marginal revenue is

Correct Answer
verified

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Correct Answer
verified

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct Answer
verified

In order to maximize profits in the short run, a firm should produce where

Correct Answer
verified

When firms in a competitive market have different costs, it is likely that

Correct Answer
verified

A firm has market power if it can

Correct Answer
verified

Correct Answer
verified

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct Answer
verified

In the long run,

Correct Answer
verified

In a market with a fixed number of firms, as long as price is above average

Correct Answer
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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

Correct Answer
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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. If the market price falls below $4.50, the firm will earn

Correct Answer
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When firms in a perfectly competitive market face the same costs, in the long run they must be operating

Correct Answer
verified

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 the marginal revenue of the 4th unit?

Correct Answer
verified

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as P-...
View Answer

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

Correct Answer
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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct Answer
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Regardless of the cost structure of firms in a competitive market, in the long run

Correct Answer
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Exam 13: Firms in Competitive Markets

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the marginal revenue is

Correct AnswerverifiedShow Answer

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Correct AnswerverifiedShow Answer

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct AnswerverifiedShow Answer

In order to maximize profits in the short run, a firm should produce where

Correct AnswerverifiedShow Answer

When firms in a competitive market have different costs, it is likely that

Correct AnswerverifiedShow Answer

A firm has market power if it can

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

In a market with a fixed number of firms, as long as price is above average

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn

Correct AnswerverifiedShow Answer

When firms in a perfectly competitive market face the same costs, in the long run they must be operating

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 the marginal revenue of the 4th unit?

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedProfit can be calculated as P-...View AnswerShow Answer

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct AnswerverifiedShow Answer

Regardless of the cost structure of firms in a competitive market, in the long run

Correct AnswerverifiedShow Answer

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Profit can be calculated as P-...
View Answer

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Correct Answer
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Correct Answer
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