Question 1

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

Accepted Answer

A)  $0
B)  $6
C)  $10
D)  $12E) A) and C)
F) A) and D)

Question 2

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

Question 3

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 4

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's total revenue if it instead produced and sold 4 units of output?

Accepted Answer

A)  $4
B)  $8
C)  $32
D)  $64E) A) and D)
F) B) and C)

Question 5

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Accepted Answer

A)  production of the 100th unit of output increases the firm's profit by $1.
B)  production of the 100th unit of output increases the firm's average total cost by $1.
C)  firm's profit-maximizing level of output is less than 100 units.
D)  production of the 101st unit of output must increase the firm's profit by more than $1.E) A) and B)
F) None of the above

Question 6

​Table 14-16
The table represents the demand information for a firm in a competitive market.  ​
-Refer to Table 14-16. For this firm, the price is

Accepted Answer

A)  ​$120
B)  ​$10
C)  ​$15
D)  ​$5E) B) and C)
F) None of the above

Question 7

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

Accepted Answer

A)  $2,000.
B)  $2,400.
C)  $4,200.
D)  We do not have enough information to answer the question.E) None of the above
F) A) and D)

Question 8

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) B) and C)

Question 9

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. At Q=499, the firm's profits equal

Accepted Answer

A)  $3,980.
B)  $3,992.
C)  $3,997.
D)  $4,017.E) B) and D)
F) A) and B)

Question 10

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

Question 11

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

Question 12

Table 14-12 
-Refer to Table 14-12. At what quantity does Bill maximize profits?

Accepted Answer

A)  3
B)  6
C)  7
D)  8E) A) and B)
F) B) and C)

Question 13

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 C)
F) None of the above

Question 14

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. At Q=499, the firm's total costs equal

Accepted Answer

A)  $5,983.
B)  $5,988.
C)  $5,995.
D)  $5,999.E) B) and C)
F) A) and D)

Question 15

Because the goods offered for sale in a competitive market are largely the same,

Accepted Answer

A)  there will be few sellers in the market.
B)  there will be few buyers in the market.
C)  only a few buyers will have market power.
D)  sellers will have little reason to charge less than the going market price.E) A) and B)
F) None of the above

Question 16

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 $10, what is the firm's total cost?

Accepted Answer

A)  $15
B)  $30
C)  $35
D)  $50E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

In a competitive market, there...

Question 18

A seller in a competitive market

Accepted Answer

A)  can sell all he wants at the going price, so he has little reason to charge less.
B)  will lose all his customers to other sellers if he raises his price.
C)  considers the market price to be a "take it or leave it" price.
D)  All of the above are correct.E) B) and C)
F) A) and B)

Question 19

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 is $6.30, 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 and shut down.
D)  zero economic profits in the short run.E) A) and B)
F) C) and D)

Question 20

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

A)  less than $2.50
B)  more than $2.50
C)  exactly $2.50
D)  The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.E) None of the above
F) A) and B)

Exam 14: Firms in Competitive Markets

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 $10, what is the firm's total cost?

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Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=499, the firm's profits equal

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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

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For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

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

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A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

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Because the goods offered for sale in a competitive market are largely the same,

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

Correct AnswerverifiedIn a competitive market, there...View AnswerShow Answer

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

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​Table 14-16 The table represents the demand information for a firm in a competitive market. ​ -Refer to Table 14-16. For this firm, the price is

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A seller in a competitive market

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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

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

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

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In the long run,

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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 is $6.30, the firm will earn

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Table 14-12 -Refer to Table 14-12. At what quantity does Bill maximize profits?

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Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8. What would be the firm's total revenue if it instead produced and sold 4 units of output?

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Scenario 14-3 Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20. -Refer to Scenario 14-3. At Q=499, the firm's total costs equal

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Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Correct AnswerverifiedShow Answer

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In a competitive market, there...
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Table 14-16 The table represents the demand information for a firm in a competitive market. -Refer to Table 14-16. For this firm, the price is

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