Question 1

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

Question 2

Total profit for a firm is calculated as

Accepted Answer

A)   marginal revenue minus average total cost.
B)   average revenue minus average total cost.
C)   marginal revenue minus marginal cost.
D)   (price minus average cost) times quantity of output.E) A) and D)
F) None of the above

Question 3

In the long-run equilibrium of a market with free entry and exit,marginal firms are operating

Accepted Answer

A)   at the point where average variable cost equals marginal cost.
B)   at the minimum point on their marginal cost curves.
C)   at their efficient scale.
D)   where accounting profit is zero.E) None of the above
F) B) and C)

Question 4

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Accepted Answer

A) True 
 B)False

Question 5

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 6

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses and many sellers have left the industry.Economic theory suggests that these conditions will

Accepted Answer

A)   shift the demand curve outward so that price will rise to the level of production cost.
B)   cause the remaining firms to collude so that they can produce more efficiently.
C)   cause the market supply to decline and the price of textiles to rise.
D)   cause firms in the textile industry to suffer long-run economic losses.E) C) and D)
F) A) and B)

Question 7

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

Question 8

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Accepted Answer

A) True 
 B)False

Question 9

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) None of the above
F) A) and B)

Question 10

Figure 14-1 
-Refer to Figure 14-1.If the market price is P1,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) A) and B)
F) None of the above

Question 11

Which of the following statements is not correct?

Accepted Answer

A)   In a long-run equilibrium,marginal firms make zero economic profit.
B)   To maximize profit,firms should produce at a level of output where price equals average variable cost.
C)   The amount of gold in the world is limited.Therefore,the gold jewelry market probably has a long-run supply curve that is upward sloping.
D)   Long-run supply curves are typically more elastic than short-run supply curves.E) C) and D)
F) A) and B)

Question 12

Figure 14-8
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 14-8.When 100 identical firms participate in this market,at what price will 15,000 units be supplied to this market?

Accepted Answer

A)   $1.00
B)   $1.50
C)   $2.00
D)   The price cannot be determined from the information provided.E) All of the above
F) B) and C)

Question 13

Table 14-6
John's Vineyard
 
-Refer to Table 14-6.What is the marginal cost of the 8th unit?

Accepted Answer

A)   $0
B)   $72.75
C)   $120
D)   $502E) A) and D)
F) A) and C)

Question 14

Entry into a market by new firms will increase the

Accepted Answer

A)   supply of the good.
B)   profits of existing firms.
C)   price of the good.
D)   marginal cost of producing the good.E) A) and B)
F) A) and C)

Question 15

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down if the price of its product falls below

Accepted Answer

A)   $90.
B)   $80.
C)   $50.
D)   $40.E) A) and B)
F) None of the above

Question 16

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 D)
F) A) and C)

Question 17

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Accepted Answer

A)   a one-unit increase in output will increase the firm's profit.
B)   a one-unit decrease in output will increase the firm's profit.
C)   total revenue exceeds total cost.
D)   total cost exceeds total revenue.E) C) and D)
F) None of the above

Question 18

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Accepted Answer

A)   increase.
B)   remain unchanged.
C)   decrease by less than 20 percent.
D)   decrease by more than 20 percent.E) A) and B)
F) A) and C)

Question 19

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A)   certain outlays of money by the firm.
B)   implicit costs.
C)   operating costs.
D)   fixed costs.E) None of the above
F) A) and C)

Question 20

In the long run,a firm will exit a competitive industry if

Accepted Answer

A)   total revenue exceeds total cost.
B)   the price exceeds average total cost.
C)   average total cost exceeds the price.
D)   Both a and b are correct.E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

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

Correct Answer
verified

In the long-run equilibrium of a market with free entry and exit,marginal firms are operating

Correct Answer
verified

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses and many sellers have left the industry.Economic theory suggests that these conditions will

Correct Answer
verified

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

Correct Answer
verified

Total profit for a firm is calculated as

Correct Answer
verified

Figure 14-1 -Refer to Figure 14-1.If the market price is P1,in the short run,the perfectly competitive firm will earn

Correct Answer
verified

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Correct Answer
verified

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct Answer
verified

In the long run,a firm will exit a competitive industry if

Correct Answer
verified

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Correct Answer
verified

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

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Correct Answer
verified

Table 14-6 John's Vineyard -Refer to Table 14-6.What is the marginal cost of the 8th unit?

Correct Answer
verified

Entry into a market by new firms will increase the

Correct Answer
verified

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down if the price of its product falls below

Correct Answer
verified

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Correct Answer
verified

Exam 14: Firms in Competitive Markets

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

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a market with free entry and exit,marginal firms are operating

Correct AnswerverifiedShow Answer

The textile industry is composed of a large number of small firms.In recent years,these firms have suffered economic losses and many sellers have left the industry.Economic theory suggests that these conditions will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total profit for a firm is calculated as

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.If the market price is P1,in the short run,the perfectly competitive firm will earn

Correct AnswerverifiedShow Answer

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Correct AnswerverifiedShow Answer

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct AnswerverifiedShow Answer

In the long run,a firm will exit a competitive industry if

Correct AnswerverifiedShow Answer

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season.

Correct AnswerverifiedShow 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

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Correct AnswerverifiedShow Answer

Table 14-6 John's Vineyard -Refer to Table 14-6.What is the marginal cost of the 8th unit?

Correct AnswerverifiedShow Answer

Entry into a market by new firms will increase the

Correct AnswerverifiedShow Answer

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down if the price of its product falls below

Correct AnswerverifiedShow Answer

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost,then

Correct AnswerverifiedShow Answer

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