Question 1

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
-When the firm produces and sells 150 units of output, its average total cost is $24.50.
-When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its variable cost amounts to

Accepted Answer

A)   $2,360.25.
B)   $2,500.00.
C)   $2,612.75.
D)   $2,700.00.E) All of the above
F) A) and B)

Question 2

Figure 14-9
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 14-9. If there are 400 identical firms in this market, what level of output will be supplied to the market when price is $2.00?

Accepted Answer

A)   10,000
B)   20,000
C)   40,000
D)   80,000E) A) and B)
F) All of the above

Question 3

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
-When the firm produces and sells 150 units of output, its average total cost is $24.50.
-When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. When the firm produces 150 units of output, its total cost is

Accepted Answer

A)   $3,450.00.
B)   $3,525.75.
C)   $3,675.00.
D)   $3,850.25.E) A) and B)
F) B) and D)

Question 4

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. The firm will earn positive economic profits if the price is

Accepted Answer

A)   (i)  only
B)   (i)  or (ii)  only
C)   (i) , (ii) , or (iii)  only
D)   (i) , (ii) , (iii) , and (iv) E) A) and B)
F) None of the above

Question 5

Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

Accepted Answer

A) True 
 B)False

Question 6

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 7

Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Accepted Answer

A)   the long-run market supply curve will be upward sloping.
B)   the long-run market supply curve will be perfectly elastic.
C)   in the long run firms will suffer economic losses, leading them to exit the industry.
D)   the number of firms will decrease, and the market will become a monopoly.E) A) and D)
F) B) and C)

Question 8

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?

Accepted Answer

A)   Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
B)   Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
C)   Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
D)   Because the price is below the firm's average variable costs, the firms will shut down.E) C) and D)
F) All of the above

Question 9

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 taken in $3,500 in monthly revenue. In the short run, Susan should

Accepted Answer

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

Question 10

In a competitive market,

Accepted Answer

A)   no single buyer or seller can influence the price of the product.
B)   there are only a small number of sellers.
C)   the goods offered by the different sellers are unique.
D)   accounting profit is driven to zero as firms freely enter and exit the market.E) B) and C)
F) All of the above

Question 11

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 12

Figure 14-14 
-Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a)  will

Accepted Answer

A)   have a zero economic profit.
B)   have a negative accounting profit.
C)   exit the market.
D)   choose to increase production to increase profit.E) A) and B)
F) All of the above

Question 13

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Accepted Answer

The firm selects the level of output at ...

Question 14

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

Question 15

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Accepted Answer

A)   exceeds P3.
B)   is less than P1.
C)   is greater than P1 but less than P3.
D)   exceeds P2.E) All of the above
F) C) and D)

Question 16

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 17

Table 14-13
Diana's Dress Emporium 
-Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Accepted Answer

A)   $78
B)   $243
C)   $278
D)   $375E) A) and D)
F) B) and D)

Question 18

Figure 14-10
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 14-10. If there are 500 identical firms in this market, what is the value of Q2?

Accepted Answer

A)   12,000
B)   60,000
C)   240,000
D)   300,000E) B) and C)
F) A) and D)

Question 19

If a firm notices that its average revenue equals the current market price, that firm must be participating in a competitive market.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 14: Firms in Competitive Markets

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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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Correct Answer
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Correct Answer
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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
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Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Correct Answer
verified
The firm selects the level of output at ...
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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
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A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

Correct Answer
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Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

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Correct Answer
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Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Correct Answer
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Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a) will

Correct Answer
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Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Correct Answer
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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?

Correct Answer
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Correct Answer
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Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Correct Answer
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If a firm notices that its average revenue equals the current market price, that firm must be participating in a competitive market.

Correct Answer
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Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Correct Answer
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In a competitive market where firms are ...
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Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. The firm will earn positive economic profits if the price is

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In a competitive market,

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Exam 14: Firms in Competitive Markets

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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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Correct AnswerverifiedShow Answer

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

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow 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?

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A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the long run.

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Because there are many buyers and sellers in a perfectly competitive market, no one seller can influence the market price.

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Correct AnswerverifiedShow Answer

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

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Figure 14-14 -Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b) , the firm represented in panel (a) will

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Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Correct AnswerverifiedShow Answer

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?

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Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

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If a firm notices that its average revenue equals the current market price, that firm must be participating in a competitive market.

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Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

Correct AnswerverifiedIn a competitive market where firms are ...View AnswerShow Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. The firm will earn positive economic profits if the price is

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In a competitive market,

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The firm selects the level of output at ...
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In a competitive market where firms are ...
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