Question 1

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

Accepted Answer

A)   more firms will enter the market.
B)   some firms will exit from the market.
C)   the equilibrium price per duck call will fall.
D)   average total costs will fall.E) None of the above
F) A) and D)

Question 2

Which of the following represents the firm's short-run condition for shutting down?

Accepted Answer

A)   shut down if TR 
B)   shut down if TR 
C)   shut down if P 
D)   shut down if TR < VCE) C) and D)
F) B) and C)

Question 3

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)   total revenue must equal total cost for each firm.
B)   economic profits must be zero.
C)   price must equal the minimum of marginal cost for each firm.
D)   Both a and b are correct.E) A) and C)
F) None of the above

Question 4

Which of the following statements is correct regarding a firm's decision-making?

Accepted Answer

A)   The decision to shut down and the decision to exit are both short-run decisions.
B)   The decision to shut down and the decision to exit are both long-run decisions.
C)   The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision.
D)   The decision to exit is a short-run decision, whereas the decision to shut down is a long-run decision.E) A) and B)
F) B) and C)

Question 5

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces

Accepted Answer

A)   2 units.
B)   3 units.
C)   4 units.
D)   5 units.E) A) and C)
F) All of the above

Question 6

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1. At Q = 999, the firm's total costs equal

Accepted Answer

A)   $10,985.
B)   $10,990.
C)   $10,995.
D)   $10,999.E) C) and D)
F) B) and D)

Question 7

Figure 14-14
 
-Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel a) , observes market price rising from P1 to P2. Which of the following could explain this observation?

Accepted Answer

A)   The entry of new firms into the market.
B)   The exit of existing consumers from the market.
C)   An increase in market supply from S0 to S1.
D)   An increase in market demand from D0 to D1.E) C) and D)
F) None of the above

Question 8

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Accepted Answer

A) True 
 B)False

Question 9

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Accepted Answer

A)   will also be -0.3.
B)   depends on how large a crop the farmer produces.
C)   will range between -0.3 and -1.0.
D)   will be infinite.E) B) and D)
F) B) and C)

Question 10

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Accepted Answer

A) True 
 B)False

Question 11

A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

Accepted Answer

A)   profit of more than $27.
B)   profit of exactly $27.
C)   loss of more than $27.
D)   loss of exactly $27.E) B) and C)
F) A) and C)

Question 12

Figure 14-7 
-Refer to Figure 14-7. In the short run, the firm's maximum profit or minimum loss)  is the same at which of the following pairs of prices?

Accepted Answer

A)   $65 and $75
B)   $75 and $85
C)   $80 and $100
D)   $125 and $175E) None of the above
F) B) and C)

Question 13

When determining whether to shut down in the short run, a competitive firm should ignore i)  fixed costs.
Ii)  variable costs.
Iii)  sunk costs.

Accepted Answer

A)   iii)  only
B)   i)  and iii)  only
C)   ii)  only
D)   i) , ii) , and iii) E) A) and B)
F) A) and C)

Question 14

Comparing marginal revenue to marginal cost i)  reveals the contribution of the last unit of production to total profit.
Ii)  is helpful in making profit-maximizing production decisions.
Iii)  tells a firm whether its fixed costs are too high.

Accepted Answer

A)   i)  only
B)   i)  and ii)  only
C)   ii)  and iii)  only
D)   i)  and iii)  onlyE) All of the above
F) B) and C)

Question 15

In a perfectly competitive market, the market supply curve is

Accepted Answer

A)   the marginal cost curve above average total cost for a representative firm.
B)   the horizontal sum of all the individual firms' supply curves.
C)   the vertical sum of all the individual firms' supply curves.
D)   always a horizontal line.E) A) and B)
F) B) and D)

Question 16

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

A)   average revenue is greater than average total cost.
B)   average revenue is equal to marginal cost.
C)   marginal cost is greater than average total cost.
D)   price is above or below marginal cost.E) B) and C)
F) A) and D)

Question 17

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 average revenue is

Accepted Answer

A)   $39.
B)   $26.
C)   $13.
D)   $0.E) B) and D)
F) B) and C)

Question 18

When a restaurant stays open for lunch service even though few customers patronize the restaurant for lunch, which of the following principles is are)  best demonstrated? i)  Fixed costs are sunk in the short run.
Ii)  In the short run, only fixed costs are important to the decision to stay open for lunch.
Iii)  If revenue exceeds variable cost, the restaurant owner is making a smart decision to remain open for lunch.

Accepted Answer

A)   i)  and ii)  only
B)   ii)  and iii)  only
C)   i)  and iii)  only
D)   i) , ii) , and iii) E) B) and D)
F) All of the above

Question 19

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A)   $6.
B)   $7.
C)   $8.
D)   $9.E) A) and C)
F) A) and D)

Question 20

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11. The marginal revenue from producing the 3rd unit equals i)  $6.
Ii)  the price.
Iii)  the marginal cost.

Accepted Answer

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

Exam 13: Firms in Competitive Markets

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

Correct Answer
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A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

Correct Answer
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In a perfectly competitive market, the market supply curve is

Correct Answer
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Correct Answer
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Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. At Q = 999, the firm's total costs equal

Correct Answer
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If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct Answer
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A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct Answer
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Figure 14-7 -Refer to Figure 14-7. In the short run, the firm's maximum profit or minimum loss) is the same at which of the following pairs of prices?

Correct Answer
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Comparing marginal revenue to marginal cost i) reveals the contribution of the last unit of production to total profit. Ii) is helpful in making profit-maximizing production decisions. Iii) tells a firm whether its fixed costs are too high.

Correct Answer
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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 average revenue is

Correct Answer
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Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Correct Answer
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Which of the following represents the firm's short-run condition for shutting down?

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. The marginal revenue from producing the 3rd unit equals i) $6. Ii) the price. Iii) the marginal cost.

Correct Answer
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When determining whether to shut down in the short run, a competitive firm should ignore i) fixed costs. Ii) variable costs. Iii) sunk costs.

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. Marginal revenue equals marginal cost when the firm produces

Correct Answer
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When firms are neither entering nor exiting a perfectly competitive market,

Correct Answer
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In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Correct Answer
verified

Figure 14-14 -Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel a) , observes market price rising from P1 to P2. Which of the following could explain this observation?

Correct Answer
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Which of the following statements is correct regarding a firm's decision-making?

Correct Answer
verified

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Correct Answer
verified

Exam 13: Firms in Competitive Markets

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the market supply curve is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. At Q = 999, the firm's total costs equal

Correct AnswerverifiedShow Answer

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. In the short run, the firm's maximum profit or minimum loss) is the same at which of the following pairs of prices?

Correct AnswerverifiedShow Answer

Comparing marginal revenue to marginal cost i) reveals the contribution of the last unit of production to total profit. Ii) is helpful in making profit-maximizing production decisions. Iii) tells a firm whether its fixed costs are too high.

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 average revenue is

Correct AnswerverifiedShow Answer

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal revenue is equal to

Correct AnswerverifiedShow Answer

Which of the following represents the firm's short-run condition for shutting down?

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. The marginal revenue from producing the 3rd unit equals i) $6. Ii) the price. Iii) the marginal cost.

Correct AnswerverifiedShow Answer

When determining whether to shut down in the short run, a competitive firm should ignore i) fixed costs. Ii) variable costs. Iii) sunk costs.

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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. Marginal revenue equals marginal cost when the firm produces

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When firms are neither entering nor exiting a perfectly competitive market,

Correct AnswerverifiedShow Answer

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel a) , observes market price rising from P1 to P2. Which of the following could explain this observation?

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding a firm's decision-making?

Correct AnswerverifiedShow Answer

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

Correct AnswerverifiedShow Answer

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