Question 1

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price

Accepted Answer

A)  is determined by demand.
B)  is determined by the minimum point on the firms' average total cost curve.
C)  is determined by the minimum point on the firms' average variable cost curve.
D)  depends on how many firms exist in the industry.E) B) and D)
F) C) and D)

Question 2

If a firm in a perfectly competitive market triples the number of units of output sold,then total revenue will

Accepted Answer

A)  more than triple.
B)  less than triple.
C)  exactly triple.
D)  Any of the above may be true depending on the firm's labor productivity.E) All of the above
F) A) and B)

Question 3

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
 
-Refer to Table 14-3.If the firm finds that its marginal cost is $11,it should

Accepted Answer

A)  increase production to maximize profit.
B)  increase the price of the product to maximize profit.
C)  advertise to attract additional buyers to maximize profit.
D)  reduce production to increase profit.E) B) and D)
F) B) and C)

Question 4

When buyers in a competitive market take the selling price as given,they are said to be

Accepted Answer

A)  market entrants.
B)  monopolists.
C)  free riders.
D)  price takers.E) A) and D)
F) None of the above

Question 5

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Accepted Answer

A)  sunk cost.
B)  average fixed cost.
C)  average variable cost.
D)  marginal cost.E) B) and D)
F) B) and C)

Question 6

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

Question 7

Table 14-1
 
-Refer to Table 14-1.The price and quantity relationship in the table is most likely that faced by a firm in a

Accepted Answer

A)  monopoly.
B)  concentrated market.
C)  competitive market.
D)  strategic market.E) A) and C)
F) B) and C)

Question 8

A profit-maximizing firm will shut down in the short run when

Accepted Answer

A)  price is less than average variable cost.
B)  price is less than average total cost.
C)  average revenue is greater marginal cost.
D)  average revenue is greater than average fixed cost.E) None of the above
F) A) and B)

Question 9

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal revenue from selling the 5th unit?

Accepted Answer

A)  $12
B)  $68
C)  $80
D)  $480E) A) and B)
F) All of the above

Question 10

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
B)  2
C)  3
D)  4E) None of the above
F) A) and B)

Question 11

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

Question 12

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

Accepted Answer

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

Question 13

When determining whether to shutdown in the short run,a competitive firm should

Accepted Answer

A)  ignore fixed costs.
B)  ignore variable costs.
C)  ignore sunk costs.
D)  Both a and c are correctE) B) and C)
F) A) and D)

Question 14

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 profitable strategic decision to remain open for lunch.

Accepted Answer

A)  (i)  and (ii)  only
B)  (ii)  and (iii)  only
C)  (i)  and (iii)  only
D)  All are demonstrated.E) All of the above
F) A) and D)

Question 15

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Accepted Answer

A) True 
 B)False

Question 16

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle,Washington.Since the market for wheat is generally considered to be competitive,the Wheeler Wheat Farm maximizes its profit by choosing

Accepted Answer

A)  to produce the quantity at which average variable cost is minimized.
B)  to produce the quantity at which average fixed cost is minimized.
C)  to sell its wheat at a price where marginal cost is equal to average total cost.
D)  the quantity at which market price is equal to the farm's marginal cost of production.E) A) and B)
F) A) and C)

Question 17

A sunk cost is one that

Accepted Answer

A)  changes as the level of output changes in the short run.
B)  was paid in the past and will not change regardless of the present decision.
C)  should determine the rational course of action in the future.
D)  has the most impact on profit-making decisions.E) C) and D)
F) None of the above

Question 18

Comparison of 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) A) and B)
F) B) and D)

Question 19

Free entry means that

Accepted Answer

A)  there are no costs of entering into an industry.
B)  no legal barriers prevent a firm from entering an industry.
C)  a firm's marginal cost is zero.
D)  a firm has no fixed costs in the short run.E) A) and C)
F) A) and B)

Question 20

Scenario 14-2
Assume a certain firm 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 14-2.At Q = 999,the firm's profit amounts to

Accepted Answer

A)  $993.
B)  $997.
C)  $1,003.
D)  $1,007.E) All of the above
F) A) and C)

Exam 14: Firms in Competitive Markets

Table 14-1 -Refer to Table 14-1.The price and quantity relationship in the table is most likely that faced by a firm in a

Correct Answer
verified

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Correct Answer
verified

If a firm in a perfectly competitive market triples the number of units of output sold,then total revenue will

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

Correct Answer
verified

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 5th unit?

Correct Answer
verified

When determining whether to shutdown in the short run,a competitive firm should

Correct Answer
verified

A sunk cost is one that

Correct Answer
verified

A profit-maximizing firm will shut down in the short run when

Correct Answer
verified

Correct Answer
verified

Free entry means that

Correct Answer
verified

Correct Answer
verified

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle,Washington.Since the market for wheat is generally considered to be competitive,the Wheeler Wheat Farm maximizes its profit by choosing

Correct Answer
verified

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.If the firm finds that its marginal cost is $11,it should

Correct Answer
verified

Scenario 14-2 Assume a certain firm 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 14-2.At Q = 999,the firm's profit amounts to

Correct Answer
verified

A competitive firm's marginal cost curve is regarded as its supply curve because

Correct Answer
verified

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct Answer
verified

Comparison of 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
verified

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price

Correct Answer
verified

When buyers in a competitive market take the selling price as given,they are said to be

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Table 14-1 -Refer to Table 14-1.The price and quantity relationship in the table is most likely that faced by a firm in a

Correct AnswerverifiedShow Answer

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market triples the number of units of output sold,then total revenue will

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

Correct AnswerverifiedShow Answer

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 5th unit?

Correct AnswerverifiedShow Answer

When determining whether to shutdown in the short run,a competitive firm should

Correct AnswerverifiedShow Answer

A sunk cost is one that

Correct AnswerverifiedShow Answer

A profit-maximizing firm will shut down in the short run when

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Free entry means that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle,Washington.Since the market for wheat is generally considered to be competitive,the Wheeler Wheat Farm maximizes its profit by choosing

Correct AnswerverifiedShow Answer

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.If the firm finds that its marginal cost is $11,it should

Correct AnswerverifiedShow Answer

Scenario 14-2 Assume a certain firm 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 14-2.At Q = 999,the firm's profit amounts to

Correct AnswerverifiedShow Answer

A competitive firm's marginal cost curve is regarded as its supply curve because

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct AnswerverifiedShow Answer

Comparison of 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

Consider a competitive market with a large number of identical firms.The firms in this market do not use any resources that are available only in limited quantities.In long-run equilibrium,market price

Correct AnswerverifiedShow Answer

When buyers in a competitive market take the selling price as given,they are said to be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified