Question 1

Which of the following statements regarding a competitive market is not correct?

Accepted Answer

A) There are many buyers and many sellers in the market. 
B) Firms can freely enter or exit the market. 
C) Price equals average revenue. 
D) Price exceeds marginal revenue. 
A) There are many buyers and many sellers in the market. 
B) Firms can freely enter or exit the market. 
C) Price equals average revenue. 
D) Price exceeds marginal revenue. D

Question 2

A market might have an upward-sloping long-run supply curve if

Accepted Answer

A) firms have different costs. 
B) consumers exercise market power over producers. 
C) all factors of production are essentially available in unlimited supply. 
D) the entry of new firms into the market has no effect on the cost structure of firms in the market. 
A) firms have different costs. 
B) consumers exercise market power over producers. 
C) all factors of production are essentially available in unlimited supply. 
D) the entry of new firms into the market has no effect on the cost structure of firms in the market. A

Question 3

Table 14-12  
-Refer to Table 14-12. What is the marginal cost of the 5th unit?

Accepted Answer

A) $55 
B) $60 
C) $68 
D) $80 
A) $55 
B) $60 
C) $68 
D) $80 C

Question 4

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 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 bottle will fall. 
D) average total costs will fall. 
A) more firms will enter the market. 
B) some firms will exit from the market. 
C) the equilibrium price per bottle will fall. 
D) average total costs will fall.

Question 5

Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur?
(i)New firms will enter the market.
(ii)In the short run, price will rise; in the long run, price will rise further.
(iii)In the long run, all firms will be producing at their efficient scale.

Accepted Answer

A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii) and (iii) 
A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii) and (iii)

Question 6

Figure 14-7  
-Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Accepted Answer

A) $5,500, and its profit amounts to $20,375. 
B) $5,750, and its profit amounts to $20,375 
C) $5,980, and its profit amounts to $25,750. 
D) $6,180, and its profit amounts to $25,750. 
A) $5,500, and its profit amounts to $20,375. 
B) $5,750, and its profit amounts to $20,375 
C) $5,980, and its profit amounts to $25,750. 
D) $6,180, and its profit amounts to $25,750.

Question 7

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Accepted Answer

A) marginal cost of production. 
B) fixed cost of production. 
C) total cost of production. 
D) average total cost of production. 
A) marginal cost of production. 
B) fixed cost of production. 
C) total cost of production. 
D) average total cost of production.

Question 8

Table 14-13  
-Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

Accepted Answer

A) 5 
B) 6 
C) 7 
D) 8 
A) 5 
B) 6 
C) 7 
D) 8

Question 9

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) 
A) (i) only 
B) (i) and (ii) only 
C) (iii) only 
D) (i), (ii), and (iii)

Question 10

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, the Brookside Racquet Club should

Accepted Answer

A) shut down. 
B) exit the industry. 
C) stay open because shutting down would be more expensive. 
D) stay open because the firm is making an economic profit. 
A) shut down. 
B) exit the industry. 
C) stay open because shutting down would be more expensive. 
D) stay open because the firm is making an economic profit.

Question 11

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

Accepted Answer

A) shut down. 
B) reduce its output but continue operating. 
C) continue to produce at the current levels. 
D) increase its output. 
A) shut down. 
B) reduce its output but continue operating. 
C) continue to produce at the current levels. 
D) increase its output.

Question 12

Which of these curves is the competitive firm's short-run supply curve?

Accepted Answer

A) the average variable cost curve above marginal cost 
B) the average total cost curve above marginal cost 
C) the marginal cost curve above average variable cost 
D) the average fixed cost curve 
A) the average variable cost curve above marginal cost 
B) the average total cost curve above marginal cost 
C) the marginal cost curve above average variable cost 
D) the average fixed cost curve

Question 13

If firms are competitive and profit maximizing, the price of a good equals the

Accepted Answer

A) marginal cost of production. 
B) fixed cost of production. 
C) total cost of production. 
D) average total cost of production. 
A) marginal cost of production. 
B) fixed cost of production. 
C) total cost of production. 
D) average total cost of production.

Question 14

In the short-run, a firm's supply curve is equal to the

Accepted Answer

A) marginal cost curve above its average variable cost curve. 
B) marginal cost curve above its average total cost curve. 
C) average variable cost curve above its marginal cost curve. 
D) average total cost curve above its marginal cost curve. 
A) marginal cost curve above its average variable cost curve. 
B) marginal cost curve above its average total cost curve. 
C) average variable cost curve above its marginal cost curve. 
D) average total cost curve above its marginal cost curve.

Question 15

Scenario 14-1. A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23.
-Refer to Scenario 14-1. Compare the firm's profit or loss at 200 units of output with its profit or loss if it were to shut down.

Accepted Answer

At @#IMG-DLM& , Profit @#IMG-DLM& . The

Question 16

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Accepted Answer

A) True 
 B)False

Question 17

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Accepted Answer

A) increase the price of the good that it produces and sells. 
B) increase its quantity of output. 
C) decrease its total cost. 
D) decrease its average total cost. 
A) increase the price of the good that it produces and sells. 
B) increase its quantity of output. 
C) decrease its total cost. 
D) decrease its average total cost.

Question 18

Suppose that a firm operating in perfectly competitive market sells 50 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?
(i)Marginal revenue equals $5.
(ii)Average revenue equals $10.
(iii)Price equals $15.

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (ii) only 
C) (i) and (ii) only 
D) (i), (ii), and (iii)

Question 19

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

Accepted Answer

A) explicit costs. 
B) implicit costs. 
C) sunk costs. 
D) opportunity costs. 
A) explicit costs. 
B) implicit costs. 
C) sunk costs. 
D) opportunity costs.

Question 20

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Accepted Answer

A) ​increase his revenue, since the output decrease leads to a higher market price. 
B) ​increase his revenue, since Tom's competitors will also decrease their output, so that price rises to offset the drop in Tom's output. 
C) ​decrease his revenue, since his output has decreased and the price remains the same. 
D) ​decrease his revenue, since the price does not rise sufficiently when output drops to offset the drop in Tom's output. 
A) ​increase his revenue, since the output decrease leads to a higher market price. 
B) ​increase his revenue, since Tom's competitors will also decrease their output, so that price rises to offset the drop in Tom's output. 
C) ​decrease his revenue, since his output has decreased and the price remains the same. 
D) ​decrease his revenue, since the price does not rise sufficiently when output drops to offset the drop in Tom's output.

Exam 14: Firms in Competitive Markets

Which of the following statements regarding a competitive market is not correct?

A market might have an upward-sloping long-run supply curve if

Table 14-12 -Refer to Table 14-12. What is the marginal cost of the 5th unit?

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $12.50 at the profit-maximizing output level, then in the long run

Figure 14-7 -Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Table 14-13 -Refer to Table 14-13. In order to maximize profits, how many units should Diana's Dress Emporium produce?

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.

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000, total variable cost to be $130,000, and total revenue to be $145,000. Because of this information, in the short run, the Brookside Racquet Club should

If a profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost, it should

Which of these curves is the competitive firm's short-run supply curve?

If firms are competitive and profit maximizing, the price of a good equals the

In the short-run, a firm's supply curve is equal to the

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

A competitive firm is currently producing a quantity of output at which marginal revenue exceeds marginal cost. In order to increase its profit, the firm should

Suppose that a firm operating in perfectly competitive market sells 50 units of output. Its total revenues from the sale are $500. Which of the following statements is correct? (i)Marginal revenue equals $5. (ii)Average revenue equals $10. (iii)Price equals $15.

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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