Question 1

When economists refer to a production cost that has already been committed and cannot be recovered,what term do they use

Accepted Answer

A) implicit cost 
B) explicit cost 
C) variable cost 
D) sunk cost 
A) implicit cost 
B) explicit cost 
C) variable cost 
D) sunk cost D

Question 2

Table 14-1
 
-Refer to Table 14-1.Over what range of output is average revenue equal to price

Accepted Answer

A) 1 to 5 
B) 3 to 7 
C) 5 to 9 
D) 1 to 9 
A) 1 to 5 
B) 3 to 7 
C) 5 to 9 
D) 1 to 9 D

Question 3

Figure 14-2
  
-Refer to Figure 14-2.When price rises from P₃ to P4,which of the following does the firm find

Accepted Answer

A) Profit is maximized at a production level of Q₃. 
B) Fixed costs are lower at a production level of Q₄. 
C) It can earn a positive profit by increasing production to Q₄. 
D) Average revenue exceeds marginal revenue at a production level of Q₄. 
A) Profit is maximized at a production level of Q₃. 
B) Fixed costs are lower at a production level of Q₄. 
C) It can earn a positive profit by increasing production to Q₄. 
D) Average revenue exceeds marginal revenue at a production level of Q₄. C

Question 4

When a firm in a competitive market produces 15 units of output,it has a marginal revenue of $8.00.What would be the firm's total revenue when it produces 8 units of output

Accepted Answer

A) $4.80 
B) $6.00 
C) $48.00 
D) $64.00 
A) $4.80 
B) $6.00 
C) $48.00 
D) $64.00

Question 5

Market demand is given as QD = 110 - 2P.Market supply is given as QS = 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's average total cost

Accepted Answer

A) $5 
B) $6 
C) $10 
D) $20 
A) $5 
B) $6 
C) $10 
D) $20

Question 6

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether this firm will shut down in the short run or choose to remain in the market. Explain your answer.

Accepted Answer

The loss and revenue are identified on t

Question 7

If marginal cost for a firm exceeds marginal revenue,what can be said about the firm

Accepted Answer

A) It is most likely to be at a profit-maximizing level of output. 
B) It should increase the level of production to maximize its profit. 
C) It must be experiencing losses. 
D) It may still be earning a profit. 
A) It is most likely to be at a profit-maximizing level of output. 
B) It should increase the level of production to maximize its profit. 
C) It must be experiencing losses. 
D) It may still be earning a profit.

Question 8

Figure 14-6
  
-Refer to Figure 14-6.When market price is P₁,which area represents a profit-maximizing firm's total profit or loss

Accepted Answer

A) (P₂ - P₁) × Q₂; profit 
B) (P₂ - P₁) × Q₁; loss 
C) (P₃ - P₁) × Q₂; loss 
D) (P₃ - P₁) × Q₁; profit 
A) (P₂ - P₁) × Q₂; profit 
B) (P₂ - P₁) × Q₁; loss 
C) (P₃ - P₁) × Q₂; loss 
D) (P₃ - P₁) × Q₁; profit

Question 9

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Accepted Answer

They choose to remain in the m

Question 10

A competitive market is in long-run equilibrium.If demand decreases,what can we be certain will happen to price

Accepted Answer

A) Price will fall in the short run.All firms will shut down and some of them will exit the industry.Price will then rise. 
B) Price will fall in the short run.No firms will shut down, but some of them will exit the industry.Price will then rise. 
C) Price will fall in the short run.All, some, or no firms will shut down, and some of them will exit the industry.Price will then rise. 
D) Price will not fall in the short run because firms will exit to maintain the price. 
A) Price will fall in the short run.All firms will shut down and some of them will exit the industry.Price will then rise. 
B) Price will fall in the short run.No firms will shut down, but some of them will exit the industry.Price will then rise. 
C) Price will fall in the short run.All, some, or no firms will shut down, and some of them will exit the industry.Price will then rise. 
D) Price will not fall in the short run because firms will exit to maintain the price.

Question 11

When do profit-maximizing firms enter a competitive market

Accepted Answer

A) when total revenue exceeds fixed costs 
B) when total revenue exceeds total variable costs 
C) when average total cost exceeds average revenue 
D) when price exceeds average total cost 
A) when total revenue exceeds fixed costs 
B) when total revenue exceeds total variable costs 
C) when average total cost exceeds average revenue 
D) when price exceeds average total cost

Question 12

Figure 14-8
  
-Refer to Figure 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,what does the figure in panel (b) most likely show

Accepted Answer

A) long-run market strategy 
B) long-run market production capacity 
C) long-run market demand 
D) long-run market supply 
A) long-run market strategy 
B) long-run market production capacity 
C) long-run market demand 
D) long-run market supply

Question 13

Table 14-5
A firm in a competitive market has the following cost structure:
  
-Refer to Table 14-5.If the market price is $4,what will this firm do

Accepted Answer

A) It will shut down in the short run and exit in the long run. 
B) It will produce 2 units in the short run and exit in the long run. 
C) It will produce 3 units in the short run and exit in the long run. 
D) It will produce 4 units in the short run and exit in the long run. 
A) It will shut down in the short run and exit in the long run. 
B) It will produce 2 units in the short run and exit in the long run. 
C) It will produce 3 units in the short run and exit in the long run. 
D) It will produce 4 units in the short run and exit in the long run.

Question 14

Scenario 14-3
In March 2000, a study sponsored by the Food Consumer Safety Board found that consumption of irradiated grapefruit increased the health of laboratory rats.As a result of national press coverage of the report, the demand for irradiated grapefruit increased dramatically.Organic farmers were able to switch from organic production of grapefruit to irradiated production with no additional cost.Assume that the grapefruit market satisfies all of the attributes of perfect competition.
-Refer to Scenario 14-3.If the increased production of irradiated grapefruit caused a rise in the marginal transportation costs of moving irradiated grapefruit to market,which statement would describe the long-run market supply curve for irradiated grapefruit

Accepted Answer

A) It would be perfectly inelastic. 
B) It would be perfectly elastic. 
C) It would be downward sloping. 
D) It would be upward sloping. 
A) It would be perfectly inelastic. 
B) It would be perfectly elastic. 
C) It would be downward sloping. 
D) It would be upward sloping.

Question 15

Suppose you bought a ticket to a football game for $40,and that you place a $45 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket

Accepted Answer

A) $40 
B) $45 
C) $50 
D) $60 
A) $40 
B) $45 
C) $50 
D) $60

Question 16

Under what circumstances might a market have an upward-sloping long-run supply curve

Accepted Answer

A) if firms have different costs 
B) if consumers exercise market power over producers 
C) if all factors of production are essentially available in unlimited supply 
D) if the industry is a constant-cost industry 
A) if firms have different costs 
B) if consumers exercise market power over producers 
C) if all factors of production are essentially available in unlimited supply 
D) if the industry is a constant-cost industry

Question 17

When managers of firms in a competitive market observe falling profits,what are they likely to infer

Accepted Answer

A) The market is characterized by a violation of conventional market forces. 
B) The market is characterized by over-investment. 
C) The market is characterized by rising prices. 
D) The market is characterized by the entering of new firms. 
A) The market is characterized by a violation of conventional market forces. 
B) The market is characterized by over-investment. 
C) The market is characterized by rising prices. 
D) The market is characterized by the entering of new firms.

Question 18

Table 14-3
  
-Refer to Table 14-3.At a production level of 3 units,what do we know about the marginal revenue or the total revenue

Accepted Answer

A) Marginal revenue is $6. 
B) Total revenue is greater than total variable cost. 
C) Total revenue is less than total cost. 
D) Marginal revenue is less than marginal cost. 
A) Marginal revenue is $6. 
B) Total revenue is greater than total variable cost. 
C) Total revenue is less than total cost. 
D) Marginal revenue is less than marginal cost.

Question 19

Market demand is given as QD = 40 - P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's average total cost

Accepted Answer

A) $2.00 
B) $2.50 
C) $6.00 
D) $20.00 
A) $2.00 
B) $2.50 
C) $6.00 
D) $20.00

Question 20

When will a profit-maximizing firm in a competitive market always make marginal adjustments to production

Accepted Answer

A) as long as average revenue is greater than average total cost 
B) as long as average revenue is equal to marginal cost 
C) as long as marginal cost is greater than average total cost 
D) as long as price is above or below marginal cost 
A) as long as average revenue is greater than average total cost 
B) as long as average revenue is equal to marginal cost 
C) as long as marginal cost is greater than average total cost 
D) as long as price is above or below marginal cost

When economists refer to a production cost that has already been committed and cannot be recovered,what term do they use

Table 14-1 -Refer to Table 14-1.Over what range of output is average revenue equal to price

Figure 14-2 -Refer to Figure 14-2.When price rises from P₃ to P4,which of the following does the firm find

When a firm in a competitive market produces 15 units of output,it has a marginal revenue of $8.00.What would be the firm's total revenue when it produces 8 units of output

Market demand is given as Q_D= 110 - 2P.Market supply is given as Q_S= 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's average total cost

If marginal cost for a firm exceeds marginal revenue,what can be said about the firm

Figure 14-6 -Refer to Figure 14-6.When market price is P₁,which area represents a profit-maximizing firm's total profit or loss

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

A competitive market is in long-run equilibrium.If demand decreases,what can we be certain will happen to price

When do profit-maximizing firms enter a competitive market

Figure 14-8 -Refer to Figure 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,what does the figure in panel (b) most likely show

Table 14-5 A firm in a competitive market has the following cost structure: -Refer to Table 14-5.If the market price is $4,what will this firm do

Suppose you bought a ticket to a football game for $40,and that you place a $45 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket

Under what circumstances might a market have an upward-sloping long-run supply curve

When managers of firms in a competitive market observe falling profits,what are they likely to infer

Table 14-3 -Refer to Table 14-3.At a production level of 3 units,what do we know about the marginal revenue or the total revenue

Market demand is given as Q_D= 40 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's average total cost

When will a profit-maximizing firm in a competitive market always make marginal adjustments to production

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

Application: 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 of Microeconomics

Filters

Exam 14: Firms in Competitive Markets

When economists refer to a production cost that has already been committed and cannot be recovered,what term do they use

Table 14-1 -Refer to Table 14-1.Over what range of output is average revenue equal to price

Figure 14-2 -Refer to Figure 14-2.When price rises from P₃ to P4,which of the following does the firm find

When a firm in a competitive market produces 15 units of output,it has a marginal revenue of $8.00.What would be the firm's total revenue when it produces 8 units of output

Market demand is given as QD = 110 - 2P.Market supply is given as QS = 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's average total cost

If marginal cost for a firm exceeds marginal revenue,what can be said about the firm

Figure 14-6 -Refer to Figure 14-6.When market price is P₁,which area represents a profit-maximizing firm's total profit or loss

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

A competitive market is in long-run equilibrium.If demand decreases,what can we be certain will happen to price

When do profit-maximizing firms enter a competitive market

Figure 14-8 -Refer to Figure 14-8.If the figure in panel (a) reflects the long-run equilibrium of a profit-maximizing firm in a competitive market,what does the figure in panel (b) most likely show

Table 14-5 A firm in a competitive market has the following cost structure: -Refer to Table 14-5.If the market price is $4,what will this firm do

Suppose you bought a ticket to a football game for $40,and that you place a $45 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket

Under what circumstances might a market have an upward-sloping long-run supply curve

When managers of firms in a competitive market observe falling profits,what are they likely to infer

Table 14-3 -Refer to Table 14-3.At a production level of 3 units,what do we know about the marginal revenue or the total revenue

Market demand is given as QD = 40 - P.Market supply is given as QS = 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's average total cost

When will a profit-maximizing firm in a competitive market always make marginal adjustments to production

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

Application: 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 of Microeconomics

Filters

Market demand is given as Q_D= 110 - 2P.Market supply is given as Q_S= 3P + 10.Each identical firm has MC = 10Q and ATC = 5Q.What is a firm's average total cost

Market demand is given as Q_D= 40 - P.Market supply is given as Q_S= 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's average total cost