Question 1

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost?

Accepted Answer

A)   3 units
B)   5 units
C)   7 units
D)   9 unitsE) C) and D)
F) A) and D)

Question 2

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A)   nuclear power
B)   municipal water and sewer
C)   dairy farming
D)   airport securityE) B) and C)
F) A) and B)

Question 3

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Accepted Answer

A)   shift the demand curve outward so that price will rise to the level of production cost.
B)   cause the remaining firms to collude so that they can produce more efficiently.
C)   cause the market supply to decline and the price of organic produce to rise.
D)   cause firms in the organic-produce industry to suffer long-run economic losses.E) A) and B)
F) C) and D)

Question 4

Which of the following statements best reflects a price-taking firm?

Accepted Answer

A)   If the firm were to charge more than the going price, it would sell none of its goods.
B)   The firm has an incentive to charge less than the market price to earn higher revenue.
C)   The firm can sell only a limited amount of output at the market price before the market price will fall.
D)   Price-taking firms maximize profits by charging a price above marginal cost.E) A) and B)
F) All of the above

Question 5

For an individual firm operating in a competitive market, marginal revenue equals

Accepted Answer

A)   average revenue and the price for all levels of output.
B)   average revenue, which is greater than the price for all levels of output.
C)   average revenue, the price, and marginal cost for all levels of output.
D)   marginal cost, which is greater than average revenue for all levels of output.E) None of the above
F) A) and B)

Question 6

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Accepted Answer

A) True 
 B)False

Question 7

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 100 identical firms in this market, what is the value of Q2?

Accepted Answer

A)   10,000
B)   20,000
C)   40,000
D)   80,000E) B) and C)
F) None of the above

Question 8

Which of the following statements is not correct about competitive firms?

Accepted Answer

A)   In a long-run equilibrium, firms must be operating at their efficient scale.
B)   In the short run, the number of firms in an industry may be fixed.
C)   In the long run, the number of firms can adjust to changing market conditions.
D)   In the short run, firms must be operating at a level of output where price equals average variable cost.E) A) and B)
F) B) and C)

Question 9

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

Accepted Answer

A)   $15
B)   $30
C)   $35
D)   $50E) C) and D)
F) A) and B)

Question 10

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 300 identical firms in this market, what level of output will be supplied to the market when price is $1.00?

Accepted Answer

A)   300
B)   6,000
C)   30,000
D)   60,000E) All of the above
F) A) and B)

Question 11

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Accepted Answer

A)   In the short run firms will shut down, and in the long run firms will leave the market.
B)   In the short run firms will continue to operate, but in the long run firms will leave the market.
C)   New firms will likely enter this market to capture any remaining economic profits.
D)   The firm will earn zero profits in both the short run and long run.E) B) and D)
F) A) and B)

Question 12

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Accepted Answer

A)   production of the 100th unit of output increases the firm's profit by $1.
B)   production of the 100th unit of output increases the firm's average total cost by $1.
C)   firm's profit-maximizing level of output is less than 100 units.
D)   production of the 101st unit of output must increase the firm's profit by more than $1.E) A) and D)
F) None of the above

Question 13

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements best expresses a firm's profit­maximizing decision rule?

Accepted Answer

A)   If marginal revenue is greater than marginal cost, the firm should increase its output.
B)   If marginal revenue is less than marginal cost, the firm should decrease its output.
C)   If marginal revenue equals marginal cost, the firm should continue producing its current level of output.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 15

Suppose that a competitive market is initially in equilibrium. Then demand increases. If some resources used in production are not available in sufficient quantities 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) None of the above
F) A) and B)

Question 16

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Accepted Answer

A)   all firms will operate at their efficient scale in the short run.
B)   all firms will operate at their efficient scale in the long run.
C)   the price of the product will differ across firms.
D)   Both a and b are correct.E) B) and D)
F) B) and C)

Question 17

For a competitive firm,

Accepted Answer

A)   total revenue equals average revenue.
B)   total revenue equals marginal revenue.
C)   total cost equals marginal revenue.
D)   average revenue equals marginal revenue.E) B) and C)
F) A) and D)

Question 18

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

Accepted Answer

A)   fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
B)   fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
C)   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 to reach the new long-run equilibrium.
D)   not fall in the short run because firms will exit to maintain the price.E) B) and C)
F) B) and D)

Question 19

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Accepted Answer

A)   shift the demand curve outward so that price will rise to the level of production cost.
B)   cause the remaining firms to collude so that they can produce more efficiently.
C)   cause the market supply to decline and the price of textiles to rise.
D)   cause firms in the textile industry to suffer long-run economic losses.E) B) and D)
F) A) and B)

Question 20

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

Because a normal rate of retur...

Exam 14: Firms in Competitive Markets

Which of the following statements is not correct about competitive firms?

Correct Answer
verified

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

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. At which quantity of output is marginal revenue equal to marginal cost?

Correct Answer
verified

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?

Correct Answer
verified
Because a normal rate of retur...
View Answer

For a competitive firm,

Correct Answer
verified

For an individual firm operating in a competitive market, marginal revenue equals

Correct Answer
verified

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

Correct Answer
verified

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Correct Answer
verified

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Correct Answer
verified

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Correct Answer
verified

Which of the following industries is most likely to exhibit the characteristic of free entry?

Correct Answer
verified

Which of the following statements best expresses a firm's profitmaximizing decision rule?

Correct Answer
verified

Which of the following statements best reflects a price-taking firm?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Correct Answer
verified

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Correct Answer
verified

Correct Answer
verified

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Correct Answer
verified

Suppose that a competitive market is initially in equilibrium. Then demand increases. If some resources used in production are not available in sufficient quantities for entering firms,

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Which of the following statements is not correct about competitive firms?

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total revenue?

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. At which quantity of output is marginal revenue equal to marginal cost?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedBecause a normal rate of retur...View AnswerShow Answer

For a competitive firm,

Correct AnswerverifiedShow Answer

For an individual firm operating in a competitive market, marginal revenue equals

Correct AnswerverifiedShow Answer

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

Correct AnswerverifiedShow Answer

In a long-run equilibrium where firms have identical costs, it is possible that some firms in a competitive market are making a positive economic profit.

Correct AnswerverifiedShow Answer

Suppose that the organic-produce industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Correct AnswerverifiedShow Answer

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

Correct AnswerverifiedShow Answer

Which of the following industries is most likely to exhibit the characteristic of free entry?

Correct AnswerverifiedShow Answer

Which of the following statements best expresses a firm's profit­maximizing decision rule?

Correct AnswerverifiedShow Answer

Which of the following statements best reflects a price-taking firm?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Correct AnswerverifiedShow Answer

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.00 and AVC = $4.50.

Correct AnswerverifiedShow Answer

Suppose that a competitive market is initially in equilibrium. Then demand increases. If some resources used in production are not available in sufficient quantities for entering firms,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Because a normal rate of retur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following statements best expresses a firm's profitmaximizing decision rule?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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