Question 1

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 short-run economic profit?

Accepted Answer

A)  $9
B)  $15
C)  $30
D)  $50E) A) and B)
F) B) and D)

Question 2

Scenario 14-4
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
-Refer to Scenario 14-4. What is Victor's opportunity costs of operating his new business?

Accepted Answer

A)  $25,000
B)  $75,000
C)  $100,000
D)  $175,000E) None of the above
F) B) and D)

Question 3

The short-run supply curve for a firm in a perfectly competitive market is

Accepted Answer

A)  horizontal.
B)  likely to slope downward.
C)  determined by forces external to the firm.
D)  the portion of its marginal cost curve that lies above its average variable cost.E) None of the above
F) B) and D)

Question 4

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) 
Marginal revenue equals $3.
(ii) 
Average revenue equals $3.
(iii) 
Total revenue equals $900.

Accepted Answer

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

Question 5

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.
​

Accepted Answer

A) True 
 B)False

Question 6

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A)  zero.
B)  equal to the industry profits.
C)  the market supply curve.
D)  a horizontal line.E) A) and B)
F) B) and C)

Question 7

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Accepted Answer

A)  total revenues exceed her total accounting costs.
B)  marginal revenue exceeds her total cost.
C)  marginal revenue exceeds her marginal cost.
D)  marginal cost exceeds her marginal revenue.E) None of the above
F) B) and D)

Question 8

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. When the firm produces 150 units of output, its total cost is

Accepted Answer

A)  $3,450.00.
B)  $3,525.75.
C)  $3,675.00.
D)  $3,850.25.E) A) and B)
F) A) and C)

Question 9

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Accepted Answer

A)  can be represented by the area P2 × Q2.
B)  can be represented by the area P3 × Q2.
C)  can be represented by the area (P3-P2)  × Q3.
D)  are zero.E) A) and D)
F) C) and D)

Question 10

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

Accepted Answer

A)  its average revenue is greater than $8.
B)  its marginal revenue is less than $8.
C)  its total cost is less than $4,000.
D)  All of the above are correct.E) C) and D)
F) A) and D)

Question 11

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

Accepted Answer

The price (average r...

Question 12

What does it mean for a buyer or seller to be a price taker?

Accepted Answer

A buyer or seller is a price t...

Question 13

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Accepted Answer

A) True 
 B)False

Question 14

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) C) and D)

Question 15

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Accepted Answer

The answer of In the long-run equilibrium of a competitive...

Question 16

Figure 14-10
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 14-10. If there are 500 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  12,000
B)  60,000
C)  240,000
D)  300,000E) A) and B)
F) A) and C)

Question 17

In a competitive market, the actions of any single buyer or seller will

Accepted Answer

A)  have a negligible impact on the market price.
B)  have little effect on market equilibrium quantity but will affect market equilibrium price.
C)  affect marginal revenue and average revenue but not price.
D)  adversely affect the profitability of more than one firm in the market.E) C) and D)
F) B) and C)

Question 18

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

Accepted Answer

A)  positive economic profits.
B)  negative economic profits but will try to remain open.
C)  negative economic profits and will shut down.
D)  zero economic profits.E) A) and C)
F) B) and C)

Question 19

Which of the following is a characteristic of a competitive market?

Accepted Answer

A)  There are many buyers but few sellers.
B)  Many firms have market power because they own patents.
C)  Buyers and sellers are price takers.
D)  Firms sell differentiated products.E) All of the above
F) A) and B)

Question 20

Table 14-12
Bill's Birdhouses 
-Refer to Table 14-12. At what quantity does Bill maximize profits?

Accepted Answer

A)  3
B)  6
C)  7
D)  8E) A) and B)
F) A) and C)

Exam 14: Firms in Competitive Markets

What does it mean for a buyer or seller to be a price taker?

Correct Answer
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A buyer or seller is a price t...
View Answer

Which of the following is a characteristic of a competitive market?

Correct Answer
verified

Correct Answer
verified

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $3. (iii) Total revenue equals $900.

Correct Answer
verified

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. At what quantity does Bill maximize profits?

Correct Answer
verified

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Correct Answer
verified

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

Correct Answer
verified

Correct Answer
verified

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Correct Answer
verified

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Correct Answer
verified

In a competitive market, the actions of any single buyer or seller will

Correct Answer
verified

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

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 short-run economic profit?

Correct Answer
verified

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.

Correct Answer
verified

The short-run supply curve for a firm in a perfectly competitive market is

Correct Answer
verified

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

Correct Answer
verified

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
verified

Correct Answer
verified

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

Correct Answer
verified
The price (average r...
View Answer

Exam 14: Firms in Competitive Markets

What does it mean for a buyer or seller to be a price taker?

Correct AnswerverifiedA buyer or seller is a price t...View AnswerShow Answer

Which of the following is a characteristic of a competitive market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $3. (iii) Total revenue equals $900.

Correct AnswerverifiedShow Answer

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. At what quantity does Bill maximize profits?

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will shut down in the short run if its economic profits fall to zero because it is likely to be earning negative accounting profits.

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total costs

Correct AnswerverifiedShow Answer

If a competitive firm is selling 500 units of its product at a price of $8 per unit and earning a positive profit, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is

Correct AnswerverifiedShow Answer

In a competitive market, the actions of any single buyer or seller will

Correct AnswerverifiedShow Answer

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pd, in the short run the firm will earn

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 short-run economic profit?

Correct AnswerverifiedShow Answer

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses. ​

Correct AnswerverifiedShow Answer

The short-run supply curve for a firm in a perfectly competitive market is

Correct AnswerverifiedShow Answer

Kate is a professional opera singer who gives voice lessons. The vocal-music industry is competitive. Kate hires a business consultant to analyze her financial records. The consultant recommends that Kate give fewer voice lessons. The consultant must have concluded that Kate's

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.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a competitive firm produces and sells 600 units of output, its total revenue is $35,970. What is the firm's total revenue when it produces and sells 620 units of output?

Correct AnswerverifiedThe price (average r...View AnswerShow Answer

Correct Answer
verified
A buyer or seller is a price t...
View Answer

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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

If a firm observes that the price of its product is above average variable cost, it would choose to continue to produce the good in the short run, even if that firm experiences economic losses.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The price (average r...
View Answer