Question 1

When a competitive firm doubles the quantity of output it sells,its

Accepted Answer

A)   total revenue doubles.
B)   average revenue doubles.
C)   marginal revenue doubles.
D)   profits must increase.E) None of the above
F) A) and C)

Question 2

A long-run supply curve is flatter than a short-run supply curve because

Accepted Answer

A)   firms can enter and exit a market more easily in the long run than in the short run.
B)   long-run supply curves are sometimes downward sloping.
C)   competitive firms have more control over demand in the long run.
D)   firms in a competitive market face identical cost structures.E) All of the above
F) B) and D)

Question 3

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 shut down if

Accepted Answer

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

Question 4

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
 
-Refer to Figure 14-1.If the market price is $4.00,the firm will earn

Accepted Answer

A)   positive economic profits in the short run.
B)   negative economic profits in the short run but remain in business.
C)   negative economic profits and shut down.
D)   zero economic profits in the short run.E) B) and C)
F) C) and D)

Question 5

Figure 14-7
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-7.Which segment of the supply curve represents the firm shutting down?

Accepted Answer

A)   ABCD
B)   BCD
C)   CD
D)   ABE) A) and B)
F) None of the above

Question 6

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

Accepted Answer

A)   positive profits.
B)   zero profits.
C)   losses but will remain in business.
D)   losses and will shut down.E) None of the above
F) All of the above

Question 7

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-2.Which of the four prices corresponds to a firm earning positive economic profits in the short run?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4E) B) and D)
F) C) and D)

Question 8

If a firm in a perfectly competitive market triples the quantity 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) None of the above
F) B) and C)

Question 9

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

Question 10

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 than marginal cost.
D)   average revenue is greater than average fixed cost.E) A) and B)
F) A) and C)

Question 11

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-10.The marginal cost of producing the 4th unit is

Accepted Answer

A)   $7.
B)   $8.
C)   $10.
D)   $23.E) None of the above
F) A) and D)

Question 12

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 13

In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

Accepted Answer

A)   should exit the industry unless her economic profits are positive.
B)   will earn zero accounting profits but positive economic profits.
C)   will earn zero economic profits but positive accounting profits.
D)   should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.E) A) and B)
F) A) and C)

Question 14

Table 14-3
 
-Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

Accepted Answer

A)   $0.
B)   $7.
C)   $14.
D)   $21.E) B) and C)
F) A) and D)

Question 15

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-5.In the short run,if the market price is P4,individual firms in a competitive industry will earn

Accepted Answer

A)   positive profits.
B)   zero profits.
C)   losses but will remain in business.
D)   losses and will shut down.E) B) and C)
F) B) and D)

Question 16

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 17

In a perfectly competitive market,the market supply curve is

Accepted Answer

A)   the marginal cost curve above average total cost for a representative firm.
B)   the horizontal sum of all the individual firms' supply curves.
C)   the vertical sum of all the individual firms' supply curves.
D)   always a horizontal line.E) B) and D)
F) B) and C)

Question 18

If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Accepted Answer

A)   rise.
B)   remain unchanged at the minimum of average total cost.
C)   fall.
D)   remain unchanged at the minimum of marginal cost.E) A) and B)
F) A) and C)

Question 19

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

Accepted Answer

A)   quantity of output is higher than it was previously.
B)   average total cost is higher than it was previously.
C)   marginal revenue is higher than it was previously.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Exam 14: Firms in Competitive Markets.

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2.Which of the four prices corresponds to a firm earning positive economic profits in the short run?

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

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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 shut down if

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The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

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If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

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A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

Correct AnswerverifiedShow Answer

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10.The marginal cost of producing the 4th unit is

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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,

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In a perfectly competitive market,the market supply curve is

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Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run? Explain your answer.

Correct AnswerverifiedIn a competitive market where firms are ...View AnswerShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.If the market price is $4.00,the firm will earn

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

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In the long run,assuming that the owner of a firm in a competitive industry has positive opportunity costs,she

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When a competitive firm doubles the quantity of output it sells,its

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A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

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Figure 14-7 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-7.Which segment of the supply curve represents the firm shutting down?

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Table 14-3 -Refer to Table 14-3.For a firm operating in a competitive market,the marginal revenue is

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Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

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A long-run supply curve is flatter than a short-run supply curve because

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Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.In the short run,if the market price is P4,individual firms in a competitive industry will earn

Correct AnswerverifiedShow Answer

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In a competitive market where firms are ...
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