Question 1

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

Accepted Answer

A)  the marginal cost curve above its average variable cost curve.
B)  the marginal cost curve above its average total cost curve.
C)  the average variable cost curve above its marginal cost curve.
D)  the average total cost curve above its marginal cost curve.E) A) and B)
F) A) and C)

Question 2

Carla's Candy Store is maximizing profits by producing 1,000 pounds of candy per day.If Carla's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Accepted Answer

A)  is less than 1,000 pounds.
B)  is still 1,000 pounds.
C)  is more than 1,000 pounds.
D)  becomes zero.E) A) and B)
F) A) and C)

Question 3

When firms in a competitive market have different costs,it is likely that

Accepted Answer

A)  free entry and exit in the market will be violated.
B)  the market will no longer be considered competitive.
C)  long-run market supply will be downward sloping.
D)  some firms will earn positive economic profits in the long run.E) All of the above
F) B) and C)

Question 4

Figure 14-2
The figure below depicts the cost structure of a profit-maximizing firm in a competitive market.
 
-Refer to Figure 14-2.Which line segment best reflects the short-run supply curve for this firm?

Accepted Answer

A)  ABCE
B)  CD
C)  DE
D)  BCDE) B) and D)
F) All of the above

Question 5

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,which of the following statements is correct?

Accepted Answer

A)  The firm's quantity of output is higher than it was previously.
B)  The firm's average total cost is higher than it was previously.
C)  The firm's marginal revenue is higher than it was previously.
D)  All of the above are correct.E) C) and D)
F) None of the above

Question 6

Total profit for a firm is calculated as

Accepted Answer

A)  (marginal revenue)  minus (average cost) .
B)  (average revenue)  minus (average cost) .
C)  (marginal revenue)  minus (marginal cost) .
D)  (price minus average cost)  times (quantity of output) .E) A) and B)
F) B) and D)

Question 7

Table 14-5
 
-Refer to Table 14-5.This table provides information on a firm's output,marginal revenue,and marginal cost for a firm.If the firm is maximizing profit,how much profit is it earning?

Accepted Answer

A)  $0.00
B)  $1.00
C)  $10.00
D)  There is insufficient data to determine the firms profit.E) C) and D)
F) A) and D)

Question 8

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

Accepted Answer

A)  there will be no change in the demand curves faced by individual firms in the market.
B)  the demand curves for firms will shift downward.
C)  the demand curves for firms will become more elastic.
D)  profits will rise.E) All of the above
F) B) and C)

Question 9

The exit of existing firms from a competitive market will

Accepted Answer

A)  increase market supply and increase market prices.
B)  increase market supply and decrease market prices.
C)  decrease market supply and increase market prices.
D)  decrease market supply and decrease market prices.E) A) and B)
F) B) and C)

Question 10

When firms have an incentive to exit a competitive market,their exit will

Accepted Answer

A)  lower market price.
B)  necessarily raise the costs of firms that remain in the market.
C)  raise profits for firms that remain in the market.
D)  reduce demand for the product.E) A) and C)
F) B) and C)

Question 11

Profit-maximizing firms enter a competitive market when,for existing firms in that market,

Accepted Answer

A)  total revenue exceeds fixed costs.
B)  total revenue exceeds total variable costs.
C)  average total cost exceeds average revenue.
D)  price exceeds average total cost.E) B) and C)
F) A) and D)

Question 12

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) None of the above
F) C) and D)

Question 13

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided...

Question 14

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? Carefully explain your answer.

Accepted Answer

In a competitive market where firms are ...

Question 15

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price.

Accepted Answer

A) True 
 B)False

Question 18

Figure 14-4
The figure below depicts the cost structure of a firm in a competitive market.
 
-Refer to Figure 14-4.Firms would be encouraged to enter this market for all prices that exceed

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  None of the above is correct.E) All of the above
F) None of the above

Question 19

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Accepted Answer

A)  the demand for products in this industry would increase.
B)  the market price of products in this industry would decrease in the short run but not in the long run.
C)  the firms in the industry would make a long-run economic profit.
D)  competition would force producers to pass the lower production costs on to consumers in the long run.E) A) and D)
F) A) and B)

Question 20

At the profit-maximizing level of output,

Accepted Answer

A)  marginal revenue equals average total cost.
B)  marginal revenue equals average variable cost.
C)  marginal revenue equals marginal cost.
D)  average revenue equals average total cost.E) All of the above
F) A) and B)

Exam 14: Firms in Competitive Markets

Correct Answer
verified

Total profit for a firm is calculated as

Correct Answer
verified

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Correct Answer
verified

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

Correct Answer
verified

Table 14-5 -Refer to Table 14-5.This table provides information on a firm's output,marginal revenue,and marginal cost for a firm.If the firm is maximizing profit,how much profit is it earning?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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? Carefully explain your answer.

Correct Answer
verified
In a competitive market where firms are ...
View Answer

Figure 14-4 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-4.Firms would be encouraged to enter this market for all prices that exceed

Correct Answer
verified

When firms have an incentive to exit a competitive market,their exit will

Correct Answer
verified

At the profit-maximizing level of output,

Correct Answer
verified

When firms in a competitive market have different costs,it is likely that

Correct Answer
verified

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct Answer
verified
Average revenue is total revenue divided...
View Answer

A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price.

Correct Answer
verified

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct Answer
verified

Carla's Candy Store is maximizing profits by producing 1,000 pounds of candy per day.If Carla's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Correct Answer
verified

The exit of existing firms from a competitive market will

Correct Answer
verified

Profit-maximizing firms enter a competitive market when,for existing firms in that market,

Correct Answer
verified

Figure 14-2 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-2.Which line segment best reflects the short-run supply curve for this firm?

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Correct AnswerverifiedShow Answer

Total profit for a firm is calculated as

Correct AnswerverifiedShow Answer

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 14-5 -Refer to Table 14-5.This table provides information on a firm's output,marginal revenue,and marginal cost for a firm.If the firm is maximizing profit,how much profit is it earning?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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? Carefully explain your answer.

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

Figure 14-4 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-4.Firms would be encouraged to enter this market for all prices that exceed

Correct AnswerverifiedShow Answer

When firms have an incentive to exit a competitive market,their exit will

Correct AnswerverifiedShow Answer

At the profit-maximizing level of output,

Correct AnswerverifiedShow Answer

When firms in a competitive market have different costs,it is likely that

Correct AnswerverifiedShow Answer

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct AnswerverifiedAverage revenue is total revenue divided...View AnswerShow Answer

A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price.

Correct AnswerverifiedShow Answer

In the long run,a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct AnswerverifiedShow Answer

Carla's Candy Store is maximizing profits by producing 1,000 pounds of candy per day.If Carla's fixed costs unexpectedly increase and the market price remains constant,then the short run profit-maximizing level of output

Correct AnswerverifiedShow Answer

The exit of existing firms from a competitive market will

Correct AnswerverifiedShow Answer

Profit-maximizing firms enter a competitive market when,for existing firms in that market,

Correct AnswerverifiedShow Answer

Figure 14-2 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-2.Which line segment best reflects the short-run supply curve for this firm?

Correct AnswerverifiedShow Answer

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In a competitive market where firms are ...
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Average revenue is total revenue divided...
View Answer

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