Question 1

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 D)
F) None of the above

Question 2

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. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

Accepted Answer

A)   $1.00
B)   $1.50
C)   $2.00
D)   The price cannot be determined from the information provided.E) B) and C)
F) None of the above

Question 3

When firms are said to be price takers, it implies that if a firm raises its price,

Accepted Answer

A)   buyers will go elsewhere.
B)   buyers will pay the higher price in the short run.
C)   competitors will also raise their prices.
D)   firms in the industry will exercise market power.E) All of the above
F) None of the above

Question 4

Figure 14-7 
-Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Accepted Answer

A)   Q = 270.
B)   Q = 322.
C)   Q = 515.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 5

If Bradley's Butcher Shop sells its product in a competitive market, then

Accepted Answer

A)   the price of that product depends on the quantity of the product that Bradley's Butcher Shop produces and sells because the firm's demand curve is downward sloping.
B)   Bradley's Butcher Shop's total cost must be a constant multiple of its quantity of output.
C)   Bradley's Butcher Shop's total revenue must be proportional to its quantity of output.
D)   Bradley's Butcher Shop's total revenue must be equal to its average revenue.E) C) and D)
F) B) and D)

Question 6

Figure 14-7 
-Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Accepted Answer

A)   $75.
B)   $85.
C)   $95.
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 7

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people

Accepted Answer

A)   consider sunk costs.
B)   equate prices to the average costs of production.
C)   prefer to purchase products from smaller rather than larger firms.
D)   think at the margin.E) A) and C)
F) None of the above

Question 8

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales. 
-Refer to Table 14-14. What is Bob's total fixed cost?

Accepted Answer

A)   $0
B)   $3
C)   $5
D)   $9E) A) and B)
F) A) and C)

Question 9

A firm that shuts down temporarily has to pay

Accepted Answer

A)   its variable costs but not its fixed costs.
B)   its fixed costs but not its variable costs.
C)   both its variable costs and its fixed costs.
D)   neither its variable costs nor its fixed costs.E) A) and B)
F) All of the above

Question 10

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. If the firm produces 3 units of output,

Accepted Answer

A)   marginal cost is $4.
B)   total revenue is greater than variable cost.
C)   marginal revenue is less than marginal cost.
D)   the firm is maximizing profit.E) All of the above
F) B) and C)

Question 11

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A)   exit if P 
B)   exit if P 
C)   exit if P 
D)   exit if MR < MCE) A) and C)
F) B) and C)

Question 12

The entry of new firms into a competitive market will

Accepted Answer

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

Question 13

In a market with 1,000 identical firms, the short-run market supply is the

Accepted Answer

A)   marginal cost curve above average variable cost for a typical firm in the market.
B)   quantity supplied by the typical firm in the market at each price.
C)   sum of the prices charged by each of the 1,000 individual firms at each quantity.
D)   sum of the quantities supplied by each of the 1,000 individual firms at each price.E) A) and D)
F) None of the above

Question 14

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?

Accepted Answer

A)   (i)  only
B)   (iii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) None of the above
F) A) and D)

Question 15

In a perfectly competitive market,

Accepted Answer

A)   no one seller can influence the price of the product.
B)   price exceeds marginal revenue for each unit sold.
C)   average revenue exceeds marginal revenue for each unit sold.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 16

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

A)   less than $2.50
B)   more than $2.50
C)   exactly $2.50
D)   The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.E) C) and D)
F) A) and C)

Question 17

When new firms enter a perfectly competitive market,

Accepted Answer

A)   demand increases.
B)   the short-run market supply curve shifts right.
C)   the short-run market supply curve shifts left.
D)   existing firms will increase prices to keep the new firms from entering.E) None of the above
F) B) and D)

Question 18

Why does a firm in a competitive industry charge the market price?

Accepted Answer

A)   If a firm charges less than the market price, it loses potential revenue.
B)   If a firm charges more than the market price, it loses all its market power.
C)   The firm can only sell limited number of units of output, so it wants to sell at the market price in order to lower its costs.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 19

A firm that exits its market has to pay

Accepted Answer

A)   its variable costs but not its fixed costs.
B)   its fixed costs but not its variable costs.
C)   both its variable costs and its fixed costs.
D)   neither its variable costs nor its fixed costs.E) None of the above
F) A) and B)

Question 20

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

Accepted Answer

A)   selling running apparel
B)   satellite radio
C)   yoga studios
D)   wheat farmingE) C) and D)
F) All of the above

Exam 14: Firms in Competitive Markets

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

Correct Answer
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Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Correct Answer
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Why does a firm in a competitive industry charge the market price?

Correct Answer
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Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Correct Answer
verified

When firms are said to be price takers, it implies that if a firm raises its price,

Correct Answer
verified

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?

Correct Answer
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Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is Bob's total fixed cost?

Correct Answer
verified

If Bradley's Butcher Shop sells its product in a competitive market, then

Correct Answer
verified

A firm that shuts down temporarily has to pay

Correct Answer
verified

Which of the following represents the firm's long-run condition for exiting a market?

Correct Answer
verified

A firm that exits its market has to pay

Correct Answer
verified

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people

Correct Answer
verified

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

Correct Answer
verified

In a market with 1,000 identical firms, the short-run market supply is the

Correct Answer
verified

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Correct Answer
verified

When new firms enter a perfectly competitive market,

Correct Answer
verified

In a perfectly competitive market,

Correct Answer
verified

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm produces 3 units of output,

Correct Answer
verified

Correct Answer
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The entry of new firms into a competitive market will

Correct Answer
verified

Exam 14: Firms in Competitive Markets

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

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is $125 at

Correct AnswerverifiedShow Answer

Why does a firm in a competitive industry charge the market price?

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Correct AnswerverifiedShow Answer

When firms are said to be price takers, it implies that if a firm raises its price,

Correct AnswerverifiedShow Answer

Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total revenues from the sale are $500. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is Bob's total fixed cost?

Correct AnswerverifiedShow Answer

If Bradley's Butcher Shop sells its product in a competitive market, then

Correct AnswerverifiedShow Answer

A firm that shuts down temporarily has to pay

Correct AnswerverifiedShow Answer

Which of the following represents the firm's long-run condition for exiting a market?

Correct AnswerverifiedShow Answer

A firm that exits its market has to pay

Correct AnswerverifiedShow Answer

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a market with 1,000 identical firms, the short-run market supply is the

Correct AnswerverifiedShow Answer

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Correct AnswerverifiedShow Answer

When new firms enter a perfectly competitive market,

Correct AnswerverifiedShow Answer

In a perfectly competitive market,

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. If the firm produces 3 units of output,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The entry of new firms into a competitive market will

Correct AnswerverifiedShow Answer

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