Question 1

Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
-Refer to Scenario 14-1. To maximize its profit, the firm should

Accepted Answer

A)  increase its output.
B)  continue to produce 1,000 units.
C)  decrease its output but continue to produce.
D)  shut down.E) C) and D)
F) A) and C)

Question 2

Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's

Accepted Answer

A)  total revenue.
B)  marginal revenue.
C)  average revenue.
D)  All of the above are correct.E) C) and D)
F) B) and C)

Question 3

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) All of the above
F) A) and B)

Question 4

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether an individual firm will shut down in the short run, or choose to remain in the market. Explain your answer.

Accepted Answer

The losses and revenues are identified o...

Question 5

​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available 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) All of the above
F) A) and B)

Question 7

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Accepted Answer

A)  exceeds P3.
B)  is less than P1.
C)  is greater than P1 but less than P3.
D)  exceeds P2.E) A) and B)
F) A) and C)

Question 8

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 300 units of output and the price is $20. If marginal cost at 300 units is $22, the firm

Accepted Answer

A)  ​could increase profits by reducing output from 300 units.
B)  ​could increase profits by increasing output from 300 units.
C)  ​should decide to increase the price above $20.
D)  ​should shut down, since it must be losing money.E) B) and C)
F) None of the above

Question 9

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 zero economic profits in the short run?

Accepted Answer

A)  Pa
B)  Pb
C)  Pc
D)  PdE) B) and D)
F) A) and D)

Question 10

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Accepted Answer

Long-run p...

Question 11

A firm in a competitive market has the following cost structure:  What is the lowest price at which this firm might choose to operate?

Accepted Answer

A)  $2
B)  $3
C)  $4
D)  $5E) B) and C)
F) A) and C)

Question 12

Figure 14-9
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)  ABCD
B)  BC
C)  ABC
D)  None of the above is correct. We must know the firm's average variable cost.E) A) and B)
F) A) and C)

Question 13

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry. 
-Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

Accepted Answer

A)  $55
B)  $120
C)  $137
D)  $140E) All of the above
F) B) and D)

Question 14

The short-run market supply curve in a perfectly competitive industry

Accepted Answer

A)  shows the total quantity supplied by all firms at each possible price.
B)  is perfectly inelastic at the market price.
C)  is perfectly elastic at the market price.
D)  shows the variety of prices that different firms will charge for a given quantity.E) None of the above
F) C) and D)

Question 15

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

Accepted Answer

A)  The firm can sell only a limited amount of output at the market price before the market price will fall.
B)  If the firm were to charge less than the going price, it would maximize its profits and revenues.
C)  If the firm were to charge more than the going price, it would sell none of its goods.
D)  Both b and c are correct.E) C) and D)
F) None of the above

Question 16

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

Accepted Answer

A)  Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
B)  Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
C)  Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
D)  Because the price is below the firm's average variable costs, the firms will shut down.E) A) and D)
F) A) and C)

Question 17

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Accepted Answer

A)  $24,970.
B)  $24,975.
C)  $24,980.
D)  $25,025.E) All of the above
F) A) and C)

Question 18

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down?

Accepted Answer

A)  ABCD
B)  BCD
C)  CD
D)  ABE) A) and D)
F) B) and C)

Question 19

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 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 C)

Question 20

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Accepted Answer

A)  fixed costs.
B)  variable costs.
C)  total costs.
D)  The firm must pay all its costs, even if it shuts down.E) B) and D)
F) None of the above

Exam 14: Firms in Competitive Markets

The short-run market supply curve in a perfectly competitive industry

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

Correct Answer
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A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

Correct Answer
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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

Correct Answer
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A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Correct Answer
verified

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Correct Answer
verified
Long-run p...
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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 zero economic profits in the short run?

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If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Correct Answer
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Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

Correct Answer
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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Correct Answer
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Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. To maximize its profit, the firm should

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

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Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

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The losses and revenues are identified o...
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Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 300 units of output and the price is $20. If marginal cost at 300 units is $22, the firm

Correct Answer
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Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Correct Answer
verified

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down?

Correct Answer
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Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's

Correct Answer
verified

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct Answer
verified

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

The short-run market supply curve in a perfectly competitive industry

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: What is the lowest price at which this firm might choose to operate?

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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?

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​A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Correct AnswerverifiedShow Answer

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Correct AnswerverifiedLong-run p...View AnswerShow Answer

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 zero economic profits in the short run?

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If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

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Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price

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Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

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Scenario 14-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. -Refer to Scenario 14-1. To maximize its profit, the firm should

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

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Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the marginal revenue from selling the 3rd unit?

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Correct AnswerverifiedThe losses and revenues are identified o...View AnswerShow Answer

Consider a firm that operates in a perfectly competitive market. Currently the firm is producing 300 units of output and the price is $20. If marginal cost at 300 units is $22, the firm

Correct AnswerverifiedShow Answer

Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

Correct AnswerverifiedShow Answer

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which segment of the supply curve represents the firm shutting down?

Correct AnswerverifiedShow Answer

Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's

Correct AnswerverifiedShow Answer

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct AnswerverifiedShow Answer

In a competitive market the current price is $5. The typical firm in the market has ATC = $5.50 and AVC = $4.50.

Correct AnswerverifiedShow Answer

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A restaurant, which operates in a perfectly competitive market, is evaluating whether it should serve breakfast on a daily basis. It would choose to do this when its revenues cover its variable costs.

Correct Answer
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Long-run p...
View Answer

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The losses and revenues are identified o...
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