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 total cost?

Accepted Answer

A)   $15
B)   $30
C)   $35
D)   $50E) A) and C)
F) B) and D)

Question 2

Which of the following firms is the closest to being a perfectly competitive firm?

Accepted Answer

A)   the New York Yankees
B)   Apple,Inc.
C)   DeBeers diamond wholesalers
D)   a wheat farmer in KansasE) A) and B)
F) A) and C)

Question 3

If a profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost,it should

Accepted Answer

A)   shut down.
B)   reduce its output but continue operating.
C)   continue to produce at the current levels.
D)   increase its output.E) B) and C)
F) A) and D)

Question 4

The competitive firm's short-run supply curve is its

Accepted Answer

A)   marginal revenue curve,but only the portion where marginal revenue exceeds marginal cost.
B)   marginal cost curve.
C)   marginal cost curve,but only the portion above the minimum of average total cost.
D)   marginal cost curve,but only the portion above the minimum of average variable cost.E) A) and C)
F) B) and C)

Question 5

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

Question 6

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-9.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A)   $6.
B)   $7.
C)   $8.
D)   $9.E) C) and D)
F) A) and C)

Question 7

The two characteristics of a competitive market are 1)many buyers and sellers in the market and 2)the goods offered by the various sellers are highly differentiated.

Accepted Answer

A) True 
 B)False

Question 8

Table 14-5
 
-Refer to Table 14-5.The average revenue when 14 units are produced and sold is

Accepted Answer

A)   $9.
B)   $11.
C)   $13.
D)   $15.E) A) and C)
F) B) and C)

Question 9

For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

Accepted Answer

A) True 
 B)False

Question 10

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

Accepted Answer

A)   marginal revenue exceeds marginal cost.
B)   marginal cost exceeds marginal revenue.
C)   total cost exceeds total revenue.
D)   None of the above is correct.E) B) and D)
F) All of the above

Question 11

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

Accepted Answer

A)   There are many buyers but few sellers.
B)   Firms sell differentiated products.
C)   There are many barriers to entry.
D)   Buyers and sellers are price takers.E) A) and B)
F) C) and D)

Question 12

Bill operates a boat rental business in a competitive industry.He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them.He rents each boat for $200 per month.The variable cost for each boat rental is $50.In the off season,Bill should

Accepted Answer

A)   operate his business as long as he rents at least 7 boats per month.
B)   operate his business as long as he rents at least 1 boat per month.
C)   operate his business as long as he rents all 10 boats each month.
D)   raise the price he charges per boat rental.E) All of the above
F) None of the above

Question 13

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 14

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

Accepted Answer

A) True 
 B)False

Question 15

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

Accepted Answer

A)   increase the firm's total revenue by $20.
B)   increase the firm's total cost by $22.
C)   decrease the firm's profit by $2.
D)   increase the firm's average variable cost by $0.44.E) A) and D)
F) All of the above

Question 16

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

Accepted Answer

A)   a one-unit increase in output will increase the firm's profit.
B)   a one-unit decrease in output will increase the firm's profit.
C)   total revenue exceeds total cost.
D)   total cost exceeds total revenue.E) B) and D)
F) A) and C)

Question 17

A seller in a competitive market

Accepted Answer

A)   can sell all he wants at the going price,so he has little reason to charge less.
B)   will lose all his customers to other sellers if he raises his price.
C)   considers the market price to be a "take it or leave it" price.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 18

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Accepted Answer

A) True 
 B)False

Question 19

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-9.In order to maximize profit,the firm will produce a level of output where marginal cost is equal to

Accepted Answer

A)   $5.
B)   $7.
C)   $9.
D)   $10.E) A) and D)
F) All of the above

Question 20

A firm will shut down in the short run if,for all positive levels of output,

Accepted Answer

A)   its losses exceed its fixed costs.
B)   its total revenue is less than its variable costs.
C)   the price of its product is less than its average variable cost.
D)   All of the above are correct.E) All of the above
F) B) and D)

Exam 14: Firms in Competitive Markets

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

Bill operates a boat rental business in a competitive industry.He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them.He rents each boat for $200 per month.The variable cost for each boat rental is $50.In the off season,Bill should

Correct AnswerverifiedShow Answer

Firms in a competitive market are said to be price takers because there are many sellers in the market,and the goods offered by the firms are very similar if not identical.

Correct AnswerverifiedShow Answer

A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production.

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

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The two characteristics of a competitive market are 1)many buyers and sellers in the market and 2)the goods offered by the various sellers are highly differentiated.

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A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

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Which of the following firms is the closest to being a perfectly competitive firm?

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Table 14-5 -Refer to Table 14-5.The average revenue when 14 units are produced and sold is

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A seller in a competitive market

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A firm will shut down in the short run if,for all positive levels of output,

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

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If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

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If a profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost,it should

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Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9.In order to maximize profit,the firm will produce a level of output where marginal cost is equal to

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If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

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Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

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For a firm operating in a perfectly competitive industry,total revenue,marginal revenue,and average revenue are all equal.

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The competitive firm's short-run supply curve is its

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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 total cost?

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