Question 1

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Accepted Answer

A)   increase.
B)   remain unchanged.
C)   decrease by less than 20 percent.
D)   decrease by more than 20 percent.E) B) and C)
F) All of the above

Question 2

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Accepted Answer

A)   If marginal revenue is greater than marginal cost,the firm should increase its output.
B)   If marginal revenue is less than marginal cost,the firm should decrease its output.
C)   If marginal revenue equals marginal cost,the firm should continue producing its current level of output.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 3

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A)   fixed cost.
B)   variable cost.
C)   total cost.
D)   revenue.E) A) and B)
F) None of the above

Question 4

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $125,000.Because of this information,in the short run,the Brookside Racquet Club should

Accepted Answer

A)   shut down because staying open would be more expensive.
B)   lower their prices to increase their profits.
C)   stay open because shutting down would be more expensive.
D)   stay open because the firm is making an economic profit.E) All of the above
F) A) and C)

Question 5

In the long run,each firm in a competitive industry earns

Accepted Answer

A)   zero accounting profits.
B)   zero economic profits.
C)   positive economic profits.
D)   Both a and b are correct.E) None of the above
F) A) and B)

Question 6

The marginal firm in a competitive market will earn zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Suppose a firm in each of the two markets listed below were to increase its price by 30 percent.In which pair would the firm in the first market listed experience a dramatic decline in sales,but the firm in the second market listed would not?

Accepted Answer

A)   oil and natural gas
B)   cable television and gasoline
C)   restaurants and MP3 players
D)   movie theaters and ballpoint pensE) B) and D)
F) B) and C)

Question 8

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Accepted Answer

A)   experience losses but will continue to produce rubber bands.
B)   shut down.
C)   earn both economic and accounting profits.
D)   raise the price of its product.E) A) and D)
F) A) and C)

Question 9

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Accepted Answer

A)   sunk cost.
B)   average fixed cost.
C)   average variable cost.
D)   marginal cost.E) B) and C)
F) B) and D)

Question 10

Figure 13-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 13-13.If the price is P1 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) C) and D)
F) A) and B)

Question 11

Figure 13-9
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 13-9.If at a market price of $1.75,52,500 units of output are supplied to this market,how many identical firms are participating in this market?

Accepted Answer

A)   75
B)   100
C)   250
D)   300E) B) and C)
F) All of the above

Question 12

Figure 13-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-5.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) A) and B)
F) A) and C)

Question 13

Consider a competitive market with 50 identical firms.Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market. D = 200 - 10P and the market supply is given by the equation QS = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market.   How many units should a firm in this market produce to maximize profit? A)  1 unit B)  2 units C)  3 units D)  4 units" class="answers-bank-image d-inline" rel="preload" > How many units should a firm in this market produce to maximize profit?

Accepted Answer

A)   1 unit
B)   2 units
C)   3 units
D)   4 unitsE) None of the above
F) B) and C)

Question 14

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 15

Christopher is a professional tennis player who gives tennis lessons.The industry is competitive.Christopher hires a business consultant to analyze his financial records.The consultant recommends that Christopher give fewer tennis lessons.The consultant must have concluded that Christopher's

Accepted Answer

A)   total revenues exceed his total accounting costs.
B)   marginal revenue exceeds his total cost.
C)   marginal revenue exceeds his marginal cost.
D)   marginal cost exceeds his marginal revenue.E) A) and D)
F) All of the above

Question 16

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A)   certain outlays of money by the firm.
B)   implicit costs.
C)   operating costs.
D)   fixed costs.E) A) and B)
F) B) and C)

Question 17

In the long run,a firm will exit a competitive industry if

Accepted Answer

A)   total revenue exceeds total cost.
B)   the price exceeds average total cost.
C)   average total cost exceeds the price.
D)   Both a and b are correct.E) A) and B)
F) A) and C)

Question 18

Figure 13-14  
-Refer to Figure 13-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Accepted Answer

A)   The entry of new firms into the market.
B)   The exit of existing consumers from the market.
C)   An increase in market supply from S0 to S1.
D)   An increase in market demand from D0 to D1.E) A) and B)
F) A) and C)

Question 19

Figure 13-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-4.When price rises from P3 to P4,the firm finds that

Accepted Answer

A)   fixed costs decrease as output increases from Q3 to Q4.
B)   it can earn a positive profit by increasing production to Q4.
C)   profit is still maximized at a production level of Q3.
D)   average revenue exceeds marginal revenue at a production level of Q4.E) A) and D)
F) B) and C)

Question 20

A competitive firm's short-run supply curve is part of which of the following curves?

Accepted Answer

A)   marginal revenue
B)   average variable cost
C)   average total cost
D)   marginal costE) A) and C)
F) A) and D)

Exam 13: Firms in Competitive Markets

Suppose a firm in each of the two markets listed below were to increase its price by 30 percent.In which pair would the firm in the first market listed experience a dramatic decline in sales,but the firm in the second market listed would not?

Correct Answer
verified

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Correct Answer
verified

Figure 13-14 -Refer to Figure 13-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Correct Answer
verified

The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct Answer
verified

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $125,000.Because of this information,in the short run,the Brookside Racquet Club should

Correct Answer
verified

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Correct Answer
verified

In the long run,each firm in a competitive industry earns

Correct Answer
verified

Figure 13-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

Correct Answer
verified

Figure 13-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 13-13.If the price is P1 in the short run,what will happen in the long run?

Correct Answer
verified

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Correct Answer
verified

Figure 13-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-4.When price rises from P3 to P4,the firm finds that

Correct Answer
verified

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct Answer
verified

Correct Answer
verified

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Correct Answer
verified

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.

Correct Answer
verified

In the long run,a firm will exit a competitive industry if

Correct Answer
verified

Correct Answer
verified

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Correct Answer
verified

A competitive firm's short-run supply curve is part of which of the following curves?

Correct Answer
verified

Christopher is a professional tennis player who gives tennis lessons.The industry is competitive.Christopher hires a business consultant to analyze his financial records.The consultant recommends that Christopher give fewer tennis lessons.The consultant must have concluded that Christopher's

Correct Answer
verified

Exam 13: Firms in Competitive Markets

Suppose a firm in each of the two markets listed below were to increase its price by 30 percent.In which pair would the firm in the first market listed experience a dramatic decline in sales,but the firm in the second market listed would not?

Correct AnswerverifiedShow Answer

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Correct AnswerverifiedShow Answer

Figure 13-14 -Refer to Figure 13-14.Suppose a firm in a competitive market,like the one depicted in panel (a) ,observes market price rising from P1 to P2.Which of the following could explain this observation?

Correct AnswerverifiedShow Answer

The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct AnswerverifiedShow Answer

The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $125,000.Because of this information,in the short run,the Brookside Racquet Club should

Correct AnswerverifiedShow Answer

Suppose a firm in a competitive market reduces its output by 20 percent.As a result,the price of its output is likely to

Correct AnswerverifiedShow Answer

In the long run,each firm in a competitive industry earns

Correct AnswerverifiedShow Answer

Figure 13-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-5.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

Correct AnswerverifiedShow Answer

Figure 13-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 13-13.If the price is P1 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Correct AnswerverifiedShow Answer

Figure 13-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-4.When price rises from P3 to P4,the firm finds that

Correct AnswerverifiedShow Answer

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands rises above the minimum of its average variable cost,but still lies below the minimum of average total cost,in the short run the firm will

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In the long run,a firm will exit a competitive industry if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit,this task is accomplished by producing the quantity at which price is equal to

Correct AnswerverifiedShow Answer

A competitive firm's short-run supply curve is part of which of the following curves?

Correct AnswerverifiedShow Answer

Christopher is a professional tennis player who gives tennis lessons.The industry is competitive.Christopher hires a business consultant to analyze his financial records.The consultant recommends that Christopher give fewer tennis lessons.The consultant must have concluded that Christopher's

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified