Question 1

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

Question 2

A book store that has market power can

Accepted Answer

A)   influence the market price for the books it sells.
B)   minimize costs more efficiently than its competitors.
C)   reduce its advertising budget more so than its competitors.
D)   ignore profit-maximizing strategies when setting the price for its books.E) C) and D)
F) A) and D)

Question 3

Figure 14-10
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 14-10.If there are 500 identical firms in this market,what is the value of Q1?

Accepted Answer

A)   10,000
B)   20,000
C)   50,000
D)   150,000E) C) and D)
F) A) and B)

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) B) and D)
F) C) and D)

Question 5

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10.At the market price of $12.50 per unit,the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units.What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P-ATC)xQ.($12.50-10)x1,000 = $2,500.Firms are likely to enter this market because existing firms are earning economic profits.

Question 6

Scenario 14-4
As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. Her business operates in a perfectly competitive industry. If Mary would have invested the $1 million in a risk-free bond fund she could have earned $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business. Her salary at Lucky.Com Inc. was $75,000 per year.
-Refer to Scenario 14-4.How large would Mary's accounting profits need to be to allow her to attain zero economic profit?

Accepted Answer

A)   $100,000
B)   $125,000
C)   $175,000
D)   $225,000E) A) and B)
F) A) and C)

Question 7

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

Question 8

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 average revenue when 4 units are sold?

Accepted Answer

A)   $60
B)   $120
C)   $125
D)   $197E) B) and C)
F) B) and D)

Question 9

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) B) and D)
F) B) and C)

Question 10

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Accepted Answer

A)   is negative.
B)   is at least zero.
C)   is also zero.
D)   could be positive, negative or zero.E) None of the above
F) A) and D)

Question 11

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

Accepted Answer

If the selling price is not su...

Question 12

Jose's restaurant operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

Accepted Answer

A)   Jose's restaurant is earning a positive economic profit.
B)   Jose's restaurant should shut down immediately.
C)   Jose's restaurant is losing money in the short run but should continue to operate.
D)   the market price will rise in the short run to increase profits.E) None of the above
F) All of the above

Question 13

Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day.If Winona'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) None of the above
F) C) and D)

Question 14

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-5.Firms would be encouraged to enter this market for all prices that exceed

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) B) and D)
F) A) and B) D

Question 15

Table 14-5
 
-Refer to Table 14-5.The price of the product is

Accepted Answer

A)   $9.
B)   $11.
C)   $13.
D)   $15.E) B) and D)
F) None of the above

Question 16

Because the goods offered for sale in a competitive market are largely the same,

Accepted Answer

A)   there will be few sellers in the market.
B)   there will be few buyers in the market.
C)   only a few buyers will have market power.
D)   sellers will have little reason to charge less than the going market price.E) A) and D)
F) None of the above

Question 17

A sunk cost is one that

Accepted Answer

A)   changes as the level of output changes in the short run.
B)   was paid in the past and will not change regardless of the present decision.
C)   should determine the rational course of action in the future.
D)   has the most impact on profit-making decisions.E) None of the above
F) B) and D)

Question 18

Table 14-12
Bill's Birdhouses
 
-Refer to Table 14-12.What is the average revenue when 4 units are sold?

Accepted Answer

A)   $0
B)   $68
C)   $80
D)   $400E) B) and C)
F) A) and D)

Question 19

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) A) and D) B

Question 20

In the long run,a profit-maximizing firm will choose to exit a market when

Accepted Answer

A)   average fixed cost is falling.
B)   variable costs exceed sunk costs.
C)   marginal cost exceeds marginal revenue at the current level of production.
D)   total revenue is less than total cost.E) A) and D)
F) B) and C)

Exam 14: Firms in Competitive Markets.

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

A book store that has market power can

Correct Answer
verified

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

Correct Answer
verified
Profit can be calculated as (P-ATC)xQ.($12.50-10)x1,000 = $2,500.Firms are likely to enter this market because existing firms are earning economic profits.

Correct Answer
verified

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

Correct Answer
verified

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 average revenue when 4 units are sold?

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.In order to maximize profit,the firm will produce a level of output where marginal cost is equal to

Correct Answer
verified

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Correct Answer
verified

Correct Answer
verified
If the selling price is not su...
View Answer

Jose's restaurant operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

Correct Answer
verified

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

Correct Answer
verified

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.Firms would be encouraged to enter this market for all prices that exceed

Correct Answer
verified
D

Table 14-5 -Refer to Table 14-5.The price of the product is

Correct Answer
verified

Because the goods offered for sale in a competitive market are largely the same,

Correct Answer
verified

A sunk cost is one that

Correct Answer
verified

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the average revenue when 4 units are sold?

Correct Answer
verified

Correct Answer
verified
B

In the long run,a profit-maximizing firm will choose to exit a market when

Correct Answer
verified

Exam 14: Firms in Competitive Markets.

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

A book store that has market power can

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedProfit can be calculated as (P-ATC)xQ.($12.50-10)x1,000 = $2,500.Firms are likely to enter this market because existing firms are earning economic profits.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 average revenue when 4 units are sold?

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.In order to maximize profit,the firm will produce a level of output where marginal cost is equal to

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a competitive market has zero economic profit,accounting profit

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the selling price is not su...View AnswerShow Answer

Jose's restaurant operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $20,AVC = $15,and the price per unit is $10.In this situation,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.Firms would be encouraged to enter this market for all prices that exceed

Correct AnswerverifiedD

Table 14-5 -Refer to Table 14-5.The price of the product is

Correct AnswerverifiedShow Answer

Because the goods offered for sale in a competitive market are largely the same,

Correct AnswerverifiedShow Answer

A sunk cost is one that

Correct AnswerverifiedShow Answer

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.What is the average revenue when 4 units are sold?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

In the long run,a profit-maximizing firm will choose to exit a market when

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P-ATC)xQ.($12.50-10)x1,000 = $2,500.Firms are likely to enter this market because existing firms are earning economic profits.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If the selling price is not su...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified