Question 1

Figure 14-14 
-Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b)  and that panel (a)  illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Accepted Answer

A)   Points W, Y, and Z represent both short-run and long-run equilibria.
B)   Points W, Y, Z, and X represent short-run equilibria.
C)   Points W, Y, and Z represent long-run equilibria.
D)   Points W and Z represent long-run equilibria.E) A) and D)
F) None of the above

Question 2

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. If the market price rises above $6.30, the firm will earn

Accepted Answer

A)   positive economic profits in the short run.
B)   negative economic profits in the short run but remain in business.
C)   negative economic profits and shut down.
D)   zero economic profits in the short run.E) None of the above
F) A) and C)

Question 3

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 D)
F) None of the above

Question 4

A seller in a competitive market can

Accepted Answer

A)   sell all he wants at the going price, so he has little reason to charge less.
B)   influence the market price by adjusting his output.
C)   influence the profits earned by competing firms by adjusting his output.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 5

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-5. In the short run, if the market price is 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) All of the above
F) None of the above

Question 6

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

Question 7

Scenario 14-4
Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.
-Refer to Scenario 14-4. How large would Victor's accounting profits need to be to allow him to attain zero economic profit?

Accepted Answer

A)   $100,000
B)   $125,000
C)   $175,000
D)   $225,000E) A) and D)
F) All of the above

Question 8

When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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 11

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. At Q = 999, the firm's profits equal

Accepted Answer

A)   $993.
B)   $997.
C)   $1,003.
D)   $1,007.E) A) and B)
F) C) and D)

Question 12

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price
is less than that firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 13

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its

Accepted Answer

A)   quantity of output is lower than it was previously.
B)   average total cost is lower than it was previously.
C)   marginal cost is higher than it was previously.
D)   All of the above are correct.E) A) and C)
F) B) and C)

Question 14

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's total revenue

Accepted Answer

A)   can be represented by the area P3 × Q3.
B)   can be represented by the area P3 × Q2.
C)   can be represented by the area (P3-P2)  × Q3.
D)   is zero.E) B) and C)
F) C) and D)

Question 15

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 16

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 C)
F) All of the above

Question 17

Which of the following statements is correct?

Accepted Answer

A)   For all firms, marginal revenue equals the price of the good.
B)   Only for competitive firms does average revenue equal the price of the good.
C)   Marginal revenue can be calculated as total revenue divided by the quantity sold.
D)   Only for competitive firms does average revenue equal marginal revenue.E) A) and B)
F) A) and C)

Question 18

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Accepted Answer

A)   average total cost curve.
B)   average variable cost curve.
C)   marginal cost curve.
D)   marginal revenue curve.E) B) and C)
F) A) and B)

Question 19

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Accepted Answer

A)   can be represented by the area P3 × Q3.
B)   can be represented by the area P3 × Q2.
C)   can be represented by the area (P3-P2)  × Q3.
D)   is zero.E) A) and B)
F) A) and C)

Question 20

Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should

Accepted Answer

A)   make more than 20 wedding cakes per month.
B)   make fewer than 20 wedding cakes per month.
C)   continue to make 20 wedding cakes per month.
D)   We do not have enough information to answer the question.E) B) and C)
F) A) and D)

Exam 14: Firms in Competitive Markets

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Correct Answer
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Correct Answer
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If the selling price is not su...
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Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Laura should

Correct Answer
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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 Answer
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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.

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. At Q = 999, the firm's profits equal

Correct Answer
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A seller in a competitive market

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. When market price is P3, a profit-maximizing firm's total revenue

Correct Answer
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When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

Correct Answer
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Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn

Correct Answer
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Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

Correct Answer
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A seller in a competitive market can

Correct Answer
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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
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A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its

Correct Answer
verified

Correct Answer
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For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price rises above $6.30, the firm will earn

Correct Answer
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A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

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

Correct Answer
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Exam 14: Firms in Competitive Markets

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Correct AnswerverifiedShow Answer

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

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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

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

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. At Q = 999, the firm's profits equal

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A seller in a competitive market

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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. When market price is P3, a profit-maximizing firm's total revenue

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When an individual firm in a competitive market decreases its production, it is likely that the market price will rise.

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Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn

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Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct?

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A seller in a competitive market can

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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?

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A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

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Which of the following statements is correct?

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Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price rises above $6.30, the firm will earn

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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