Question 1

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Accepted Answer

A)   $12.
B)   $4.
C)   $3.
D)   $1.25.E) B) and D)
F) A) and B)

Question 2

Table 14-12
Bill's Birdhouses
 
-Refer to Table 14-12.At what quantity does Bill maximize profits?

Accepted Answer

A)   3
B)   6
C)   7
D)   8E) None of the above
F) A) and D)

Question 3

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Accepted Answer

A)   at least some firms will shut down.
B)   price will fall below marginal cost for some firms.
C)   price will fall below average total cost for some firms.
D)   at least some firms will enter the industry.E) B) and C)
F) C) and D)

Question 4

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

Question 5

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

Accepted Answer

A)   to produce the quantity at which average variable cost is minimized.
B)   to produce the quantity at which average fixed cost is minimized.
C)   to sell at a price where marginal cost is equal to average total cost.
D)   the quantity at which market price is equal to Sam's marginal cost of production.E) A) and C)
F) None of the above

Question 6

Figure 14-1 
-Refer to Figure 14-1.The firm will shut down in the short run if the price of the good is

Accepted Answer

A)   $75.
B)   $85.
C)   $95.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 7

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

Question 8

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) None of the above
F) A) and C)

Question 9

Timmy's Trophies operates in a perfectly competitive market.If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level,then in the long run

Accepted Answer

A)   more firms will enter the market.
B)   some firms will exit from the market.
C)   the equilibrium price per trophy will rise.
D)   average total costs will fall.E) B) and D)
F) C) and D)

Question 10

Regardless of the cost structure of firms in a competitive market,in the long run

Accepted Answer

A)   firms will experience rising demand for their products.
B)   the marginal firm will earn zero economic profit.
C)   firms will experience a less competitive market environment.
D)   exit and entry is likely to lead to a horizontal long-run supply curve.E) A) and B)
F) A) and C)

Question 11

Total profit for a firm is calculated as

Accepted Answer

A)   marginal revenue minus average total cost.
B)   average revenue minus average total cost.
C)   marginal revenue minus marginal cost.
D)   (price minus average cost) times quantity of output.E) B) and C)
F) All of the above

Question 12

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 Q2?

Accepted Answer

A)   12,000
B)   60,000
C)   240,000
D)   300,000E) B) and C)
F) A) and D)

Question 13

The firm will make the most profits if it produces the quantity of output at which

Accepted Answer

A)   marginal cost equals average cost.
B)   profit per unit is greatest.
C)   marginal revenue equals total revenue.
D)   marginal revenue equals marginal cost.E) None of the above
F) A) and D)

Question 14

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Accepted Answer

A)   $4
B)   $8
C)   $32
D)   $64E) A) and D)
F) C) and D)

Question 16

Suppose a competitive market is comprised of firms that face identical cost curves.The firms experience an increase in demand that results in positive profits for the firms.Which of the following events are then most likely to occur?
 (i) New firms will enter the market.
(ii) In the short run,price will rise;in the long run,price will rise further.
(iii) In the long run,all firms will be producing at their efficient scale.

Accepted Answer

A)   (i) and (ii) only
B)   (i) and (iii) only
C)   (ii) and (iii) only
D)   (i) , (ii) and (iii) E) A) and C)
F) B) and C)

Question 17

A corporation has been steadily losing money on one of its product lines,plastic flamingo lawn ornaments.The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago.The firm is now considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not to sell is correct?

Accepted Answer

A)   The firm should turn down the purchase offer because the factory cost more than $15 million to build.
B)   The $20 million spent on the factory is a sunk cost;that cost should not affect the decision.
C)   The $20 million spent on the factory is an implicit cost,which should be included in the decision.
D)   The firm should sell the factory only if it can reduce its costs elsewhere by $5 million.E) B) and C)
F) B) and D)

Question 18

Marcia is a fashion designer who runs a small clothing business in a competitive industry.Marcia specializes in making designer dresses.Marcia sells 10 dresses per month.Her monthly total revenue is $5,000.The marginal cost of making a dress is $500.In order to maximize profits,Marcia should

Accepted Answer

A)   make more than 10 dresses per month.
B)   make fewer than 10 dresses per month.
C)   continue to make 10 dresses per month.
D)   We do not have enough information with which to answer the question.E) C) and D)
F) A) and B)

Question 19

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Accepted Answer

A)   $90.
B)   $80.
C)   $50.
D)   $40.E) C) and D)
F) None of the above

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

A book store that has market power can

Correct Answer
verified

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct Answer
verified

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

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

Total profit for a firm is calculated as

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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A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Correct Answer
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Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Correct Answer
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Table 14-12 Bill's Birdhouses -Refer to Table 14-12.At what quantity does Bill maximize profits?

Correct Answer
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Timmy's Trophies operates in a perfectly competitive market.If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level,then in the long run

Correct Answer
verified

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Correct Answer
verified

Regardless of the cost structure of firms in a competitive market,in the long run

Correct Answer
verified

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

Correct Answer
verified

Marcia is a fashion designer who runs a small clothing business in a competitive industry.Marcia specializes in making designer dresses.Marcia sells 10 dresses per month.Her monthly total revenue is $5,000.The marginal cost of making a dress is $500.In order to maximize profits,Marcia should

Correct Answer
verified

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Correct Answer
verified

Figure 14-1 -Refer to Figure 14-1.The firm will shut down in the short run if the price of the good is

Correct Answer
verified

The firm will make the most profits if it produces the quantity of output at which

Correct Answer
verified

Exam 14: Firms in Competitive Markets

A book store that has market power can

Correct AnswerverifiedShow Answer

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct AnswerverifiedShow Answer

Sam sells soybeans to a broker in Chicago,Illinois.Because the market for soybeans is generally considered to be competitive,Sam maximizes his profit by choosing

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

Total profit for a firm is calculated as

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?

Correct AnswerverifiedShow Answer

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

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Table 14-12 Bill's Birdhouses -Refer to Table 14-12.At what quantity does Bill maximize profits?

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Timmy's Trophies operates in a perfectly competitive market.If trophies sell for $20 each and average total cost per trophy is $15 at the profit-maximizing output level,then in the long run

Correct AnswerverifiedShow Answer

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Correct AnswerverifiedShow Answer

Regardless of the cost structure of firms in a competitive market,in the long run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Marcia is a fashion designer who runs a small clothing business in a competitive industry.Marcia specializes in making designer dresses.Marcia sells 10 dresses per month.Her monthly total revenue is $5,000.The marginal cost of making a dress is $500.In order to maximize profits,Marcia should

Correct AnswerverifiedShow Answer

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.The firm will shut down in the short run if the price of the good is

Correct AnswerverifiedShow Answer

The firm will make the most profits if it produces the quantity of output at which

Correct AnswerverifiedShow Answer

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