Question 1

A profit-maximizing firm will shut down in the short run when

Accepted Answer

A)   price is less than average variable cost.
B)   price is less than average total cost.
C)   average revenue is greater than marginal cost.
D)   average revenue is greater than average fixed cost.E) B) and D)
F) All of the above

Question 2

Assume a firm is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Accepted Answer

A)   $-1,600.
B)   $1,600.
C)   $3,200.
D)   $8,000.E) C) and D)
F) None of the above

Question 3

When determining whether to shut down in the short run,a competitive firm should

Accepted Answer

A)   ignore fixed costs.
B)   ignore variable costs.
C)   ignore sunk costs.
D)   Both a and c are correctE) C) and D)
F) B) and D)

Question 4

A corporation has been steadily losing money on one of its product lines,Wally's Widgets.The firm produces Wally's Widgets 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) A) and D)

Question 5

Table 14-2
 
-Refer to Table 14-2.Over what range of output is marginal revenue declining?

Accepted Answer

A)   1 to 6
B)   3 to 7
C)   7 to 9
D)   None;marginal revenue is constant over the entire range of output.E) A) and D)
F) All of the above

Question 6

Figure 14-1 
-Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4E) None of the above
F) A) and D)

Question 7

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Accepted Answer

A) True 
 B)False

Question 8

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.Which of following is not necessarily true?

Accepted Answer

A)   Production of the 50th unit of output increases the firm's total revenue by $20.
B)   Production of the 50th unit of output increases the firm's total cost by $22.
C)   Production of the 50th unit of output decreases the firm's profit by $2.
D)   Production of the 50th unit of output increases the firm's average variable cost by $0.44.E) B) and C)
F) A) and C)

Question 9

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

Accepted Answer

A)   average revenue exceeds marginal cost.
B)   the firm is earning a positive profit.
C)   decreasing output would increase the firm's profit.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 10

A firm that shuts down temporarily has to pay

Accepted Answer

A)   its variable costs but not its fixed costs.
B)   its fixed costs but not its variable costs.
C)   both its variable costs and its fixed costs.
D)   neither its variable costs nor its fixed costs.E) B) and D)
F) A) and B)

Question 11

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure:

The long-run supply curve for this market is

Accepted Answer

A)   positively sloped.
B)   horizontal at a price of $3.33.
C)   horizontal at a price of $5.
D)   horizontal at a price of $7.E) All of the above
F) A) and D)

Question 12

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,which of the following statements is correct?

Accepted Answer

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

Question 13

Table 14-3
The following table presents cost and revenue information for Soper's Port Vineyard.
 
-Refer to Table 14-3.What is the marginal revenue from selling the 3rd unit?

Accepted Answer

A)   $55
B)   $120
C)   $137
D)   $140E) C) and D)
F) B) and D)

Question 14

At the profit-maximizing level of output,

Accepted Answer

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

Question 15

Figure 14-8
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 14-8.If there are 200 identical firms in this market,what level of output will be supplied to the market when price is $1.00?

Accepted Answer

A)   2,000
B)   5,000
C)   10,000
D)   20,000E) A) and D)
F) C) and D)

Question 16

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Accepted Answer

A)   sunk costs
B)   marginal costs
C)   variable costs
D)   opportunity costsE) A) and B)
F) A) and C)

Question 17

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

$2,500;firms are lik...

Question 18

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

Question 19

Scenario 14-3
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 made $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 14-3.What are Mary's opportunity costs of operating her new business?

Accepted Answer

A)   $25,000
B)   $75,000
C)   $100,000
D)   $175,000E) C) and D)
F) A) and C)

Question 20

A market is competitive if

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 B)
F) A) and C)

Exam 14: Firms in Competitive Markets

Correct Answer
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$2,500;firms are lik...
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At the profit-maximizing level of output,

Correct Answer
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A market is competitive if

Correct Answer
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Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

Correct Answer
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A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Correct Answer
verified

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

Correct Answer
verified

Assume a firm is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct Answer
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A firm that shuts down temporarily has to pay

Correct Answer
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A profit-maximizing firm will shut down in the short run when

Correct Answer
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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.Which of following is not necessarily true?

Correct Answer
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Correct Answer
verified

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure: The long-run supply curve for this market is

Correct Answer
verified

When determining whether to shut down in the short run,a competitive firm should

Correct Answer
verified

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Table 14-2 -Refer to Table 14-2.Over what range of output is marginal revenue declining?

Correct Answer
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Table 14-3 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-3.What is the marginal revenue from selling the 3rd unit?

Correct Answer
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Exam 14: Firms in Competitive Markets

Correct Answerverified$2,500;firms are lik...View AnswerShow Answer

At the profit-maximizing level of output,

Correct AnswerverifiedShow Answer

A market is competitive if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume a firm is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Correct AnswerverifiedShow Answer

A firm that shuts down temporarily has to pay

Correct AnswerverifiedShow Answer

A profit-maximizing firm will shut down in the short run when

Correct AnswerverifiedShow Answer

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.Which of following is not necessarily true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure: The long-run supply curve for this market is

Correct AnswerverifiedShow Answer

When determining whether to shut down in the short run,a competitive firm should

Correct AnswerverifiedShow Answer

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-2 -Refer to Table 14-2.Over what range of output is marginal revenue declining?

Correct AnswerverifiedShow Answer

Table 14-3 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-3.What is the marginal revenue from selling the 3rd unit?

Correct AnswerverifiedShow Answer

Correct Answer
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$2,500;firms are lik...
View Answer

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