Question 1

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Accepted Answer

A)  its total cost is more than $9,000.
B)  its marginal revenue is less than $10.
C)  its average total cost is less than $10.
D)  the firm cannot be a competitive firm because competitive firms cannot earn positive profits.E) C) and D)
F) A) and D)

Question 2

​Table 14-17
The table below shows the price and cost information for a firm that operates in a perfectly competitive market. 
-​Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Accepted Answer

A)  ​3 units.
B)  ​4 units.
C)  ​5 units.
D)  ​6 units.E) A) and D)
F) C) and D)

Question 3

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

Question 4

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

Accepted Answer

A)  implicit cost.
B)  explicit cost.
C)  variable cost.
D)  sunk cost.E) B) and D)
F) A) and B)

Question 5

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Accepted Answer

The decrease in demand results in firms ...

Question 6

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Accepted Answer

A)  above $6.30.
B)  less than $6.30 but more than $4.50.
C)  less than $4.50.
D)  exactly $6.30.E) A) and B)
F) A) and D)

Question 7

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Accepted Answer

A)  2 units
B)  3 units
C)  4 units
D)  5 unitsE) A) and D)
F) A) and C)

Question 8

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Accepted Answer

A)  $40
B)  $80
C)  $160
D)  This cannot be determined from the given information.E) All of the above
F) A) and C)

Question 9

Table 14-13
Diana's Dress Emporium 
-Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Accepted Answer

A)  $78
B)  $243
C)  $278
D)  $375E) B) and C)
F) A) and B)

Question 10

Table 14-7
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Accepted Answer

A)  $0.50
B)  $7.50
C)  $10
D)  There is insufficient data to determine the firm's profit.E) A) and D)
F) All of the above

Question 11

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Accepted Answer

The market is not competitive ...

Question 12

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-10. At which level of production will the firm maximize profit?

Accepted Answer

A)  3 units
B)  4 units
C)  5 units
D)  6 unitsE) B) and C)
F) None of the above

Question 13

Firms operating in competitive markets produce output levels where marginal revenue equals

Accepted Answer

A)  price.
B)  average revenue.
C)  total revenue divided by output.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 14

The term shutdown

Accepted Answer

A)  and the term exit both refer to short-run decisions that a firm might make.
B)  and the term exit both refer to long-run decisions that a firm might make.
C)  refers to a short-run decision that a firm might make, whereas the term exit refers to a long-run decision that a firm might make.
D)  refers to a long-run decision that a firm might make, whereas the term exit refers to a short-run decision that a firm might make.E) B) and D)
F) C) and D)

Question 15

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. If the firm's marginal cost is $5, it should

Accepted Answer

A)  reduce fixed costs by lowering production.
B)  increase production to maximize profit.
C)  decrease production to maximize profit.
D)  maintain its current level of production to maximize profit.E) B) and C)
F) C) and D)

Question 16

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 $200. 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) None of the above
F) A) and B)

Question 17

Figure 14-11 
-Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Accepted Answer

A)  A only
B)  A and C only
C)  B only
D)  B and D onlyE) A) and B)
F) A) and D)

Question 18

​Table 14-17
The table below shows the price and cost information for a firm that operates in a perfectly competitive market. 
-​Refer to Table 14-17. Using this information, determine the average variable cost (AVC)  when Q = 5.

Accepted Answer

A)  ​$36.
B)  ​$30.
C)  ​$5.
D)  ​$6.E) All of the above
F) B) and C)

Question 19

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 20

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...

Exam 14: Firms in Competitive Markets

Firms operating in competitive markets produce output levels where marginal revenue equals

Correct Answer
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In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Correct Answer
verified
The market is not competitive ...
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Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Correct Answer
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The term shutdown

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A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Correct Answer
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When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Correct Answer
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If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Correct Answer
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Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of production will the firm maximize profit?

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. The firm will earn a positive economic profit in the short run if the market price is

Correct Answer
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Correct Answer
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If the selling price is not su...
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Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

Correct Answer
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Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. If the firm's marginal cost is $5, it should

Correct Answer
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Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Correct Answer
verified

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Correct Answer
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The decrease in demand results in firms ...
View Answer

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 $200. In order to maximize profits, Laura should

Correct Answer
verified

Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Correct Answer
verified

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

Correct Answer
verified

Correct Answer
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Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Correct Answer
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Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

Correct Answer
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Exam 14: Firms in Competitive Markets

Firms operating in competitive markets produce output levels where marginal revenue equals

Correct AnswerverifiedShow Answer

In a certain market there are many buyers and many sellers. It is easy to distinguish the product sold by one firm from the products sold by other firms. Is the market competitive?

Correct AnswerverifiedThe market is not competitive ...View AnswerShow Answer

Table 14-13 Diana's Dress Emporium -Refer to Table 14-13. What is Diana's economic profit at the profit maximizing point?

Correct AnswerverifiedShow Answer

The term shutdown

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive market may earn positive, negative, or zero economic profit in the short run.

Correct AnswerverifiedShow Answer

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is average revenue?

Correct AnswerverifiedShow Answer

If a competitive firm is selling 900 units of its product at a price of $10 per unit and earning a positive profit, then

Correct AnswerverifiedShow Answer

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of production will the firm maximize profit?

Correct AnswerverifiedShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

Correct AnswerverifiedShow Answer

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

Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. At which level of output in the table is average variable cost equal to $6?

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. If the firm's marginal cost is $5, it should

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Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were eight identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve?

Correct AnswerverifiedShow Answer

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new long-run equilibrium.

Correct AnswerverifiedThe decrease in demand results in firms ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

​Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -​Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Correct AnswerverifiedShow Answer

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-7 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning?

Correct AnswerverifiedShow Answer

​Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -​Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

Correct AnswerverifiedShow Answer

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The market is not competitive ...
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If the selling price is not su...
View Answer

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Correct Answer
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The decrease in demand results in firms ...
View Answer

Correct Answer
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Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Based upon this information, the profit maximizing output level is

Correct Answer
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Correct Answer
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Correct Answer
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Table 14-17 The table below shows the price and cost information for a firm that operates in a perfectly competitive market. -Refer to Table 14-17. Using this information, determine the average variable cost (AVC) when Q = 5.

Correct Answer
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