Question 1

Figure 13-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-4.When price falls from P3 to P1,the firm finds that it

Accepted Answer

A)   decreases its fixed costs.
B)   should produce Q1 units of output.
C)   should produce Q3 units of output.
D)   should shut down immediately.E) B) and D)
F) B) and C)

Question 2

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

Question 3

Figure 13-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-5.Firms will be encouraged to enter this market for all prices that exceed

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 4

A key characteristic of a competitive market is that

Accepted Answer

A)   government antitrust laws regulate competition.
B)   producers sell nearly identical products.
C)   firms minimize total costs.
D)   firms have price setting power.E) A) and C)
F) B) and C)

Question 5

Table 13-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 13-9.If the firm's marginal cost is $11,it should

Accepted Answer

A)   increase production to maximize profit.
B)   increase the price of the product to maximize profit.
C)   advertise to attract additional buyers to maximize profit.
D)   reduce production to increase profit.E) B) and C)
F) B) and D)

Question 6

Table 13-4
 
-Refer to Table 13-4.For a firm operating in a competitive market,the average revenue is

Accepted Answer

A)   $45.
B)   $30.
C)   $15.
D)   $0.E) B) and C)
F) None of the above

Question 7

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Accepted Answer

A)   If marginal revenue is greater than marginal cost,the firm should increase its output.
B)   If marginal revenue is less than marginal cost,the firm should shut down in the short run.
C)   If marginal revenue equals marginal cost,the firm should produce exactly one more unit of output.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 8

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur...

Question 9

In a long-run equilibrium,the marginal firm has

Accepted Answer

A)   price equal to average total cost.
B)   total revenue equal to total cost.
C)   economic profit equal to zero.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 10

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 D)
F) B) and C)

Question 11

Table 13-3
 
-Refer to Table 13-3.For a firm operating in a competitive market,the average revenue is

Accepted Answer

A)   $21.
B)   $14.
C)   $7.
D)   $0.E) B) and C)
F) All of the above

Question 12

Figure 13-14  
-Refer to Figure 13-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Accepted Answer

A)   have a zero economic profit.
B)   have a negative accounting profit.
C)   exit the market.
D)   choose to increase production to increase profit.E) B) and C)
F) A) and D)

Question 13

When profit-maximizing firms in competitive markets are earning profits,

Accepted Answer

A)   market demand must exceed market supply at the market equilibrium price.
B)   market supply must exceed market demand at the market equilibrium price.
C)   new firms will enter the market.
D)   the most inefficient firms will be encouraged to leave the market.E) A) and D)
F) B) and D)

Question 14

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

Question 15

The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 16

When new firms enter a perfectly competitive market,

Accepted Answer

A)   economic profits of existing firms will continue to be zero.
B)   entering firms will earn zero economic profit upon entry into the market.
C)   existing firms may see their costs rise if more firms compete for limited resources.
D)   prices will rise as existing firms raise prices to keep new firms out of the market.E) C) and D)
F) B) and D)

Question 17

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 18

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Accepted Answer

A) True 
 B)False

Question 19

Figure 13-10
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 13-10.If there are 700 identical firms in this market,what is the value of Q1?

Accepted Answer

A)   140,000
B)   210,000
C)   280,000
D)   420,000E) A) and D)
F) All of the above

Question 20

Which of the following industries is least likely to exhibit the characteristic of free entry?

Accepted Answer

A)   selling running apparel
B)   wheat farming
C)   yoga studios
D)   satellite radioE) A) and D)
F) A) and C)

Exam 13: Firms in Competitive Markets

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Correct Answer
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Correct Answer
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If the selling price is not su...
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Table 13-4 -Refer to Table 13-4.For a firm operating in a competitive market,the average revenue is

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

Correct Answer
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Table 13-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 13-9.If the firm's marginal cost is $11,it should

Correct Answer
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The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

Correct Answer
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Table 13-3 -Refer to Table 13-3.For a firm operating in a competitive market,the average revenue is

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
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If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct Answer
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Because a normal rate of retur...
View Answer

When new firms enter a perfectly competitive market,

Correct Answer
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Figure 13-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-5.Firms will be encouraged to enter this market for all prices that exceed

Correct Answer
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When profit-maximizing firms in competitive markets are earning profits,

Correct Answer
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Figure 13-14 -Refer to Figure 13-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Correct Answer
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A key characteristic of a competitive market is that

Correct Answer
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Which of the following industries is least likely to exhibit the characteristic of free entry?

Correct Answer
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Figure 13-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-4.When price falls from P3 to P1,the firm finds that it

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Correct Answer
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A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Correct Answer
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In a long-run equilibrium,the marginal firm has

Correct Answer
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Exam 13: Firms in Competitive Markets

Which of the following statements best expresses a firm's profit-maximizing decision rule?

Correct AnswerverifiedShow Answer

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

Table 13-4 -Refer to Table 13-4.For a firm operating in a competitive market,the average revenue is

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

Table 13-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 13-9.If the firm's marginal cost is $11,it should

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The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

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Table 13-3 -Refer to Table 13-3.For a firm operating in a competitive market,the average revenue is

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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

If identical firms that remain in a competitive market over the long run make zero economic profit,why do these firms choose to remain in the market?

Correct AnswerverifiedBecause a normal rate of retur...View AnswerShow Answer

When new firms enter a perfectly competitive market,

Correct AnswerverifiedShow Answer

Figure 13-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-5.Firms will be encouraged to enter this market for all prices that exceed

Correct AnswerverifiedShow Answer

When profit-maximizing firms in competitive markets are earning profits,

Correct AnswerverifiedShow Answer

Figure 13-14 -Refer to Figure 13-14.When the market is in long-run equilibrium at point A in panel (b) ,the firm represented in panel (a) will

Correct AnswerverifiedShow Answer

A key characteristic of a competitive market is that

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Which of the following industries is least likely to exhibit the characteristic of free entry?

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Figure 13-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-4.When price falls from P3 to P1,the firm finds that it

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Which of the following statements is correct?

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Correct AnswerverifiedShow Answer

A firm is currently producing 100 units of output per day.The manager reports to the owner that producing the 100th unit costs the firm $5.The firm can sell the unit for $6.The firm should produce more than 100 units in order to maximize its profits (or minimize its losses).

Correct AnswerverifiedShow Answer

In a long-run equilibrium,the marginal firm has

Correct AnswerverifiedShow Answer

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Because a normal rate of retur...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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