Question 1

Figure 14-3
The figure below depicts the cost structure of a profit-maximizing firm in a competitive market.
 
-Refer to Figure 14-3.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, the long-run supply curve requires knowledge of the average variable cost structure.E) B) and C)
F) C) and D)

Question 2

If all firms have the same costs of production,then in long-run equilibrium,

Accepted Answer

A)  price exceeds average total cost for all firms.
B)  price exceeds marginal cost for all firms.
C)  some firms may earn positive economic profits.
D)  all firms have zero economic profits and just cover their opportunity costs.E) B) and D)
F) A) and D)

Question 3

Scenario 14-1
As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. 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 14-1.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) All of the above
F) None of the above

Question 4

Susan quit her job as a teacher,which paid her $36,000 per year,in order to start her own catering business.She spent $12,000 of her savings,which had been earning 10 percent interest per year,on equipment for her business.She also borrowed $12,000 from her bank at 10 percent interest,which she also spent on equipment.For the past several months she has spent $1,000 per month on ingredients and other variable costs.Also for the past several months she has taken in $3,500 in monthly revenue.

Accepted Answer

A)  In the short run, Susan should shut down her business and in the long run she should exit the industry.
B)  In the short run, Susan should continue to operate her business, but in the long run she should exit the industry.
C)  In the short run, Susan should continue to operate her business, but in the long run she will probably face competition from newly entering firms.
D)  In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.E) B) and C)
F) None of the above

Question 5

A competitive firm might choose to set its price below the market price,because

Accepted Answer

A)  this would result in higher average revenue.
B)  this would result in higher profits.
C)  this would result in lower total costs.
D)  None of the above is correct.E) A) and B)
F) None of the above

Question 6

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Accepted Answer

A)  total revenue.
B)  marginal revenue.
C)  average revenue.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 7

Table 14-2
The following table presents cost and revenue information for Soper's Port Vineyard.
 
-Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the total revenue from selling 4 units?

Accepted Answer

A)  $120
B)  $217
C)  $263
D)  $480E) A) and B)
F) A) and C)

Question 8

Because the goods offered for sale in a competitive market are largely the same,

Accepted Answer

A)  there will be few sellers in the market.
B)  there will be few buyers in the market.
C)  buyers will have market power.
D)  sellers will have little reason to charge less than the going market price.E) A) and C)
F) B) and C)

Question 9

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

A)  new firms to enter the market.
B)  the market price to fall.
C)  its profits to fall.
D)  All of the aboveE) All of the above
F) B) and C)

Question 10

Table 14-1
 
-Refer to Table 14-1.If the firm doubles its output from 3 to 6 units,total revenue will

Accepted Answer

A)  increase by less than $39.
B)  increase by exactly $39.
C)  increase by more than $39.
D)  It cannot be determined from the information provided.E) A) and D)
F) All of the above

Question 11

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Accepted Answer

A)  its total cost is less than $9,000.
B)  its marginal revenue is less than $9.
C)  its average revenue is greater than $9.
D)  the firm cannot be a competitive firm since competitive firms can only earn zero profit.E) A) and D)
F) None of the above

Question 12

When firms in a perfectly competitive market face the same costs,in the long run they must be operating

Accepted Answer

A)  under diseconomies of scale.
B)  with small, but positive, levels of profit.
C)  at their efficient scale.
D)  where price is equal to average fixed cost.E) A) and B)
F) A) and C)

Question 13

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal revenue from selling the 1st unit?

Accepted Answer

A)  $50
B)  $80
C)  $160
D)  $170E) All of the above
F) B) and C)

Question 14

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)  Profit = MR - MC
B)  Profit = MR - TC
C)  Profit = (P - M
C)  Q
D)  Profit = (P - A
C)  QE) B) and D)
F) B) and C)

Question 15

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14 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 marginal revenue is lower than it was previously.
B)  The firm's marginal cost is lower than it was previously.
C)  The firm's quantity of output is higher than it was previously.
D)  All of the above are correct.E) All of the above
F) B) and D)

Question 16

Which of the following statements is correct regarding a firm's decision-making?

Accepted Answer

A)  The decision to shutdown and the decision to exit are both short-run decisions.
B)  The decision to shutdown and the decision to exit are both long-run decisions.
C)  The decision to shutdown is a short-run decision, whereas the decision to exit is a long-run decision.
D)  The decision to exit is a short-run decision, whereas the decision to shutdown is a long-run decision.E) B) and D)
F) B) and C)

Question 17

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Accepted Answer

A)  average revenue is greater than average total cost.
B)  average revenue is equal to marginal cost.
C)  marginal cost is greater than average total cost.
D)  price is above or below marginal cost.E) A) and B)
F) A) and C)

Question 18

When fixed costs are ignored because they are irrelevant to a business's production decision,they are called

Accepted Answer

A)  explicit costs.
B)  implicit costs.
C)  sunk costs.
D)  opportunity costs.E) B) and C)
F) A) and D)

Question 19

Figure 14-3
The figure below depicts the cost structure of a profit-maximizing firm in a competitive market.
 
-Refer to Figure 14-3.This firm will exit the market for any price on the line segment

Accepted Answer

A)  AB
B)  BC
C)  CD
D)  None of the aboveE) A) and D)
F) A) and C)

Question 20

Figure 14-7
 
-Refer to Figure 14-7.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from Demand₀ to Demand₁ will result in

Accepted Answer

A)  a new market equilibrium at point D.
B)  an eventual increase in the number of firms in the market and a new long-run equilibrium at point C.
C)  rising prices and falling profits for existing firms in the market.
D)  falling prices and falling profits for existing firms in the market.E) B) and C)
F) A) and D)

Exam 14: Firms in Competitive Markets

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 1st unit?

Correct Answer
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Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct Answer
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A competitive firm might choose to set its price below the market price,because

Correct Answer
verified

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct Answer
verified

Correct Answer
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Figure 14-7 -Refer to Figure 14-7.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from Demand₀ to Demand₁ will result in

Correct Answer
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Which of the following could be used to calculate the profit for a firm?

Correct Answer
verified

When firms in a perfectly competitive market face the same costs,in the long run they must be operating

Correct Answer
verified

If all firms have the same costs of production,then in long-run equilibrium,

Correct Answer
verified

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Correct Answer
verified

Correct Answer
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Which of the following statements is correct regarding a firm's decision-making?

Correct Answer
verified

Because the goods offered for sale in a competitive market are largely the same,

Correct Answer
verified

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14 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?

Correct Answer
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When fixed costs are ignored because they are irrelevant to a business's production decision,they are called

Correct Answer
verified

Table 14-1 -Refer to Table 14-1.If the firm doubles its output from 3 to 6 units,total revenue will

Correct Answer
verified

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct Answer
verified

Figure 14-3 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-3.Which line segment best reflects the long-run supply curve for this firm?

Correct Answer
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Figure 14-3 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-3.This firm will exit the market for any price on the line segment

Correct Answer
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Table 14-2 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the total revenue from selling 4 units?

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 1st unit?

Correct AnswerverifiedShow Answer

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Correct AnswerverifiedShow Answer

A competitive firm might choose to set its price below the market price,because

Correct AnswerverifiedShow Answer

Changes in the output of a perfectly competitive firm,without any change in the price of the product,will change the firm's

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7.Assume that the market starts in equilibrium at point A in panel (b) .An increase in demand from Demand₀ to Demand₁ will result in

Correct AnswerverifiedShow Answer

Which of the following could be used to calculate the profit for a firm?

Correct AnswerverifiedShow Answer

When firms in a perfectly competitive market face the same costs,in the long run they must be operating

Correct AnswerverifiedShow Answer

If all firms have the same costs of production,then in long-run equilibrium,

Correct AnswerverifiedShow Answer

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding a firm's decision-making?

Correct AnswerverifiedShow Answer

Because the goods offered for sale in a competitive market are largely the same,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When fixed costs are ignored because they are irrelevant to a business's production decision,they are called

Correct AnswerverifiedShow Answer

Table 14-1 -Refer to Table 14-1.If the firm doubles its output from 3 to 6 units,total revenue will

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will always make marginal adjustments to production as long as

Correct AnswerverifiedShow Answer

Figure 14-3 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-3.Which line segment best reflects the long-run supply curve for this firm?

Correct AnswerverifiedShow Answer

Figure 14-3 The figure below depicts the cost structure of a profit-maximizing firm in a competitive market. -Refer to Figure 14-3.This firm will exit the market for any price on the line segment

Correct AnswerverifiedShow Answer

Table 14-2 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the total revenue from selling 4 units?

Correct AnswerverifiedShow Answer

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