Question 1

In the long run,

Accepted Answer

A)   competitive firms' profits are zero.
B)   competitive firms' variable costs are zero.
C)   competitive firms' ATC curves shift upward or downward to ensure that all demand is satisfied.
D)   the number of firms in the market is fixed.E) A) and B)
F) A) and C)

Question 2

A competitive market will typically experience entry and exit until accounting profits are zero.

Accepted Answer

A) True 
 B)False

Question 3

Figure 14-7 
-Refer to Figure 14-7. At what price is the firm's maximum profit zero?

Accepted Answer

A)   $80
B)   $90
C)   $100
D)   $125E) A) and B)
F) A) and C)

Question 4

A firm has market power if it can

Accepted Answer

A)   maximize profits.
B)   minimize costs.
C)   influence the market price of the good it sells.
D)   hire as many workers as it needs at the prevailing wage rate.E) B) and C)
F) All of the above

Question 5

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14. At what quantity will Bob maximize his profit?

Accepted Answer

A)   5 units
B)   6 units
C)   7 units
D)   8 unitsE) C) and D)
F) A) and B)

Question 6

If there is an increase in market demand in a perfectly competitive market, then in the short run prices will

Accepted Answer

A)   rise.
B)   remain unchanged at the minimum of average total cost.
C)   fall.
D)   remain unchanged at the minimum of marginal cost.E) A) and D)
F) B) and C)

Question 7

Which of the following is a characteristic of a competitive market?

Accepted Answer

A)   There are many buyers but few sellers.
B)   Firms sell differentiated products.
C)   There are many barriers to entry.
D)   Buyers and sellers are price takers.E) B) and C)
F) B) and D)

Question 8

Which of the following statements regarding a competitive market is not correct?

Accepted Answer

A)   There are many buyers and many sellers in the market.
B)   Firms can freely enter or exit the market.
C)   Price equals average revenue.
D)   Price exceeds marginal revenue.E) C) and D)
F) B) and C)

Question 9

For an individual firm operating in a competitive market, marginal revenue equals

Accepted Answer

A)   average revenue and the price for all levels of output.
B)   average revenue, which is greater than the price for all levels of output.
C)   average revenue, the price, and marginal cost for all levels of output.
D)   marginal cost, which is greater than average revenue for all levels of output.E) A) and B)
F) A) and C)

Question 10

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Accepted Answer

A)   should exit the industry unless her economic profits are positive.
B)   will earn zero accounting profits but positive economic profits.
C)   will earn zero economic profits but positive accounting profits.
D)   should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.E) A) and C)
F) A) and B)

Question 11

Scenario 14-3
Suppose a certain competitive firm is producing Q=500 units of output. The marginal cost of the 500th unit is $17, and the average total cost of producing 500 units is $12. The firm sells its output for $20.
-Refer to Scenario 14-3. If the marginal cost of producing the 501st unit would be $19, producing and selling the 501st unit would

Accepted Answer

A)   decrease the firm's profit by $19.
B)   decrease the firm's profit by $2.
C)   increase the firm's profit by $1.
D)   increase the firm's profit by $3.E) B) and D)
F) B) and C)

Question 12

Figure 14-9
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 14-9. If there are 100 identical firms in this market, what is the value of Q2?

Accepted Answer

A)   10,000
B)   20,000
C)   40,000
D)   80,000E) All of the above
F) A) and C)

Question 13

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Accepted Answer

A)   Pa
B)   Pb
C)   Pc
D)   PdE) All of the above
F) A) and B)

Question 14

Figure 14-9
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-9. 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 is correct. We must know the firm's average variable cost.E) A) and B)
F) None of the above

Question 15

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 D)
F) A) and C)

Question 16

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs (fuel, flight attendants, etc.)  amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should

Accepted Answer

A)   drop the flight immediately.
B)   continue the flight.
C)   continue flying until the lease expires and then drop the run.
D)   drop the flight now but renew the lease if conditions improve.E) None of the above
F) A) and B)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

For a firm in a perfectly competitive market, the price of the good is always

Accepted Answer

A)   equal to marginal revenue.
B)   equal to total revenue.
C)   greater than average revenue.
D)   equal to the firm's efficient scale of output.E) A) and C)
F) None of the above

Question 20

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. Production of the 50th unit of output does not necessarily

Accepted Answer

A)   increase the firm's total revenue by $20.
B)   increase the firm's total cost by $22.
C)   decrease the firm's profit by $2.
D)   increase the firm's average variable cost by $0.44.E) B) and C)
F) C) and D)

Exam 14: Firms in Competitive Markets

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

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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In the long run,

Correct Answer
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For an individual firm operating in a competitive market, marginal revenue equals

Correct Answer
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Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct Answer
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If there is an increase in market demand in a perfectly competitive market, then in the short run prices will

Correct Answer
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Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. At what quantity will Bob maximize his profit?

Correct Answer
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Figure 14-7 -Refer to Figure 14-7. At what price is the firm's maximum profit zero?

Correct Answer
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Which of the following statements regarding a competitive market is not correct?

Correct Answer
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In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct Answer
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A competitive market will typically experience entry and exit until accounting profits are zero.

Correct Answer
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Correct Answer
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Which of the following is a characteristic of a competitive market?

Correct Answer
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A firm has market power if it can

Correct Answer
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For a firm in a perfectly competitive market, the price of the good is always

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

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. Production of the 50th unit of output does not necessarily

Correct Answer
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Exam 14: Firms in Competitive Markets

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero economic profits in the short run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For an individual firm operating in a competitive market, marginal revenue equals

Correct AnswerverifiedShow Answer

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct AnswerverifiedShow Answer

If there is an increase in market demand in a perfectly competitive market, then in the short run prices will

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. At what quantity will Bob maximize his profit?

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. At what price is the firm's maximum profit zero?

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive market is not correct?

Correct AnswerverifiedShow Answer

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct AnswerverifiedShow Answer

A competitive market will typically experience entry and exit until accounting profits are zero.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a competitive market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm has market power if it can

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market, the price of the good is always

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

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

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. Production of the 50th unit of output does not necessarily

Correct AnswerverifiedShow Answer

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