Question 1

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Accepted Answer

A)   fixed costs.
B)   variable costs.
C)   total costs.
D)   The firm must pay all its costs, even if it shuts down.E) C) and D)
F) A) and B)

Question 2

Who is a price taker in a competitive market?

Accepted Answer

A)   buyers only
B)   sellers only
C)   both buyers and sellers
D)   neither buyers nor sellersE) A) and D)
F) B) and C)

Question 3

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

Accepted Answer

A)   experience losses but will continue to produce rubber bands.
B)   shut down.
C)   earn both economic and accounting profits.
D)   raise the price of its product.E) A) and C)
F) B) and C)

Question 4

In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

Accepted Answer

A)   200 units
B)   300 units
C)   400 units
D)   500 unitsE) All of the above
F) None of the above

Question 5

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

Accepted Answer

A)   there will be no change in the demand curves faced by individual firms in the market.
B)   the demand curves for firms will shift downward.
C)   the demand curves for firms will become more elastic.
D)   profits will rise.E) A) and B)
F) None of the above

Question 6

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 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 bottle will rise
D)   average total costs will rise.E) All of the above
F) C) and D)

Question 7

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

Question 8

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Accepted Answer

A)   ABCF
B)   CD
C)   DF
D)   BCDE) All of the above
F) C) and D)

Question 9

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

Accepted Answer

A) True 
 B)False

Question 10

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. 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) B) and D)
F) All of the above

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Accepted Answer

A)   fixed cost.
B)   variable cost.
C)   total cost.
D)   revenue.E) B) and C)
F) C) and D)

Question 13

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

Accepted Answer

A)   (iii)  only
B)   (i)  and (iii)  only
C)   (ii)  only
D)   (i) , (ii) , and (iii) E) B) and D)
F) A) and B)

Question 14

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales. 
-Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75 per loaf. At this new price, what is Bob's profit­maximizing quantity?

Accepted Answer

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

Question 15

In the transition from the short run to the long run, the number of firms in a competitive industry is

Accepted Answer

A)   fixed.
B)   increasing at a constant rate.
C)   decreasing.
D)   able to adjust to market conditions.E) All of the above
F) B) and D)

Question 16

A sunk cost is one that

Accepted Answer

A)   changes as the level of output changes in the short run.
B)   was paid in the past and will not change regardless of the present decision.
C)   should determine the rational course of action in the future.
D)   has the most impact on profit-making decisions.E) A) and D)
F) C) and D)

Question 17

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 negative economic profits in the short run and shutting down?

Accepted Answer

A)   Pa
B)   Pb
C)   Pc
D)   PdE) None of the above
F) B) and D)

Question 18

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Accepted Answer

A)   $24,970.
B)   $24,975.
C)   $24,980.
D)   $25,025.E) C) and D)
F) A) and C)

Question 19

Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether an individual firm will shut down in the short run, or choose to remain in the market. Explain your answer.

Accepted Answer

The losses and revenues are identified o...

Question 20

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
-When the firm produces and sells 150 units of output, its average total cost is $24.50.
-When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its average variable cost amounts to

Accepted Answer

A)   $16.40.
B)   $17.00.
C)   $18.00.
D)   $19.60.E) A) and B)
F) B) and C)

Exam 14: Firms in Competitive Markets

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

Correct Answer
verified

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Correct Answer
verified

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Correct Answer
verified

Correct Answer
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Who is a price taker in a competitive market?

Correct Answer
verified

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 at the profit-maximizing output level, then in the long run

Correct Answer
verified

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

Correct Answer
verified

In the transition from the short run to the long run, the number of firms in a competitive industry is

Correct Answer
verified

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

Correct Answer
verified

In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

Correct Answer
verified

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
verified

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

Correct Answer
verified

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

Correct Answer
verified

A sunk cost is one that

Correct Answer
verified

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Correct Answer
verified

Correct Answer
verified
The losses and revenues are identified o...
View Answer

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 negative economic profits in the short run and shutting down?

Correct Answer
verified

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Correct Answer
verified

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Because there are many sellers in a competitive market, individual firms are unable to maximize profits.

Correct AnswerverifiedShow Answer

If a firm operating in a competitive industry shuts down in the short run, it can avoid paying

Correct AnswerverifiedShow Answer

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8. Which line segment best reflects the short-run supply curve for this firm?

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Who is a price taker in a competitive market?

Correct AnswerverifiedShow Answer

Roger owns a small health store that sells vitamins in a perfectly competitive market. If vitamins sell for $12 per bottle and the average total cost per bottle is $11.50 at the profit-maximizing output level, then in the long run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the transition from the short run to the long run, the number of firms in a competitive industry is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market?

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

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A sunk cost is one that

Correct AnswerverifiedShow Answer

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit. -Refer to Scenario 14-2. At Q = 999, the firm's total costs equal

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe losses and revenues are identified o...View AnswerShow Answer

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 negative economic profits in the short run and shutting down?

Correct AnswerverifiedShow Answer

The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow 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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The losses and revenues are identified o...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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