Question 1

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 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 duck call will fall.
D)   average total costs will fall.E) C) and D)
F) B) and C)

Question 2

When total revenue is less than variable costs, a firm in a competitive market will

Accepted Answer

A)   continue to operate as long as average revenue exceeds marginal cost.
B)   continue to operate as long as average revenue exceeds average fixed cost.
C)   shut down.
D)   raise its price.E) C) and D)
F) B) and D)

Question 3

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs: 
-Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Accepted Answer

A)   first unit.
B)   second unit.
C)   fourth unit.
D)   fifth unit.E) All of the above
F) B) and D)

Question 4

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. When the firm increases its output from 150 units to 151 units, its profit

Accepted Answer

A)   decreases by $5.75.
B)   decreases by $7.20.
C)   increases by $4.15.
D)   increases by $7.95.E) None of the above
F) B) and D)

Question 5

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Accepted Answer

A)   $0
B)   $12
C)   $15
D)   $18E) C) and D)
F) B) and C)

Question 7

As a general rule, when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A)   certain outlays of money by the firm.
B)   implicit costs.
C)   operating costs.
D)   fixed costs.E) A) and D)
F) A) and C)

Question 8

In the long run, each firm in a competitive industry earns

Accepted Answer

A)   zero accounting profits.
B)   zero economic profits.
C)   positive economic profits.
D)   Both a and b are correct.E) B) and C)
F) B) and D)

Question 9

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)   Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume.
C)   Price and average revenue are equal.
D)   Price and marginal revenue are equal.E) C) and D)
F) All of the above

Question 10

The short-run market supply curve in a perfectly competitive industry

Accepted Answer

A)   shows the total quantity supplied by all firms at each possible price.
B)   is perfectly inelastic at the market price.
C)   is perfectly elastic at the market price.
D)   shows the variety of prices that different firms will charge for a given quantity.E) A) and D)
F) A) and B)

Question 11

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 12

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to

Accepted Answer

A)   $6.
B)   $7.
C)   $8.
D)   $9.E) A) and B)
F) A) and C)

Question 13

Table 14-2
The table represents a demand curve faced by a firm in a competitive market. 
-Refer to Table 14-2. For this firm, the average revenue from selling 3 units is

Accepted Answer

A)   $4.
B)   $3.
C)   $1.
D)   $12.E) A) and D)
F) A) and C)

Question 14

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

Question 15

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) B) and D)
F) B) and C)

Question 16

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 14-1. If the market price is $4.00, the firm will earn

Accepted Answer

A)   positive economic profits in the short run.
B)   negative economic profits in the short run but remain in business.
C)   negative economic profits and shut down.
D)   zero economic profits in the short run.E) A) and D)
F) A) and C)

Question 17

Robin owns a horse stables and riding academy and gives riding lessons for children at "pony camp." Her business operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is $4,000. The marginal cost of pony camp is $100 per child. In order to maximize profits, Robin should

Accepted Answer

A)   give riding lessons to more than 20 children per month.
B)   give riding lessons to fewer than 20 children per month.
C)   continue to give riding lessons to 20 children per month.
D)   We do not have enough information to answer the question.E) A) and B)
F) A) and C)

Question 18

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price?

Accepted Answer

A)   $9
B)   $10
C)   $11
D)   $12E) All of the above
F) A) and C)

Question 19

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:  Which of the following is a point on the long-run supply curve?

Accepted Answer

A)   P=$10, Q=500.
B)   P=$6, Q=1,000.
C)   P=$5, Q=500.
D)   P=$5, Q=1,500.E) A) and C)
F) None of the above

Question 20

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. At this new price, if Bob produces and sells the profit-maximizing quantity, how much profit will he earn?

Accepted Answer

A)   $0.25
B)   $1.25
C)   $2.25
D)   The firm will lose $6.25.E) A) and D)
F) All of the above

Exam 14: Firms in Competitive Markets

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $4.00, the firm will earn

Correct Answer
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In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Which of the following is a point on the long-run supply curve?

Correct Answer
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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

Correct Answer
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When total revenue is less than variable costs, a firm in a competitive market will

Correct Answer
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Correct Answer
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The short-run market supply curve in a perfectly competitive industry

Correct Answer
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Correct Answer
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Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. For this firm, the average revenue from selling 3 units is

Correct Answer
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Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

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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Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

Correct Answer
verified

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

Correct Answer
verified

Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to

Correct Answer
verified

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price?

Correct Answer
verified

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Correct Answer
verified

As a general rule, when accountants calculate profit they account for explicit costs but usually ignore

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

Correct Answer
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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct Answer
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In the long run, each firm in a competitive industry earns

Correct Answer
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Exam 14: Firms in Competitive Markets

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1. If the market price is $4.00, the firm will earn

Correct AnswerverifiedShow Answer

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Which of the following is a point on the long-run supply curve?

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's short­run economic profit?

Correct AnswerverifiedShow Answer

When total revenue is less than variable costs, a firm in a competitive market will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The short-run market supply curve in a perfectly competitive industry

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2. For this firm, the average revenue from selling 3 units is

Correct AnswerverifiedShow Answer

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

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

Phil sells duck calls in a perfectly competitive market. If duck calls sell for $10 each and average total cost per unit is $11 at the profit-maximizing output level, then in the long run

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 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to

Correct AnswerverifiedShow Answer

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $5, and is earning $240 economic profit in the short run. What is the current market price?

Correct AnswerverifiedShow Answer

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down.

Correct AnswerverifiedShow Answer

As a general rule, when accountants calculate profit they account for explicit costs but usually ignore

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. In order to maximize profits, the firm should stop producing after it makes the

Correct AnswerverifiedShow Answer

In the long run, each firm in a competitive industry earns

Correct AnswerverifiedShow Answer

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $6, what is the firm's shortrun economic profit?

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