Question 1

Table 14-12
Bill's Birdhouses 
-Refer to Table 14-12. What is the marginal cost of the 5th unit?

Accepted Answer

A)   $55
B)   $60
C)   $68
D)   $80E) C) and D)
F) A) and D)

Question 2

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Accepted Answer

A)   will also be -0.3.
B)   depends on how large a crop the farmer produces.
C)   will range between -0.3 and -1.0.
D)   will be infinite.E) A) and D)
F) B) and D)

Question 3

When a profit-maximizing firm is earning profits, those profits can be identified by

Accepted Answer

A)   P × Q.
B)   (MC - AV
C)   × Q.
C)   (P - AT
C)   × Q.
D)   (P - AV
C)   × Q.E) B) and D)
F) B) and C)

Question 4

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

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 6

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

Accepted Answer

A)   maximizing total revenue.
B)   maximizing profit.
C)   minimizing variable cost.
D)   minimizing average total cost.E) C) and D)
F) B) and C)

Question 7

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 $250 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) None of the above
F) B) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Accepted Answer

A)   $7.
B)   $6.
C)   $4.
D)   We do not have enough information to answer the question.E) A) and C)
F) None of the above

Question 10

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Accepted Answer

A) True 
 B)False

Question 11

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Accepted Answer

The firm selects the level of output at ...

Question 12

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P...

Question 13

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 $6.30, 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) B) and D)
F) All of the above

Question 14

Which of the following expressions is correct for a competitive firm?

Accepted Answer

A)   profit = (quantity of output)  x (price - average total cost) 
B)   marginal revenue = (change in total revenue) /(quantity of output) 
C)   average total cost = total variable cost/quantity of output
D)   average revenue = (marginal revenue)  x (quantity of output) E) A) and C)
F) All of the above

Question 15

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Accepted Answer

A)   rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium.
B)   rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.
C)   fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
D)   not rise in the short run because firms will enter to maintain the price.E) None of the above
F) All of the above

Question 16

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Accepted Answer

A) True 
 B)False

Question 17

Table 14-4
The table represents a demand curve faced by a firm in a competitive market. 
-Refer to Table 14-4. For this firm, the average revenue is

Accepted Answer

A)   $0.
B)   $5.
C)   $10.
D)   $15.E) C) and D)
F) All of the above

Question 18

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

Question 19

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Accepted Answer

A)   restaurants and MP3 players
B)   electricity and natural gas
C)   corn and satellite radio
D)   rice and soybeansE) None of the above
F) A) and D)

Question 20

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct Answer
verified

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Correct Answer
verified
The firm selects the level of output at ...
View Answer

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal cost of the 5th unit?

Correct Answer
verified

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

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

Correct Answer
verified

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Correct Answer
verified

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Correct Answer
verified

When a profit-maximizing firm is earning profits, those profits can be identified by

Correct Answer
verified

Correct Answer
verified

In a long-run equilibrium, the marginal firm has

Correct Answer
verified

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

Correct Answer
verified

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct Answer
verified

Which of the following expressions is correct for a competitive firm?

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P...
View Answer

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the average revenue is

Correct Answer
verified

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct Answer
verified

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Correct Answer
verified

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 $6.30, the firm will earn

Correct Answer
verified

Exam 14: Firms in Competitive Markets

A profit-maximizing firm in a competitive market will decrease production when marginal cost exceeds average revenue.

Correct AnswerverifiedShow Answer

Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower production?

Correct AnswerverifiedThe firm selects the level of output at ...View AnswerShow Answer

Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal cost of the 5th unit?

Correct AnswerverifiedShow Answer

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

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be

Correct AnswerverifiedShow Answer

In competitive markets, firms that raise their prices are typically rewarded with larger profits.

Correct AnswerverifiedShow Answer

A firm's marginal cost has a minimum value of $4, its average variable cost has a minimum value of $6, and its average total cost has a minimum value of $7. Then the firm will shut down in the short run once the price of its product falls below

Correct AnswerverifiedShow Answer

When a profit-maximizing firm is earning profits, those profits can be identified by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a long-run equilibrium, the marginal firm has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

Correct AnswerverifiedShow Answer

Which of the following expressions is correct for a competitive firm?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedProfit can be calculated as (P...View AnswerShow Answer

A competitive firm's profit will be increasing as long as marginal revenue is greater than marginal cost.

Correct AnswerverifiedShow Answer

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Correct AnswerverifiedShow Answer

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the average revenue is

Correct AnswerverifiedShow Answer

Suppose a firm in each of the two markets listed below were to increase its price by 25 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct AnswerverifiedShow Answer

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

Correct AnswerverifiedShow Answer

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 $6.30, the firm will earn

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The firm selects the level of output at ...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P...
View Answer

Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified