Question 1

In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?

Accepted Answer

A)   $0 per unit
B)   $1 per unit
C)   $2 per unit
D)   $3 per unit

Question 2

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14. When Bob produces and sells the profit-maximizing quantity, how much profit does he earn?

Accepted Answer

A)   $0.25
B)   $2.75
C)   $4.00
D)   $5.25

Question 3

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.

Question 4

Which of the following industries is most likely to exhibit the characteristic of free entry?

Accepted Answer

A)   nuclear power
B)   municipal water and sewer
C)   dairy farming
D)   airport security

Question 5

A firm that has little ability to influence market prices operates in a

Accepted Answer

A)   competitive market.
B)   strategic market.
C)   thin market.
D)   power market.

Question 6

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Accepted Answer

A) True 
 B)False

Question 7

In a perfectly competitive market, the process of entry and exit will end when

Accepted Answer

A)   price equals minimum marginal cost.
B)   marginal revenue equals marginal cost.
C)   economic profits are zero.
D)   accounting profits are zero.

Question 8

Table 14-12

-Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Accepted Answer

A)   $12
B)   $68
C)   $80
D)   $480

Question 9

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

Accepted Answer

A)   The firm increases its output above 500 doorknobs.
B)   The firm decreases its output below 500 doorknobs.
C)   The market price of doorknobs rises above $10.
D)   The market price of doorknobs falls below $10.

Question 10

Profit-maximizing firms enter a competitive market when existing firms in that market have

Accepted Answer

A)   total revenues that exceed fixed costs.
B)   total revenues that exceed total variable costs.
C)   average total costs that exceed average revenue.
D)   average total costs less than market price.

Question 11

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14. What is Bob's total fixed cost?

Accepted Answer

A)   $0
B)   $3
C)   $5
D)   $9

Question 12

Table 14-12

-Refer to Table 14-12. What is the total revenue from selling 4 units?

Accepted Answer

A)   $80
B)   $137
C)   $320
D)   $480

Question 13

In calculating accounting profit, accountants typically don't include

Accepted Answer

A)   long-run costs.
B)   sunk costs.
C)   explicit costs of production.
D)   opportunity costs that do not involve an outflow of money.

Question 14

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 14-9. If the firm's marginal cost is $5, it should

Accepted Answer

A)   reduce fixed costs by lowering production.
B)   increase production to maximize profit.
C)   decrease production to maximize profit.
D)   maintain its current level of production to maximize profit.

Question 15

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Accepted Answer

A)   all firms will operate at their efficient scale in the short run.
B)   all firms will operate at their efficient scale in the long run.
C)   the price of the product will differ across firms.
D)   Both a and b are correct.

Question 16

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit or not enter) the market.

Accepted Answer

A) True 
 B)False

Question 17

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Accepted Answer

A)   average fixed cost for the marginal firm.
B)   marginal cost of the marginal firm.
C)   average total cost of the marginal firm.
D)   average variable cost of the marginal firm.

Question 18

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)   $125

Question 19

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Accepted Answer

The firm could not sell any more of its ...

Question 20

Total profit for a firm is calculated as

Accepted Answer

A)   marginal revenue minus average total cost.
B)   average revenue minus average total cost.
C)   marginal revenue minus marginal cost.
D)   price minus average cost)  times quantity of output.

Exam 13: Firms in Competitive Markets

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Correct Answer
verified
The firm could not sell any more of its ...
View Answer

Table 14-12 -Refer to Table 14-12. What is the total revenue from selling 4 units?

Correct Answer
verified

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit or not enter) 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. What is Bob's total fixed cost?

Correct Answer
verified

In a perfectly competitive market, the process of entry and exit will end when

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. When Bob produces and sells the profit-maximizing quantity, how much profit does he earn?

Correct Answer
verified

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
verified

Which of the following industries is most likely to exhibit the characteristic of free entry?

Correct Answer
verified

In calculating accounting profit, accountants typically don't include

Correct Answer
verified

In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?

Correct Answer
verified

A firm that has little ability to influence market prices operates in a

Correct Answer
verified

Total profit for a firm is calculated as

Correct Answer
verified

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Correct Answer
verified

Table 14-12 -Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Correct Answer
verified

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Correct Answer
verified

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

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. If the firm's marginal cost is $5, it should

Correct Answer
verified

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

Correct Answer
verified

Profit-maximizing firms enter a competitive market when existing firms in that market have

Correct Answer
verified

Exam 13: Firms in Competitive Markets

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Correct AnswerverifiedThe firm could not sell any more of its ...View AnswerShow Answer

Table 14-12 -Refer to Table 14-12. What is the total revenue from selling 4 units?

Correct AnswerverifiedShow Answer

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit or not enter) 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. What is Bob's total fixed cost?

Correct AnswerverifiedShow Answer

In a perfectly competitive market, the process of entry and exit will end when

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. When Bob produces and sells the profit-maximizing quantity, how much profit does he earn?

Correct AnswerverifiedShow Answer

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 industries is most likely to exhibit the characteristic of free entry?

Correct AnswerverifiedShow Answer

In calculating accounting profit, accountants typically don't include

Correct AnswerverifiedShow Answer

In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run?

Correct AnswerverifiedShow Answer

A firm that has little ability to influence market prices operates in a

Correct AnswerverifiedShow Answer

Total profit for a firm is calculated as

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a competitive market, the number of firms in the market adjusts until the market demand is satisfied at a price equal to the minimum of

Correct AnswerverifiedShow Answer

Table 14-12 -Refer to Table 14-12. What is the marginal revenue from selling the 5th unit?

Correct AnswerverifiedShow Answer

In a competitive market with free entry and exit, if all firms have the same cost structure, then

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

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. If the firm's marginal cost is $5, it should

Correct AnswerverifiedShow Answer

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

Correct AnswerverifiedShow Answer

Profit-maximizing firms enter a competitive market when existing firms in that market have

Correct AnswerverifiedShow Answer

Correct Answer
verified
The firm could not sell any more of its ...
View Answer

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