Question 1

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 2

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Accepted Answer

A)   increase.
B)   remain unchanged.
C)   decrease by less than 20 percent.
D)   decrease by more than 20 percent.E) C) and D)
F) All of the above

Question 3

Which of the following is not a characteristic of a competitive market?

Accepted Answer

A)   Buyers and sellers are price takers.
B)   Each firm sells a virtually identical product.
C)   Entry is limited.
D)   Each firm chooses an output level that maximizes profits.E) All of the above
F) C) and D)

Question 4

Table 14-5
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Accepted Answer

A)   $9.
B)   $11.
C)   $13.
D)   $15.E) B) and C)
F) A) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements regarding a competitive firm is correct?

Accepted Answer

A)   Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
B)   If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
C)   By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
D)   For all firms, average revenue equals the price of the good.E) A) and B)
F) B) and C)

Question 7

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 8

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

Accepted Answer

A) True 
 B)False

Question 9

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

Accepted Answer

A)   increases if MR  ATC.
B)   does not change.
C)   increases.
D)   decreases.E) C) and D)
F) B) and D)

Question 10

When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm

Accepted Answer

A)   can set price above marginal cost.
B)   must set price below average total cost.
C)   will never show losses.
D)   can safely ignore fixed costs when deciding how much output to produce.E) A) and B)
F) B) and D)

Question 11

When an individual firm in a competitive market increases its production, it is likely that the market price will fall.

Accepted Answer

A) True 
 B)False

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. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market?

Accepted Answer

A)   $1.00
B)   $1.50
C)   $2.00
D)   The price cannot be determined from the information provided.E) B) and C)
F) None of the above

Question 13

Figure 14-14
 
-Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel b) , a decrease in demand will ultimately lead to

Accepted Answer

A)   more firms in the industry but lower levels of output for each firm.
B)   fewer firms in the market.
C)   a new long-run equilibrium at point X in panel b) .
D)   lower prices once the new long-run equilibrium is reached.E) A) and B)
F) None of the above

Question 14

A firm in a competitive market has the following cost structure:  If the market price is $16, this firm will

Accepted Answer

A)   produce 4 units of output in the short run and exit in the long run.
B)   produce 5 units of output in the short run and exit in the long run.
C)   produce 5 units of output in the short run and face competition from new market entrants in the long run.
D)   shut down in the short run and exit in the long run.E) B) and D)
F) All of the above

Question 15

We can measure the profits earned by a firm in a competitive industry as

Accepted Answer

A)   P - AT
C)   × Q.
B)   P - M
C)   × Q.
C)   MR × MC.
D)   MC - AT
C)   × Q.E) A) and B)
F) B) and C)

Question 16

Suppose a firm in each of the two markets listed below were to increase its price by 15 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)   cotton and soybeans
B)   gasoline and corn
C)   #2 lead pencils and college textbooks
D)   electricity and cable televisionE) A) and D)
F) None of the above

Question 17

Which of the following statements is not correct?

Accepted Answer

A)   In a long-run equilibrium, marginal firms make zero economic profit.
B)   To maximize profit, firms should produce at a level of output where price equals average variable cost.
C)   The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping.
D)   Long-run supply curves are typically more elastic than short-run supply curves.E) B) and C)
F) B) and D)

Question 18

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average total cost but greater than the firm's average variable cost.

Accepted Answer

A) True 
 B)False

Question 19

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 $10, what is the firm's short­run economic profit?

Accepted Answer

A)   $9
B)   $15
C)   $30
D)   $50E) A) and B)
F) A) and C)

Question 20

Figure 14-14
 
-Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel b)  and that panel a)  illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

Accepted Answer

A)   Point W is a long-run equilibrium point.
B)   Points W, Y, and Z are short-run equilibria points.
C)   Point Y is a long-run equilibrium point.
D)   Point Z is a long-run equilibrium point.E) All of the above
F) C) and D)

Exam 13: Firms in Competitive Markets

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Correct Answer
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Correct Answer
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Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Correct Answer
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Which of the following is not a characteristic of a competitive market?

Correct Answer
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When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm

Correct Answer
verified

We can measure the profits earned by a firm in a competitive industry as

Correct Answer
verified

Whenever a perfectly competitive firm chooses to change its level of output, its marginal 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 ...
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Suppose a firm in each of the two markets listed below were to increase its price by 15 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
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Correct Answer
verified
The losses and revenues are identified o...
View Answer

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

Correct Answer
verified

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

Correct Answer
verified

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 $10, what is the firm's shortrun economic profit?

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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When an individual firm in a competitive market increases its production, it is likely that the market price will fall.

Correct Answer
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Which of the following statements regarding a competitive firm is correct?

Correct Answer
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Figure 14-14 -Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel b) , a decrease in demand will ultimately lead to

Correct Answer
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Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel b) and that panel a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

Correct Answer
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A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average total cost but greater than the firm's average variable cost.

Correct Answer
verified

A firm in a competitive market has the following cost structure: If the market price is $16, this firm will

Correct Answer
verified

Exam 13: Firms in Competitive Markets

Suppose a firm in a competitive market reduces its output by 20 percent. As a result, the price of its output is likely to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a competitive market?

Correct AnswerverifiedShow Answer

When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm

Correct AnswerverifiedShow Answer

We can measure the profits earned by a firm in a competitive industry as

Correct AnswerverifiedShow Answer

Whenever a perfectly competitive firm chooses to change its level of output, its marginal 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

Suppose a firm in each of the two markets listed below were to increase its price by 15 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

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

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

Correct AnswerverifiedShow Answer

By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production.

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 $10, what is the firm's short­run economic profit?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

When an individual firm in a competitive market increases its production, it is likely that the market price will fall.

Correct AnswerverifiedShow Answer

Which of the following statements regarding a competitive firm is correct?

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14. If the market starts in equilibrium at point Z in panel b) , a decrease in demand will ultimately lead to

Correct AnswerverifiedShow Answer

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel b) and that panel a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will continue to operate in the short run but earn losses if the market price is less than that firm's average total cost but greater than the firm's average variable cost.

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: If the market price is $16, this firm will

Correct AnswerverifiedShow Answer

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The firm selects the level of output at ...
View 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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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 $10, what is the firm's shortrun economic profit?

Correct Answer
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