Question 1

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 2

Competitive markets are characterized by

Accepted Answer

A)   a small number of buyers and sellers.
B)   unique products.
C)   the interdependence of firms.
D)   free entry and exit by firms.E) All of the above
F) B) and C)

Question 3

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) None of the above
F) A) 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

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.E) A) and D)
F) B) and C)

Question 6

Table 13-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 13-11.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) A) and B)
F) A) and C)

Question 7

If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then

Accepted Answer

A)   its average revenue is greater than $8.
B)   its marginal revenue is less than $8.
C)   its total cost is less than $8,000.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 8

Bill operates a boat rental business in a competitive industry.He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them.He rents each boat for $200 per month.The variable cost for each boat rental is $50.In the off season,Bill should

Accepted Answer

A)   operate his business as long as he rents at least 7 boats per month.
B)   operate his business as long as he rents at least 1 boat per month.
C)   operate his business as long as he rents all 10 boats each month.
D)   raise the price he charges per boat rental.E) B) and D)
F) B) and C)

Question 9

Scenario 13-2
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 13-2.At Q = 999,the firm's profits equal

Accepted Answer

A)   $4,990.
B)   $5,000.
C)   $5,020.
D)   $5,030.E) C) and D)
F) A) and B)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Table 13-2
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 13-2.A firm operating in a competitive market maximizes total revenue by producing

Accepted Answer

A)   2 units.
B)   3 units.
C)   4 units.
D)   as many units as possible.E) B) and D)
F) A) and D)

Question 12

In the long-run equilibrium of a market with free entry and exit,marginal firms are operating

Accepted Answer

A)   at the point where average variable cost equals marginal cost.
B)   at the minimum point on their marginal cost curves.
C)   at their efficient scale.
D)   where accounting profit is zero.E) B) and C)
F) All of the above

Question 13

When buyers in a competitive market take the selling price as given,they are said to be

Accepted Answer

A)   market entrants.
B)   monopolists.
C)   free riders.
D)   price takers.E) B) and C)
F) None of the above

Question 14

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)   Profit = MR - MC
B)   Profit = MR - TC
C)   Profit = (P - M
C)  * Q
D)   Profit = (P - AT
C)  * QE) A) and D)
F) A) and B)

Question 15

Table 13-12
Bill's Birdhouses
 
-Refer to Table 13-12.What is Bill's economic profit at the profit-maximizing output level?

Accepted Answer

A)   $25
B)   $75
C)   $115
D)   $225E) A) and C)
F) B) and C)

Question 16

The stable,long-run equilibrium in a competitive market occurs when the market price equals the lowest point on a firm's average total cost curve.

Accepted Answer

A) True 
 B)False

Question 17

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 variable cost.

Accepted Answer

A) True 
 B)False

Question 18

A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 19

Table 13-9
Suppose that a firm in a competitive market faces the following revenues and costs:
 
-Refer to Table 13-9.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

Accepted Answer

A)   $6.
B)   $7.
C)   $8.
D)   $9.E) All of the above
F) C) and D)

Question 20

The entry of new firms into a competitive market will

Accepted Answer

A)   increase market supply and increase market price.
B)   increase market supply and decrease market price.
C)   decrease market supply and increase market price.
D)   decrease market supply and decrease market price.E) None of the above
F) B) and C)

Exam 13: Firms in Competitive Markets

The entry of new firms into a competitive market will

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If a competitive firm is selling 1,000 units of its product at a price of $8 per unit and earning a positive profit,then

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

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Bill operates a boat rental business in a competitive industry.He owns 10 boats and pays $1,000 per month on the loan that he took out to buy them.He rents each boat for $200 per month.The variable cost for each boat rental is $50.In the off season,Bill should

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When buyers in a competitive market take the selling price as given,they are said to be

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Which of the following could be used to calculate the profit for a firm?

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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 variable cost.

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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

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Table 13-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 13-11.In order to maximize profits,the firm should stop producing after it makes the

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Table 13-12 Bill's Birdhouses -Refer to Table 13-12.What is Bill's economic profit at the profit-maximizing output level?

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

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The stable,long-run equilibrium in a competitive market occurs when the market price equals the lowest point on a firm's average total cost curve.

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

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Competitive markets are characterized by

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A firm operating in a perfectly competitive market may earn positive,negative,or zero economic profit in the short run.

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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.

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Scenario 13-2 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 13-2.At Q = 999,the firm's profits equal

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Table 13-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 13-9.In order to maximize profit,the firm will produce a level of output where marginal revenue is equal to

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In the long-run equilibrium of a market with free entry and exit,marginal firms are operating

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Table 13-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 13-2.A firm operating in a competitive market maximizes total revenue by producing

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