Question 1

In the long run the market supply

Accepted Answer

A)   must always be horizontal.
B)   could be upward sloping if the cost of production falls as new firms enter the market.
C)   could be upward sloping if the cost of production rises as new firms enter the market.
D)   could be upward sloping if technological improvements lower the cost of producing in the market.E) B) and C)
F) None of the above

Question 2

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Accepted Answer

A) True 
 B)False

Question 3

Competitive firms that earn a loss in the short run should

Accepted Answer

A)   shut down if P 
B)   raise their price.
C)   lower their output.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 4

Table 13-5
 
-Refer to Table 13-5.The marginal revenue of the 12th unit is

Accepted Answer

A)   $9.
B)   $10.
C)   $11
D)   The marginal revenue cannot be determined without knowing the total revenue when 11 units are sold.E) B) and D)
F) All of the above

Question 5

The exit of existing firms from 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) A) and B)
F) All of the above

Question 6

Mrs.Smith operates a business in a competitive market.The current market price is $8.10.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Accepted Answer

A)   shut down her business in the short run but continue to operate in the long run.
B)   continue to operate in the short run but shut down in the long run.
C)   continue to operate in both the short run and long run.
D)   shut down in both the short run and long run.E) A) and B)
F) A) and C)

Question 7

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Accepted Answer

A)   $4
B)   $8
C)   $32
D)   $64E) B) and C)
F) None of the above

Question 8

Figure 13-1
Suppose that a firm in a competitive market has the following cost curves: 
-Refer to Figure 13-1.If the market price falls below $4.50,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 in the short run and shut down.
D)   zero economic profits in the short run.E) None of the above
F) A) and B)

Question 9

In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Accepted Answer

A)   zero.
B)   equal to the industry profits.
C)   the market supply curve.
D)   a horizontal line.E) A) and B)
F) A) and C)

Question 10

In a market with 1,000 identical firms,the short-run market supply is the

Accepted Answer

A)   marginal cost curve above average variable cost for a typical firm in the market.
B)   quantity supplied by the typical firm in the market at each price.
C)   sum of the prices charged by each of the 1,000 individual firms at each quantity.
D)   sum of the quantities supplied by each of the 1,000 individual firms at each price.E) None of the above
F) All of the above

Question 11

For a competitive firm,

Accepted Answer

A)   total revenue equals average revenue.
B)   total revenue equals marginal revenue.
C)   total cost equals marginal revenue.
D)   average revenue equals marginal revenue.E) A) and B)
F) B) and C)

Question 12

For any competitive market,the supply curve is closely related to the

Accepted Answer

A)   preferences of consumers who purchase products in that market.
B)   income tax rates of consumers in that market.
C)   firms' costs of production in that market.
D)   interest rates on government bonds.E) B) and C)
F) B) and D)

Question 13

One of the defining characteristics of a perfectly competitive market is

Accepted Answer

A)   a small number of sellers.
B)   a large number of buyers and a small number of sellers.
C)   a similar product.
D)   significant advertising by firms to promote their products.E) B) and C)
F) A) and B)

Question 14

Figure 13-8
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-8.Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)   ABCD
B)   BC
C)   ABC
D)   None of the above is correct.We must know the firm's average variable cost.E) All of the above
F) C) and D)

Question 15

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Accepted Answer

A)   the long-run market supply curve must be horizontal.
B)   the long-run market supply curve must be upward-sloping.
C)   the long-run market supply curve must be downward-sloping.
D)   we do not have sufficient information to determine the shape of the long-run market supply curve.E) A) and B)
F) B) and C)

Question 16

Figure 13-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-2.If the market price is P1,in the short run the firm will earn

Accepted Answer

A)   positive economic profits.
B)   negative economic profits but will try to remain open.
C)   negative economic profits and will shut down.
D)   zero economic profits.E) A) and B)
F) A) and C)

Question 17

Cold Duck Airlines flies between Tacoma and Portland.The company leases planes on a year-long contract at a cost that averages $600 per flight.Other costs (fuel,flight attendants,etc.) amount to $550 per flight.Currently,Cold Duck's revenues are $1,000 per flight.All prices and costs are expected to continue at their present levels.If it wants to maximize profit,Cold Duck Airlines should

Accepted Answer

A)   drop the flight immediately.
B)   continue the flight.
C)   continue flying until the lease expires and then drop the run.
D)   drop the flight now but renew the lease if conditions improve.E) A) and B)
F) A) and C)

Question 18

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Accepted Answer

A) True 
 B)False

Question 19

A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue.
(ii) higher profits.
(iii) lower total costs.

Accepted Answer

A)   (i) only
B)   (ii) and (iii) only
C)   (i) ,(ii) ,and (iii) 
D)   None of the above is correct.E) C) and D)
F) None of the above

Question 20

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

Exam 13: Firms in Competitive Markets

The exit of existing firms from a competitive market will

Correct Answer
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In the long run the market supply

Correct Answer
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Figure 13-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-8.Which line segment best reflects the long-run supply curve for this firm?

Correct Answer
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In a market with 1,000 identical firms,the short-run market supply is the

Correct Answer
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For any competitive market,the supply curve is closely related to the

Correct Answer
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In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Correct Answer
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One of the defining characteristics of a perfectly competitive market is

Correct Answer
verified

Competitive firms that earn a loss in the short run should

Correct Answer
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A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs.

Correct Answer
verified

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Correct Answer
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Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

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

Correct Answer
verified

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct Answer
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Table 13-5 -Refer to Table 13-5.The marginal revenue of the 12th unit is

Correct Answer
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Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.If the market price falls below $4.50,the firm will earn

Correct Answer
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For a competitive firm,

Correct Answer
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Mrs.Smith operates a business in a competitive market.The current market price is $8.10.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Correct Answer
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Figure 13-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-2.If the market price is P1,in the short run the firm will earn

Correct Answer
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In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Correct Answer
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Exam 13: Firms in Competitive Markets

The exit of existing firms from a competitive market will

Correct AnswerverifiedShow Answer

In the long run the market supply

Correct AnswerverifiedShow Answer

Figure 13-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-8.Which line segment best reflects the long-run supply curve for this firm?

Correct AnswerverifiedShow Answer

In a market with 1,000 identical firms,the short-run market supply is the

Correct AnswerverifiedShow Answer

For any competitive market,the supply curve is closely related to the

Correct AnswerverifiedShow Answer

In a perfectly competitive market,the horizontal sum of all the individual firms' supply curves is

Correct AnswerverifiedShow Answer

One of the defining characteristics of a perfectly competitive market is

Correct AnswerverifiedShow Answer

Competitive firms that earn a loss in the short run should

Correct AnswerverifiedShow Answer

A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs.

Correct AnswerverifiedShow Answer

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

Correct AnswerverifiedShow Answer

Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00.What would be the firm's total revenue if it instead produced and sold 4 units of output?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a competitive market experiences rising prices,it will respond with an increase in production.

Correct AnswerverifiedShow Answer

Table 13-5 -Refer to Table 13-5.The marginal revenue of the 12th unit is

Correct AnswerverifiedShow Answer

Figure 13-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 13-1.If the market price falls below $4.50,the firm will earn

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a competitive firm,

Correct AnswerverifiedShow Answer

Mrs.Smith operates a business in a competitive market.The current market price is $8.10.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Correct AnswerverifiedShow Answer

Figure 13-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-2.If the market price is P1,in the short run the firm will earn

Correct AnswerverifiedShow Answer

In the long run,when price is greater than average total cost,some firms in a competitive market will choose to enter the market.

Correct AnswerverifiedShow Answer

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