Question 1

In a competitive market,

Accepted Answer

A)  no single buyer or seller can influence the price of the product.
B)  there are only a small number of sellers.
C)  the goods offered by the different sellers are unique.
D)  accounting profit is driven to zero as firms freely enter and exit the market.E) None of the above
F) C) and D)

Question 2

In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 3

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) C) and D)

Question 4

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Accepted Answer

At 45 units of outpu...

Question 5

Which of the following represents the firm's long-run condition for exiting a market?

Accepted Answer

A)  exit if P 
B)  exit if P 
C)  exit if P 
D)  exit if MR < MCE) B) and D)
F) B) and C)

Question 6

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Accepted Answer

A)  more than double.
B)  double.
C)  increase but by less than double.
D)  may increase or decrease depending on the price elasticity of demand.E) C) and D)
F) A) and B)

Question 7

Figure 14-2
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-2. If the market price is Pa, 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) None of the above
F) A) and B)

Question 8

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 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) A) and B)
F) B) and D)

Question 9

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.E) None of the above
F) C) and D)

Question 10

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Accepted Answer

A) True 
 B)False

Question 11

Figure 14-10
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 14-10. If there are 700 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  140,000
B)  210,000
C)  280,000
D)  420,000E) A) and B)
F) A) and C)

Question 12

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 13

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

Accepted Answer

A)  $0
B)  $6
C)  $10
D)  $12E) C) and D)
F) B) and D)

Question 14

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Accepted Answer

Because a normal rate of retur...

Question 15

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. At which price range will the firm continue to operate in the short run but earn negative profits?

Accepted Answer

A)  any price higher than P4
B)  any price higher than P3 but less than P4
C)  any price higher than P2 but less than P3
D)  any price lower than P1E) A) and C)
F) A) and D)

Question 16

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

Accepted Answer

A)  There are many buyers and sellers.
B)  Firms can freely enter and exit the market.
C)  Many firms have market power.
D)  Firms sell very similar products.E) All of the above
F) A) and B)

Question 17

When a competitive firm doubles the quantity of output it sells, its

Accepted Answer

A)  total revenue doubles.
B)  average revenue doubles.
C)  marginal revenue doubles.
D)  profits must increase.E) A) and B)
F) A) and C)

Question 18

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Accepted Answer

A) True 
 B)False

Question 19

Profit-maximizing firms in a competitive market produce an output level where

Accepted Answer

A)  marginal cost equals marginal revenue.
B)  marginal cost equals average total cost.
C)  marginal revenue is increasing.
D)  price is less than marginal revenue.E) C) and D)
F) A) and B)

Question 20

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) A) and B)
F) All of the above

Exam 14: Firms in Competitive Markets

Which of the following represents the firm's long-run condition for exiting a market?

Correct Answer
verified

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Correct Answer
verified

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

Correct Answer
verified

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

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Correct Answer
verified
Because a normal rate of retur...
View Answer

In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Correct Answer
verified
At 45 units of outpu...
View Answer

In calculating accounting profit, accountants typically don't include

Correct Answer
verified

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

Correct Answer
verified

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 marginal revenue of the 12th unit is

Correct Answer
verified

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

Correct Answer
verified

When a competitive firm doubles the quantity of output it sells, its

Correct Answer
verified

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. At which price range will the firm continue to operate in the short run but earn negative profits?

Correct Answer
verified

Profit-maximizing firms in a competitive market produce an output level where

Correct Answer
verified

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pa, in the short run the firm will earn

Correct Answer
verified

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct Answer
verified

In a competitive market,

Correct Answer
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A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Which of the following represents the firm's long-run condition for exiting a market?

Correct AnswerverifiedShow Answer

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Correct AnswerverifiedShow Answer

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

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

If identical firms that remain in a competitive market over the long run make zero economic profit, why do these firms choose to remain in the market?

Correct AnswerverifiedBecause a normal rate of retur...View AnswerShow Answer

In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

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

Correct AnswerverifiedShow Answer

When a certain competitive firm produces and sells 40 units of output, its total revenue is $740. If there is no change in price, then what is the amount of the firm's total revenue if it produces and sells 45 units of output?

Correct AnswerverifiedAt 45 units of outpu...View AnswerShow Answer

In calculating accounting profit, accountants typically don't include

Correct AnswerverifiedShow Answer

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

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 marginal revenue of the 12th unit is

Correct AnswerverifiedShow Answer

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

Correct AnswerverifiedShow Answer

When a competitive firm doubles the quantity of output it sells, its

Correct AnswerverifiedShow Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. At which price range will the firm continue to operate in the short run but earn negative profits?

Correct AnswerverifiedShow Answer

Profit-maximizing firms in a competitive market produce an output level where

Correct AnswerverifiedShow Answer

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-2. If the market price is Pa, in the short run the firm will earn

Correct AnswerverifiedShow Answer

The manager of a firm operating in a competitive market can ignore sunk costs when making business decisions.

Correct AnswerverifiedShow Answer

In a competitive market,

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Because a normal rate of retur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
At 45 units of outpu...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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