Question 1

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Accepted Answer

A)  Sunk costs
B)  Marginal costs
C)  Variable costs
D)  Information costsE) B) and C)
F) C) and D)

Question 2

In a competitive market with identical firms,

Accepted Answer

A)  an increase in demand in the short run will result in a new price above the minimum of average total cost allowing firms to earn a positive economic profit in the long run.
B)  firms cannot earn positive economic profit in either the short run or long run.
C)  firms can earn positive economic profit in the long run if the long-run market supply curve is upward sloping.
D)  free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.E) A) and B)
F) All of the above

Question 3

Table 14-2
The following table presents cost and revenue information for Soper's Port Vineyard.
 
-Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the marginal cost of the 1st unit?

Accepted Answer

A)  $50
B)  $75
C)  $80
D)  $150E) A) and B)
F) C) and D)

Question 4

A competitive firm's short-run supply curve is part of which of the following curves?

Accepted Answer

A)  Marginal revenue
B)  Average variable cost
C)  Average total cost
D)  Marginal costE) B) and D)
F) C) and D)

Question 5

Table 14-3
Use the information for a competitive firm in the table below to answer the following questions.
 
-Refer to Table 14-3.If this firm chooses to maximize profit it will choose a level of output where marginal revenue is equal to

Accepted Answer

A)  6
B)  7
C)  8
D)  9E) A) and B)
F) None of the above

Question 6

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Accepted Answer

A)  certain outlays of money by the firm.
B)  implicit costs.
C)  operating costs.
D)  fixed costs.E) C) and D)
F) All of the above

Question 7

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

Accepted Answer

If the selling price is not su...

Question 8

Figure 14-1
The graph below depicts the cost structure for a firm in a competitive market.
 
-Refer to Figure 14-1.When price rises from P₂ to P₃,the firm finds that

Accepted Answer

A)  marginal cost exceeds marginal revenue at a production level of Q₂.
B)  if it produces at output level Q₃ it will earn a positive profit.
C)  expanding output to Q₄ would leave the firm with losses.
D)  it could increase profits by lowering output from Q₃ to Q₂.E) All of the above
F) A) and B)

Question 9

Which of the following statements best reflects a price-taking firm?

Accepted Answer

A)  If the firm were to charge more than the going price, it would sell none of its goods.
B)  The firm has an incentive to charge less than the market price to earn higher revenue.
C)  The firm can sell only a limited amount of output at the market price before the market price will fall.
D)  Price-taking firms maximize profits by charging a price above marginal cost.E) A) and B)
F) A) and C)

Question 10

List and describe the characteristics of a perfectly competitive market.

Accepted Answer

There are many buyers and sell...

Question 11

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Accepted Answer

A)  200 units
B)  300 units
C)  400 units
D)  500 unitsE) A) and D)
F) A) and C)

Question 12

A firm that shuts down temporarily

Accepted Answer

A)  still has to pay its variable costs, but not its fixed costs.
B)  still has to pay its fixed costs, but not its variable costs.
C)  still has to pay both its variable costs and its fixed costs.
D)  has to pay neither its variable costs nor its fixed costs.E) A) and B)
F) A) and C)

Question 13

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

Accepted Answer

A)  marginal revenue exceeds marginal cost.
B)  marginal cost exceeds marginal revenue.
C)  total cost exceeds total revenue.
D)  None of the above is correct.E) C) and D)
F) None of the above

Question 14

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

Firms in competitive markets are said to be price takers.

Accepted Answer

A) True 
 B)False

Question 16

Figure 14-5
The figure below depicts the cost structure of a firm in a competitive market.
 
-Refer to Figure 14-5.When market price is P₁,a profit-maximizing firm's total profit or loss can be represented by which area?

Accepted Answer

A)  P₁ × Q₃; profit
B)  (P₃ - P₁)  × Q₂ ; loss
C)  (P₂ - P₁)  × Q₁; loss
D)  We can't tell because we don't know fixed costs.E) C) and D)
F) A) and B)

Question 17

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that

Accepted Answer

A)  the production of the 100th unit of output increases the firm's profit by $3.
B)  the production of the 100th unit of output increases the firm's average total cost by $7.
C)  the firm's profit-maximizing level of output is less than 100 units.
D)  the production of the 110th unit of output must increase the firm's profit by less than $3.E) A) and C)
F) C) and D)

Question 18

The assumption of free entry and exit is necessary for firms in a competitive market to be price takers.

Accepted Answer

A) True 
 B)False

Question 19

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

By selecting the level of outp...

Question 20

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 this firm will shut down in the short run,or choose to remain in the market.Explain your answer.

Accepted Answer

The loss and revenue are identified on t...

Exam 14: Firms in Competitive Markets

Which of the following statements best reflects a price-taking firm?

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
By selecting the level of outp...
View Answer

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.If this firm chooses to maximize profit it will choose a level of output where marginal revenue is equal to

Correct Answer
verified

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

Correct Answer
verified

A competitive firm's short-run supply curve is part of which of the following curves?

Correct Answer
verified

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct Answer
verified

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Correct Answer
verified

A firm that shuts down temporarily

Correct Answer
verified

Correct Answer
verified
The loss and revenue are identified on t...
View Answer

Figure 14-1 The graph below depicts the cost structure for a firm in a competitive market. -Refer to Figure 14-1.When price rises from P₂ to P₃,the firm finds that

Correct Answer
verified

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Correct Answer
verified

Correct Answer
verified
If the selling price is not su...
View Answer

In a competitive market with identical firms,

Correct Answer
verified

Firms in competitive markets are said to be price takers.

Correct Answer
verified

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that

Correct Answer
verified

List and describe the characteristics of a perfectly competitive market.

Correct Answer
verified
There are many buyers and sell...
View Answer

The assumption of free entry and exit is necessary for firms in a competitive market to be price takers.

Correct Answer
verified

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Correct Answer
verified

Table 14-2 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the marginal cost of the 1st unit?

Correct Answer
verified

Figure 14-5 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-5.When market price is P₁,a profit-maximizing firm's total profit or loss can be represented by which area?

Correct Answer
verified

Exam 14: Firms in Competitive Markets

Which of the following statements best reflects a price-taking firm?

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 AnswerverifiedBy selecting the level of outp...View AnswerShow Answer

Table 14-3 Use the information for a competitive firm in the table below to answer the following questions. -Refer to Table 14-3.If this firm chooses to maximize profit it will choose a level of output where marginal revenue is equal to

Correct AnswerverifiedShow Answer

If a competitive firm is currently producing a level of output at which profit is not maximized,then it must be true that

Correct AnswerverifiedShow Answer

A competitive firm's short-run supply curve is part of which of the following curves?

Correct AnswerverifiedShow Answer

As a general rule,when accountants calculate profit they account for explicit costs but usually ignore

Correct AnswerverifiedShow Answer

In the short run,a market consists of 100 identical firms.The market price is $8,and the total cost to each firm of producing various levels of output is given in the table below.What will total quantity supplied be in the market?

Correct AnswerverifiedShow Answer

A firm that shuts down temporarily

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe loss and revenue are identified on t...View AnswerShow Answer

Figure 14-1 The graph below depicts the cost structure for a firm in a competitive market. -Refer to Figure 14-1.When price rises from P₂ to P₃,the firm finds that

Correct AnswerverifiedShow Answer

Which of these types of costs can be ignored when an individual or a firm is making decisions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the selling price is not su...View AnswerShow Answer

In a competitive market with identical firms,

Correct AnswerverifiedShow Answer

Firms in competitive markets are said to be price takers.

Correct AnswerverifiedShow Answer

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.It follows that

Correct AnswerverifiedShow Answer

List and describe the characteristics of a perfectly competitive market.

Correct AnswerverifiedThere are many buyers and sell...View AnswerShow Answer

The assumption of free entry and exit is necessary for firms in a competitive market to be price takers.

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

Correct AnswerverifiedShow Answer

Table 14-2 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-2.Consumers are willing to pay $120 per unit of port wine.What is the marginal cost of the 1st unit?

Correct AnswerverifiedShow Answer

Figure 14-5 The figure below depicts the cost structure of a firm in a competitive market. -Refer to Figure 14-5.When market price is P₁,a profit-maximizing firm's total profit or loss can be represented by which area?

Correct AnswerverifiedShow Answer

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By selecting the level of outp...
View Answer

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The loss and revenue are identified on t...
View Answer

Correct Answer
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Correct Answer
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If the selling price is not su...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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There are many buyers and sell...
View Answer

Correct Answer
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Correct Answer
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