Question 1

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $200.In order to maximize profits,Laura should

Accepted Answer

A)   make more than 20 wedding cakes per month.
B)   make fewer than 20 wedding cakes per month.
C)   continue to make 20 wedding cakes per month.
D)   We do not have enough information with which to answer the question.E) A) and B)
F) A) and C)

Question 2

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 is $4.00,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 and shut down.
D)   zero economic profits in the short run.E) B) and D)
F) All of the above

Question 3

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Accepted Answer

A)   maximizing total revenue.
B)   maximizing profit.
C)   minimizing variable cost.
D)   minimizing average total cost.E) B) and D)
F) C) and D)

Question 4

Figure 13-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 13-13.If the price is P2 in the short run,what will happen in the long run?

Accepted Answer

A)   Nothing.The price is consistent with zero economic profits,so there is no incentive for firms to enter or exit the industry.
B)   Individual firms will earn positive economic profits in the short run,which will entice other firms to enter the industry.
C)   Individual firms will earn negative economic profits in the short run,which will cause some firms to exit the industry.
D)   Because the price is below the firm's average variable costs,the firms will shut down.E) A) and D)
F) All of the above

Question 5

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Accepted Answer

A)   earning small but positive economic profits.
B)   facing the prospect of future losses.
C)   operating at the efficient scale.
D)   that work together to raise market prices.E) B) and C)
F) A) and D)

Question 6

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

Accepted Answer

A)   $5
B)   $30
C)   $35
D)   $65E) A) and B)
F) A) and C)

Question 7

All competitive firms earn zero economic profit in both the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 8

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

Accepted Answer

A)   price is less than average total cost.
B)   price is greater than average total cost.
C)   average revenue is greater than average fixed cost.
D)   average revenue is greater than marginal cost.E) B) and C)
F) All of the above

Question 9

Entry into a market by new firms will increase the

Accepted Answer

A)   supply of the good.
B)   profits of existing firms.
C)   price of the good.
D)   marginal cost of producing the good.E) A) and B)
F) A) and C)

Question 10

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 13-5
A study sponsored by the Food Consumer Safety Board found that consumption of irradiated tomatoes increased the health of laboratory rats.As a result of national press coverage of the report,the demand for irradiated tomatoes increased dramatically.Organic farmers were able to switch from organic production of tomatoes to irradiated production with no additional cost.Assume that the tomato market satisfies all of the assumptions of perfect competition.
-Refer to Scenario 13-5.If the increased production of irradiated tomatoes caused a rise in the marginal transportation costs of moving irradiated tomatoes to market,the

Accepted Answer

A)   short-run market supply curve for irradiated tomatoes would be affected but not the long-run market supply.
B)   long-run market supply curve for irradiated tomatoes would be perfectly elastic.
C)   long-run market supply of irradiated tomatoes would be downward sloping.
D)   long-run market supply of irradiated tomatoes would be upward sloping.E) A) and C)
F) A) and D)

Question 12

Table 13-5
 
-Refer to Table 13-5.The average revenue when 14 units are produced and sold is

Accepted Answer

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

Question 13

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $11.It follows that the

Accepted Answer

A)   production of the 100th unit of output increases the firm's profit by $1.
B)   production of the 100th unit of output increases the firm's average total cost by $1.
C)   firm's profit-maximizing level of output is less than 100 units.
D)   production of the 110th unit of output must increase the firm's profit but by less than $1.E) B) and D)
F) A) and B)

Question 14

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Accepted Answer

A)   experience losses but will continue to produce rubber bands.
B)   shut down.
C)   earn both economic and accounting profits.
D)   raise the price of its product.E) All of the above
F) A) and B)

Question 15

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Accepted Answer

A)   more than triple.
B)   less than triple.
C)   exactly triple.
D)   Any of the above may be true depending on the firm's labor productivity.E) A) and D)
F) All of the above

Question 16

Table 13-13
Diana's Dress Emporium
 
-Refer to Table 13-13.In order to maximize profits,how many units should Diana's Dress Emporium produce?

Accepted Answer

A)   5
B)   6
C)   7
D)   8E) A) and B)
F) B) and C)

Question 17

Scenario 13-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit.
-Refer to Scenario 13-1.At Q = 1,000,the firm's profits equal

Accepted Answer

A)   $-200.
B)   $1,000.
C)   $3,000.
D)   $4,000.E) B) and C)
F) A) and B)

Question 18

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Accepted Answer

A)   at least some firms will shut down.
B)   price will fall below marginal cost for some firms.
C)   price will fall below average total cost for some firms.
D)   at least some firms will enter the industry.E) All of the above
F) B) and C)

Question 19

The competitive firm's short-run supply curve is its

Accepted Answer

A)   marginal revenue curve,but only the portion where marginal revenue exceeds marginal cost.
B)   marginal cost curve.
C)   marginal cost curve,but only the portion above the minimum of average total cost.
D)   marginal cost curve,but only the portion above the minimum of average variable cost.E) B) and C)
F) A) and D)

Question 20

Figure 13-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 13-6.Firms will be earn losses in the short run but will remain in business if the market price

Accepted Answer

A)   exceeds P3.
B)   is less than P1.
C)   is greater than P1 but less than P3.
D)   exceeds P2.E) B) and C)
F) B) and D)

Exam 13: Firms in Competitive Markets

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct Answer
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Correct Answer
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Entry into a market by new firms will increase the

Correct Answer
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Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $200.In order to maximize profits,Laura should

Correct Answer
verified

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct Answer
verified

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

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 $11.It follows that the

Correct Answer
verified

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Correct Answer
verified

Figure 13-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 13-13.If the price is P2 in the short run,what will happen in the long run?

Correct Answer
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Figure 13-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-6.Firms will be earn losses in the short run but will remain in business if the market price

Correct Answer
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If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Correct Answer
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Scenario 13-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit. -Refer to Scenario 13-1.At Q = 1,000,the firm's profits equal

Correct Answer
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Table 13-5 -Refer to Table 13-5.The average revenue when 14 units are produced and sold is

Correct Answer
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All competitive firms earn zero economic profit in both the short run and the long run.

Correct Answer
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Table 13-13 Diana's Dress Emporium -Refer to Table 13-13.In order to maximize profits,how many units should Diana's Dress Emporium produce?

Correct Answer
verified

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Correct Answer
verified

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Correct Answer
verified

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Correct Answer
verified

The competitive firm's short-run supply curve is its

Correct Answer
verified

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 is $4.00,the firm will earn

Correct Answer
verified

Exam 13: Firms in Competitive Markets

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to shut down if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Entry into a market by new firms will increase the

Correct AnswerverifiedShow Answer

Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $200.In order to maximize profits,Laura should

Correct AnswerverifiedShow Answer

When all firms and potential firms in a market have the same cost curves,the long-run equilibrium of a competitive market with free entry and exit will be characterized by firms

Correct AnswerverifiedShow Answer

Suppose you bought a ticket to a football game for $30 and that you place a $35 value on seeing the game.If you lose the ticket,then what is the maximum price you should pay for another ticket? Assume that losing the ticket does not alter how you value it.

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 $11.It follows that the

Correct AnswerverifiedShow Answer

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

Correct AnswerverifiedShow Answer

Figure 13-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 13-13.If the price is P2 in the short run,what will happen in the long run?

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Figure 13-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 13-6.Firms will be earn losses in the short run but will remain in business if the market price

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market triples the quantity of output sold,then total revenue will

Correct AnswerverifiedShow Answer

Scenario 13-1 Assume a certain firm in a competitive market is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit. -Refer to Scenario 13-1.At Q = 1,000,the firm's profits equal

Correct AnswerverifiedShow Answer

Table 13-5 -Refer to Table 13-5.The average revenue when 14 units are produced and sold is

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All competitive firms earn zero economic profit in both the short run and the long run.

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Table 13-13 Diana's Dress Emporium -Refer to Table 13-13.In order to maximize profits,how many units should Diana's Dress Emporium produce?

Correct AnswerverifiedShow Answer

Suppose a profit-maximizing firm in a competitive market produces rubber bands.When the market price for rubber bands falls below the minimum of its average total cost,but still lies above the minimum of average variable cost,in the short run the firm will

Correct AnswerverifiedShow Answer

By comparing marginal revenue and marginal cost,a firm in a competitive market is able to adjust production to the level that achieves its objective,which we assume to be

Correct AnswerverifiedShow Answer

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

Correct AnswerverifiedShow Answer

The competitive firm's short-run supply curve is its

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 is $4.00,the firm will earn

Correct AnswerverifiedShow Answer

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