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) B) and D)

Question 2

Table 14-10
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Accepted Answer

A)  $3.
B)  $5.
C)  $7.
D)  $9.E) A) and C)
F) B) and C)

Question 3

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 4

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves: 
-Refer to Figure 14-13. If the price is $6 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) None of the above
F) C) and D)

Question 5

If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 6

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

Accepted Answer

A)  quantity of output is higher than it was previously.
B)  average total cost is higher than it was previously.
C)  marginal revenue is higher than it was previously.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 7

A competitive firm sells 100 units of output for $5 per unit. The firm's marginal revenue amounts to __________.

Accepted Answer

The answer of A competitive firm sells 100 units of...

Question 8

A firm operating in a perfectly competitive industry will shut down 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 9

​Table 14-16
The table represents the demand information for a firm in a competitive market.  ​
-Refer to Table 14-16. For this firm, when output is equal to 12 units, average revenue is

Accepted Answer

A)  ​$15.
B)  ​$150.
C)  ​always greater than marginal revenue.
D)  ​decreasing.E) All of the above
F) C) and D)

Question 10

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) A) and C)

Question 11

When new firms enter a perfectly competitive market,

Accepted Answer

A)  economic profits of existing firms will continue to be zero.
B)  entering firms will earn zero economic profit upon entry into the market.
C)  existing firms may see their costs rise if more firms compete for limited resources.
D)  prices will rise as existing firms raise prices to keep new firms out of the market.E) A) and D)
F) B) and D)

Question 12

When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit

Accepted Answer

A)  is negative.
B)  is at least zero.
C)  is also zero.
D)  could be positive, negative or zero.E) None of the above
F) A) and D)

Question 13

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

Accepted Answer

A)  less than $2.50
B)  more than $2.50
C)  exactly $2.50
D)  The marginal revenue cannot be determined without knowing the actual quantity sold by the typical firm.E) C) and D)
F) A) and D)

Question 14

Table 14-9
Suppose that a firm in a competitive market faces the following revenues and costs: 
-Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to

Accepted Answer

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

Question 15

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

Accepted Answer

A) True 
 B)False

Question 16

In a market with a fixed number of firms, as long as price is above average

Accepted Answer

A)  variable cost, each firm's marginal-cost curve is its supply curve.
B)  variable cost, each firm's average-total-cost curve is its supply curve.
C)  total cost, each firm's marginal-cost curve is its supply curve.
D)  total cost, each firm's average-total-cost curve is its supply curve.E) C) and D)
F) None of the above

Question 17

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its

Accepted Answer

A)  quantity of output is lower than it was previously.
B)  average total cost is lower than it was previously.
C)  marginal cost is higher than it was previously.
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 18

When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm

Accepted Answer

A)  can set price above marginal cost.
B)  must set price below average total cost.
C)  will never show losses.
D)  can safely ignore fixed costs when deciding how much output to produce.E) A) and C)
F) C) and D)

Question 19

The short-run supply curve in a competitive market must be more elastic than the long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 20

In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue.

Accepted Answer

A) True 
 B)False

Exam 14: Firms in Competitive Markets

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

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The short-run supply curve in a competitive market must be more elastic than the long-run supply curve.

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In the long run the market supply

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A competitive firm sells 100 units of output for $5 per unit. The firm's marginal revenue amounts to __________.

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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $6 in the short run, what will happen in the long run?

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​Table 14-16 The table represents the demand information for a firm in a competitive market. ​ -Refer to Table 14-16. For this firm, when output is equal to 12 units, average revenue is

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In the short run, a firm should exit the industry if its marginal cost exceeds its marginal revenue.

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The exit of existing firms from a competitive market will

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A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

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When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit

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Table 14-9 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to

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A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost.

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For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal.

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If some resources used in the production of a good are only available in limited quantities, then the long run market supply curve will be perfectly elastic.

Correct AnswerverifiedShow Answer

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price falls to $18, and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price. Once the firm has adjusted, its

Correct AnswerverifiedShow Answer

When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm

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In a market with a fixed number of firms, as long as price is above average

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Table 14-10 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to

Correct AnswerverifiedShow Answer

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

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When new firms enter a perfectly competitive market,

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Table 14-16 The table represents the demand information for a firm in a competitive market. -Refer to Table 14-16. For this firm, when output is equal to 12 units, average revenue is

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