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Exam 14: Firms in Competitive Markets

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Question 91

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Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the average revenue is

A) $39.
B) $26.
C) $13.
D) $0.

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

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Question 92

Multiple Choice

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Table 14-8 Suppose that a firm in a competitive market faces the following revenues and costs: -Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

A) is greater than marginal revenue.
B) equals marginal revenue.
C) is less than marginal revenue.
D) is minimized.

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

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Question 93

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

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct?

A firm has market power if it can

For a firm in a perfectly competitive market, the price of the good is always

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has earned $4,500 in monthly revenue. In the short run, Susan should

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

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 revenue is equal to

Figure 14-7 -Refer to Figure 14-7. The firm will shut down in the short run if the price of the good is

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

The stable, long-run equilibrium in a competitive market occurs when the market price equals the lowest point on a firm's average total cost curve.

Which of the following statements is correct regarding a firm's decision-making?

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.

Figure 14-14 -Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) . An increase in demand from D0 to D1 will result in

For a firm operating in a competitive industry, which of the following statements is not correct?

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Suppose a firm is considering producing zero units of output. We call this shutting down in the short run and exiting an industry in the long run.

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.

Which of the following industries is most likely to exhibit the characteristic of free entry?