Question 1

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Question 2

A firm in a competitive market has the following cost structure:
Output
ATC
0
--
1
$10
2
$8
3
$7
4
$8
5
$10
If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Accepted Answer

A)  1 unit
B)  2 units
C)  3 units
D)  4 unitsE) C) and D)
F) None of the above

Question 3

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A)  total revenue is equal to variable cost.
B)  total revenue is equal to fixed cost.
C)  total revenue is equal to total cost.
D)  profit is maximized.E) B) and C)
F) A) and D)

Question 4

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?

Accepted Answer

Profit can be calculated as (P...

Question 5

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Accepted Answer

A)  to produce the quantity at which average variable cost is minimized.
B)  to produce the quantity at which average fixed cost is minimized.
C)  the quantity at which market price is equal to Mr. McDonald's marginal cost of production.
D)  the quantity at which market price exceeds Mr. McDonald's marginal cost of production by the greatest amount.E) All of the above
F) A) and B)

Question 6

Regardless of the cost structure of firms in a competitive market, in the long run

Accepted Answer

A)  firms will experience rising demand for their products.
B)  the marginal firm will earn zero economic profit.
C)  firms will experience a less competitive market environment.
D)  exit and entry is likely to lead to a horizontal long-run supply curve.E) B) and D)
F) None of the above

Question 7

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Accepted Answer

A)  should exit the industry unless her economic profits are positive.
B)  will earn zero accounting profits but positive economic profits.
C)  will earn zero economic profits but positive accounting profits.
D)  should ignore opportunity costs because they are a type of sunk cost that disappears in the long run.E) None of the above
F) A) and C)

Question 8

For a competitive firm,

Accepted Answer

A)  total revenue equals average revenue.
B)  total revenue equals marginal revenue.
C)  total cost equals marginal revenue.
D)  average revenue equals marginal revenue.E) B) and C)
F) None of the above

Question 9

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs: 
-Refer to Table 14-11. The marginal revenue from producing the 5th unit equals
(i)  $6.
(ii)  the price.
(iii)  the marginal cost.

Accepted Answer

A)  (i)  only
B)  (i)  and (ii)  only
C)  (iii)  only
D)  (i) , (ii) , and (iii) E) A) and D)
F) None of the above

Question 10

When new firms have an incentive to enter a competitive market, their entry will

Accepted Answer

A)  increase the price of the product.
B)  drive down profits of existing firms in the market.
C)  shift the market supply curve to the left.
D)  increase demand for the product.E) A) and B)
F) C) and D)

Question 11

Figure 14-7 
-Refer to Figure 14-7. In the short run, the firm's maximum profit (or minimum loss)  is the same at which of the following pairs of prices?

Accepted Answer

A)  $65 and $75
B)  $75 and $85
C)  $80 and $100
D)  $125 and $175E) A) and D)
F) A) and C)

Question 12

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Accepted Answer

The answer of In the long-run equilibrium of a competitive...

Question 13

When total revenue is less than variable costs, a firm in a competitive market will

Accepted Answer

A)  continue to operate as long as average revenue exceeds marginal cost.
B)  continue to operate as long as average revenue exceeds average fixed cost.
C)  shut down.
D)  raise its price.E) B) and D)
F) C) and D)

Question 14

Which of the following could be used to calculate the profit for a firm?

Accepted Answer

A)  Profit = MR - MC
B)  Profit = MR - TC
C)  Profit = (P - M
C)   × Q
D)  Profit = (P - AT
C)   × QE) A) and C)
F) B) and D)

Question 15

Land of Many Lakes (LML)  sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not choose the

Accepted Answer

A)  quantity of butter to produce.
B)  price at which it sells its butter.
C)  profits it earns.
D)  All of the above are correct.E) None of the above
F) C) and D)

Question 16

If marginal cost exceeds marginal revenue, the firm

Accepted Answer

A)  is most likely to be at a profit-maximizing level of output.
B)  should increase the level of production to maximize its profit.
C)  should reduce its average fixed cost in order to lower its marginal cost.
D)  may still be earning a positive accounting profit.E) None of the above
F) B) and D)

Question 17

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Accepted Answer

A)  price is less than average total cost.
B)  marginal revenue exceeds the marginal cost.
C)  price is greater than average variable cost.
D)  price is greater than average fixed cost but less than average variable cost.E) A) and C)
F) None of the above

Question 18

Figure 14-7 
-Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Accepted Answer

A)  $75.
B)  $85.
C)  $95.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 19

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Accepted Answer

A) True 
 B)False

Question 20

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 500 identical firms in this market, what is the value of Q1?

Accepted Answer

A)  10,000
B)  20,000
C)  50,000
D)  150,000E) A) and D)
F) C) and D)

Exam 14: Firms in Competitive Markets

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Correct Answer
verified

Figure 14-7 -Refer to Figure 14-7. In the short run, the firm's maximum profit (or minimum loss) is the same at which of the following pairs of prices?

Correct Answer
verified

When total revenue is less than variable costs, a firm in a competitive market will

Correct Answer
verified

If marginal cost exceeds marginal revenue, the firm

Correct Answer
verified

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct Answer
verified

For a competitive firm,

Correct Answer
verified

Correct Answer
verified

Regardless of the cost structure of firms in a competitive market, in the long run

Correct Answer
verified

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Which of the following could be used to calculate the profit for a firm?

Correct Answer
verified

A firm in a competitive market has the following cost structure: Output ATC 0 -- 1 $10 2 $8 3 $7 4 $8 5 $10 If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Correct Answer
verified

When new firms have an incentive to enter a competitive market, their entry will

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P...
View Answer

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Correct Answer
verified

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Correct Answer
verified

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6. (ii) the price. (iii) the marginal cost.

Correct Answer
verified

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Correct Answer
verified

A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Correct Answer
verified

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not choose the

Correct Answer
verified

Exam 14: Firms in Competitive Markets

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. In the short run, the firm's maximum profit (or minimum loss) is the same at which of the following pairs of prices?

Correct AnswerverifiedShow Answer

When total revenue is less than variable costs, a firm in a competitive market will

Correct AnswerverifiedShow Answer

If marginal cost exceeds marginal revenue, the firm

Correct AnswerverifiedShow Answer

In the long run, assuming that the owner of a firm in a competitive industry has positive opportunity costs, she

Correct AnswerverifiedShow Answer

For a competitive firm,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Regardless of the cost structure of firms in a competitive market, in the long run

Correct AnswerverifiedShow Answer

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Correct AnswerverifiedShow Answer

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs.

Correct AnswerverifiedShow Answer

Which of the following could be used to calculate the profit for a firm?

Correct AnswerverifiedShow Answer

A firm in a competitive market has the following cost structure: Output ATC 0 -- 1 $10 2 $8 3 $7 4 $8 5 $10 If the firm's fixed cost of production is $3, and the market price is $10, how many units should the firm produce to maximize profit?

Correct AnswerverifiedShow Answer

When new firms have an incentive to enter a competitive market, their entry will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedProfit can be calculated as (P...View AnswerShow Answer

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

Correct AnswerverifiedShow Answer

In the long-run equilibrium of a competitive market with free entry and exit, firms operate at their __________ scale.

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. The marginal revenue from producing the 5th unit equals (i) $6. (ii) the price. (iii) the marginal cost.

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is

Correct AnswerverifiedShow Answer

​A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Correct AnswerverifiedShow Answer

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not choose the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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
verified

Correct Answer
verified

Correct Answer
verified
Profit can be calculated as (P...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A ski resort will choose to remain open in the summer whenever its fixed costs are low enough.

Correct Answer
verified

Correct Answer
verified