Question 1

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Accepted Answer

A)  shut down the business
B)  produce more custom-made shoes
C)  decrease the price
D)  produce fewer custom-made shoesE) A) and C)
F) None of the above

Question 2

Table 14-4
The table represents a demand curve faced by a firm in a competitive market. 
-Refer to Table 14-4. For this firm, the average revenue is

Accepted Answer

A)  $0.
B)  $5.
C)  $10.
D)  $15.E) A) and B)
F) C) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands rises above the minimum of its average variable cost, but still lies below the minimum of average total 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) A) and B)
F) A) and C)

Question 5

When a profit-maximizing firm is earning profits, those profits can be identified by

Accepted Answer

A)  P × Q.
B)  (MC - AV
C)   × Q.
C)  (P - AT
C)   × Q.
D)  (P - AV
C)   × Q.E) None of the above
F) A) and B)

Question 6

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Accepted Answer

A)  cotton and soybeans
B)  gasoline and corn
C)  #2 lead pencils and college textbooks
D)  electricity and cable televisionE) A) and B)
F) None of the above

Question 7

A competitive firm would benefit from charging a price below the market price because the firm would achieve
(i) higher average revenue.
(ii) higher profits.
(iii) lower total costs.

Accepted Answer

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

Question 8

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) None of the above
F) A) and C)

Question 9

When firms are neither entering nor exiting a perfectly competitive market,

Accepted Answer

A)  total revenue must equal total variable cost for each firm.
B)  economic profits must be zero.
C)  price must equal average variable cost for each firm.
D)  Both a and c are correct.E) A) and B)
F) B) and C)

Question 10

Why does a firm in a competitive industry charge the market price?

Accepted Answer

A)  If a firm charges less than the market price, it loses potential revenue.
B)  If a firm charges more than the market price, it loses all its market power.
C)  The firm can only sell limited number of units of output, so it wants to sell at the market price in order to lower its costs.
D)  All of the above are correct.E) A) and C)
F) A) and B)

Question 11

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales. 
-Refer to Table 14-14. What is the total revenue from selling 5 units?

Accepted Answer

A)  $2.50
B)  $3.25
C)  $12.50
D)  $16.25E) A) and D)
F) A) and C)

Question 12

The marginal firm in a competitive market will earn zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 13

Figure 14-9
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Accepted Answer

A)  ABCD
B)  BC
C)  ABC
D)  None of the above is correct. We must know the firm's average variable cost.E) A) and B)
F) None of the above

Question 14

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. Firms will earn positive profits in the short run if the market price

Accepted Answer

A)  is less than P1.
B)  is greater than P1 but less than P3.
C)  equals P3.
D)  exceeds P3.E) All of the above
F) A) and D)

Question 15

Figure 14-9
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 14-9. If there are 100 identical firms in this market, what is the value of Q2?

Accepted Answer

A)  10,000
B)  20,000
C)  40,000
D)  80,000E) B) and C)
F) A) and C)

Question 16

What name do economists have for a cost that has already been committed and cannot be recovered?

Accepted Answer

Economists...

Question 17

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm

Accepted Answer

A)  will be earning positive economic profit at the profit-maximizing quantity.
B)  will have economic profit less than zero at the profit-maximizing quantity.
C)  will have zero economic profit at the profit-maximizing quantity.
D)  should increase the quantity of production to increase profit.E) All of the above
F) B) and C)

Question 18

A key characteristic of a competitive market is that

Accepted Answer

A)  government antitrust laws regulate competition.
B)  producers sell nearly identical products.
C)  firms minimize total costs.
D)  firms have price setting power.E) A) and C)
F) None of the above

Question 19

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Accepted Answer

Long-run p...

Question 20

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) A) and B)
F) B) and C)

Exam 14: Firms in Competitive Markets

When a profit-maximizing firm is earning profits, those profits can be identified by

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

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct Answer
verified

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Correct Answer
verified

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

Correct Answer
verified

A key characteristic of a competitive market is that

Correct Answer
verified

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

Correct Answer
verified

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the total revenue from selling 5 units?

Correct Answer
verified

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct Answer
verified

When firms are neither entering nor exiting a perfectly competitive market,

Correct Answer
verified

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the average revenue is

Correct Answer
verified

What name do economists have for a cost that has already been committed and cannot be recovered?

Correct Answer
verified
Economists...
View Answer

Correct Answer
verified

Why does a firm in a competitive industry charge the market price?

Correct Answer
verified

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

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will earn positive profits in the short run if the market price

Correct Answer
verified

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Correct Answer
verified
Long-run p...
View Answer

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm

Correct Answer
verified

A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs.

Correct Answer
verified

The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct Answer
verified

Exam 14: Firms in Competitive Markets

When a profit-maximizing firm is earning profits, those profits can be identified by

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

Suppose a firm in each of the two markets listed below were to increase its price by 15 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not?

Correct AnswerverifiedShow Answer

Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A key characteristic of a competitive market is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14. What is the total revenue from selling 5 units?

Correct AnswerverifiedShow Answer

Figure 14-9 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-9. Which line segment best reflects the long-run supply curve for this firm?

Correct AnswerverifiedShow Answer

When firms are neither entering nor exiting a perfectly competitive market,

Correct AnswerverifiedShow Answer

Table 14-4 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-4. For this firm, the average revenue is

Correct AnswerverifiedShow Answer

What name do economists have for a cost that has already been committed and cannot be recovered?

Correct AnswerverifiedEconomists...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Why does a firm in a competitive industry charge the market price?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. Firms will earn positive profits in the short run if the market price

Correct AnswerverifiedShow Answer

In the long run with free entry and exit and identical firms, are competitive firms' profits positive, zero, or negative?

Correct AnswerverifiedLong-run p...View AnswerShow Answer

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm

Correct AnswerverifiedShow Answer

A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs.

Correct AnswerverifiedShow Answer

The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct AnswerverifiedShow Answer

Correct Answer
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Economists...
View Answer

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Long-run p...
View Answer

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Correct Answer
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Correct Answer
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