Question 1

Cold Duck Airlines flies between Tacoma and Portland.The company leases planes on a year-long contract at a cost that averages $600 per flight.Other costs (fuel,flight attendants,etc.) amount to $550 per flight.Currently,Cold Duck's revenues are $1,000 per flight.All prices and costs are expected to continue at their present levels.If it wants to maximize profit,Cold Duck Airlines should

Accepted Answer

A)   drop the flight immediately.
B)   continue the flight.
C)   continue flying until the lease expires and then drop the run.
D)   drop the flight now but renew the lease if conditions improve.E) A) and D)
F) A) and C)

Question 2

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
 
-Refer to Figure 14-1.The firm will earn a negative economic profit but remain in business in the short run if the market price is

Accepted Answer

A)   above $6.30 but less than $8.
B)   above $6.30.
C)   less than $6.30 but more than $4.50.
D)   less than $4.50.E) B) and C)
F) A) and C)

Question 5

Which of the following is a characteristic of a competitive market?

Accepted Answer

A)   There are many buyers but few sellers.
B)   Firms sell differentiated products.
C)   There are many barriers to entry.
D)   Buyers and sellers are price takers.E) B) and D)
F) C) and D)

Question 6

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-5.When market price is P2,a profit-maximizing firm's losses can be represented by the area

Accepted Answer

A)   (P4 - P2)  * Q2.
B)   (P2 - P1)  * (Q2-Q1) .
C)   At a market price of P2, the firm earns profits, not losses.
D)   At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.E) A) and B)
F) All of the above

Question 7

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14,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)   marginal revenue is lower than it was previously.
B)   marginal cost is lower than it was previously.
C)   quantity of output is higher than it was previously.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 8

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

Question 9

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-6.Firms will be encouraged to enter this market for all prices that exceed

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 10

In the long run,a firm will enter a competitive industry if

Accepted Answer

A)   total revenue exceeds total cost.
B)   the price exceeds average total cost.
C)   the firm can earn economic profits.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 11

When price is greater than marginal cost for a firm in a competitive market,

Accepted Answer

A)   marginal cost must be falling.
B)   the firm must be minimizing its losses.
C)   there are opportunities to increase profit by increasing production.
D)   the firm should decrease output to maximize profit.E) A) and B)
F) None of the above

Question 12

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

Question 13

Table 14-12
Bill's Birdhouses
 
-Refer to Table 14-12.At what quantity does Bill maximize profits?

Accepted Answer

A)   3
B)   6
C)   7
D)   8E) All of the above
F) None of the above

Question 14

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Accepted Answer

Average revenue is total revenue divided...

Question 15

Figure 14-8
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Accepted Answer

A)   ABCD.
B)   AB.
C)   CD.
D)   None of the above is correct.E) A) and D)
F) C) and D)

Question 16

Table 14-1
 
-Refer to Table 14-1.The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Accepted Answer

A)   monopoly.
B)   concentrated market.
C)   competitive market.
D)   strategic market.E) A) and B)
F) A) and C)

Question 17

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

Accepted Answer

A)   increase the firm's total revenue by $20.
B)   increase the firm's total cost by $22.
C)   decrease the firm's profit by $2.
D)   increase the firm's average variable cost by $0.44.E) B) and D)
F) C) and D)

Question 18

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Accepted Answer

A)   $90.
B)   $80.
C)   $50.
D)   $40.E) A) and B)
F) A) and C)

Question 19

In a competitive market,firms are unable to differentiate their product from that of other producers.

Accepted Answer

A) True 
 B)False

Question 20

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

Accepted Answer

A)   is horizontal and equal to the minimum of long-run marginal cost for each firm.
B)   must slope downward.
C)   must slope upward.
D)   is horizontal and equal to the minimum of long-run average cost for each firm.E) A) and C)
F) None of the above

Exam 14: Firms in Competitive Markets.

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Correct Answer
verified

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

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

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm will earn a negative economic profit but remain in business in the short run if the market price is

Correct Answer
verified

Table 14-1 -Refer to Table 14-1.The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Correct Answer
verified

When price is greater than marginal cost for a firm in a competitive market,

Correct Answer
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Correct Answer
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If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

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

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Correct Answer
verified

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct Answer
verified
Average revenue is total revenue divided...
View Answer

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.When market price is P2,a profit-maximizing firm's losses can be represented by the area

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 be encouraged to enter this market for all prices that exceed

Correct Answer
verified

In the long run,a firm will enter a competitive industry if

Correct Answer
verified

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

Correct Answer
verified

In a competitive market,firms are unable to differentiate their product from that of other producers.

Correct Answer
verified

Which of the following is a characteristic of a competitive market?

Correct Answer
verified

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

Correct Answer
verified

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Correct Answer
verified

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.At what quantity does Bill maximize profits?

Correct Answer
verified

Exam 14: Firms in Competitive Markets.

A firm operating in a perfectly competitive market earns zero economic profit in the long run but remains in business because the firm's revenues cover the business owners' opportunity costs.

Correct AnswerverifiedShow Answer

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit.Then,the price rises to $14,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,its

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

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm will earn a negative economic profit but remain in business in the short run if the market price is

Correct AnswerverifiedShow Answer

Table 14-1 -Refer to Table 14-1.The price and quantity relationship in the table is most likely a demand curve faced by a firm in a

Correct AnswerverifiedShow Answer

When price is greater than marginal cost for a firm in a competitive market,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If all existing firms and all potential firms have the same cost curves,there are no inputs in limited quantities,and the market is characterized by free entry and exit,then the long-run market supply curve

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

A firm's marginal cost has a minimum value of $50,its average variable cost has a minimum value of $80,and its average total cost has a minimum value of $90.Then the firm will shut down once the price of its product falls below

Correct AnswerverifiedShow Answer

Describe the difference between average revenue and marginal revenue.Why are both of these revenue measures important to a profit-maximizing firm?

Correct AnswerverifiedAverage revenue is total revenue divided...View AnswerShow Answer

Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-5.When market price is P2,a profit-maximizing firm's losses can be represented by the area

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 be encouraged to enter this market for all prices that exceed

Correct AnswerverifiedShow Answer

In the long run,a firm will enter a competitive industry if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a competitive market,firms are unable to differentiate their product from that of other producers.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a competitive market?

Correct AnswerverifiedShow Answer

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Production of the 50th unit of output does not necessarily

Correct AnswerverifiedShow Answer

Figure 14-8 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-8.The firm will exit the market for any price on the line segment

Correct AnswerverifiedShow Answer

Table 14-12 Bill's Birdhouses -Refer to Table 14-12.At what quantity does Bill maximize profits?

Correct AnswerverifiedShow Answer

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Average revenue is total revenue divided...
View Answer

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