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| 1. Refer to Table 14-1. The price and quantity relationship in the table is most likely that faced by a firm in a |
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| 2. Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will |
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| b. increase by exactly $39. |
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| 3. When firms are said to be price takers, it implies that if a firm raises its price, |
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| a. buyers will go elsewhere. |
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| 4. Which of the following statements best reflects a price-taking firm? |
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| a. If the firm were to charge more than the going price, it would sell none of its goods. |
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| Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? |
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| Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue |
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| a. no single buyer or seller can influence the price of the product. |
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| 8. Which of the following expressions is correct for a competitive firm? |
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| a. Profit = (Quantity of output) x (Price - Average total cost) |
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| 9. For a competitive firm, |
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| d. Average revenue = Marginal revenue. |
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| 9. For a competitive firm, |
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| d. Average revenue = Marginal revenue. |
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| 10. When a competitive firm triples the amount of output it sells, |
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| a. its total revenue triples. |
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| Refer to Table 14-2. Consumers are willing to pay $120 per unit of port wine. What is the average revenue when 4 units are sold? |
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| 12. Refer to Table 14-3. If the firm finds that its marginal cost is $11, it should |
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| d. reduce production to increase profit. |
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| 13. Refer to Table 14-3. If the firm finds that its marginal cost is $5, it should |
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| b. increase production to maximize profit. |
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| marginal cost exceeds marginal revenue, the firm |
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| d. may still be earning a positive accounting profit. |
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| 15. When marginal revenue equals marginal cost, the firm |
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| b. may be minimizing its losses, rather than maximizing its profit. |
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| 16. When calculating marginal cost, what must the firm know? |
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| 17. Refer to Figure 14-1. When price falls from P3 to P1, the firm finds that |
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| d. it should shut down immediately. |
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| 18. When price is greater than marginal cost for a firm in a competitive market, |
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| c. there are opportunities to increase profit by increasing production. |
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| short-run supply curve for a firm in a perfectly competitive market is |
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| d. the portion of its marginal cost curve that lies above its average variable cost. |
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| 20. When total revenue is less than variable costs, a firm in a competitive market will |
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| 20. When total revenue is less than variable costs, a firm in a competitive market will |
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| 21. When price is below average variable cost, a firm in a competitive market will |
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| a. shut down and incur fixed costs. |
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| 22. Refer to Figure 14-3. Which line segment best reflects the long-run supply curve for this firm? |
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| 23. When fixed costs are ignored because they are irrelevant to a business's production decision, they are called |
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| 24. When profit-maximizing firms in competitive markets are earning profits, |
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| c. new firms will enter the market. |
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| 25. Profit-maximizing firms enter a competitive market when, for existing firms in that market, |
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| d. price exceeds average total cost. |
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| When a profit-maximizing competitive firm finds itself minimizing losses because it is unable to earn a positive profit, this task is accomplished by producing the quantity at which price is equal to |
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| a competitive firm's short-run supply curve is part of which of the following curves? |
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| By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be |
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| b. maximization of profit. |
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| the long run, a profit-maximizing firm will choose to exit a market when |
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| d. total revenue is less than total cost. |
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| 30. A 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, which of the following statements is correct?competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price |
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| c. The firm's quantity of output is higher than it was previously. |
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| Suppose you bought a ticket to a football game for $30, and that you place a $35 value on seeing the game. If you lose the ticket, then what is the maximum price you should pay for another ticket? |
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| 32. The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above average |
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| If the market price is $8, how many units should the firm produce to maximize profit? TABLE |
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| 34. The competitive firm's short-run supply curve |
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is its marginal cost curve, but only the portion above the minimum of average variable
cost. |
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| 35. Which of the following could be used to calculate the profit for a firm? |
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| 36. Which of the following represents the firm's long-run condition for exiting a market? |
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| Mrs. Smith operates a business in a competitive market. The current market price is $8.50, and at her profit-maximizing level of production, the average variable cost is $8.00 and the average total cost is $8.25. |
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| c. Mrs. Smith should continue to operate in both the short run and long run. |
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| 38. Refer to Table 14-4. What is the marginal revenue from selling the 1st unit? |
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| 39. Refer to Table 14-4. What is the marginal revenue from selling the 5th unit? |
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| 40. Refer to Table 14-4. At what quantity does John’s Vineyard maximize profits? |
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| Refer to Table 14-5. This table provides information on a firm’s output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do? |
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| c. Continue to operate at 14 units. |
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| Refer to Table 14-5. This table provides information on a firm’s output, marginal revenue, and marginal cost for a firm. If the firm is maximizing profit, how much profit is it earning? |
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| d. There is insufficient data to determine the firms profit. |
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| if there is an increase in market demand in a perfectly competitive market, then in the short run |
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| b. was paid in the past and will not change regardless of the present decision. |
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| Refer to Figure 14-6. If there are 200 identical firms in this market, what level of output will be supplied to the market when price is $1.00? |
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| 46. Entry into a market by new firms will |
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| a. increase the supply of the good. |
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| Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run, |
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| c. price will fall below average total cost for some firms. |
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| Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In long-run equilibrium, market price |
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| b. is determined by the minimum point on the firms' average total cost curve. |
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| 49. When market conditions in a competitive industry are such that firms cannot cover their production costs, then |
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some firms will exit the market, causing prices to rise until the remaining firms can cover
their production costs. |
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| in a perfectly competitive market, the horizontal sum of all the individual firms' supply curves is |
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| c. the market supply curve. |
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