Question 1

For any given price, a firm in a competitive market will maximise profit by selecting the level of output in which price intersects the:

Accepted Answer

A)   marginal revenue curve
B)   marginal cost curve
C)   average total cost curve
D)   average variable cost curveE) A) and B)
F) C) and D)

Question 2

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)   shut down
B)   continue to operate as long as average revenue exceeds marginal cost
C)   continue to operate as long as average revenue exceeds average fixed cost
D)   always exit the industryE) All of the above
F) A) and B)

Question 4

A profit-maximising firm in a competitive market will not increase production when average revenue exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

When firms think at the margin and make incremental adjustments to the level of production, they are naturally led to a level of production where:

Accepted Answer

A)   average variable cost exceeds marginal cost
B)   costs are minimised
C)   profit is maximised
D)   total cost is less than average revenueE) B) and C)
F) C) and D)

Question 6

Which of the following statements best reflects the production decision of a profit-maximising firm in a competitive market when price falls below the minimum of average variable cost?

Accepted Answer

A)   the firm will immediately stop production to minimise its losses
B)   the firm will continue to produce to attempt to pay fixed costs
C)   the firm will stop production as soon as it is able to pay its sunk costs
D)   the firm will continue to produce in the short run but will likely exit the market in the long runE) B) and D)
F) A) and B)

Question 7

When business managers of firms in a competitive market observe falling profits, they are likely to infer that the market is characterised by:

Accepted Answer

A)   a violation of conventional market forces
B)   rising prices
C)   too few firms in the market
D)   over-investmentE) A) and B)
F) C) and D)

Question 8

Graph 14-7
  In this graph, 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. Use the graph to answer the following question(s) .
-Refer to Graph 14-7. If there are 30 identical firms in this market, what level of output will be supplied to the market when price is $1.00?

Accepted Answer

A)   300
B)   1000
C)   3000
D)   30 000E) B) and D)
F) A) and D)

Question 9

Marginal adjustments to production end when firms in competitive markets experience a price equal to marginal revenue.

Accepted Answer

A) True 
 B)False

Question 10

It is not possible for the marginal firm in a competitive market to make an economic profit in the long-run.

Accepted Answer

A) True 
 B)False

Question 11

When a forester is making a long-run decision about whether or not to exit an industry, the cost of the land used for the plantation:

Accepted Answer

A)   will be considered as part of the forester's fixed cost
B)   is treated differently than the cost of sawmill
C)   is not considered a sunk cost
D)   will be ignored as irrelevantE) B) and C)
F) None of the above

Question 12

Profit-maximising producers in a competitive market in general, produce output at a point where:

Accepted Answer

A)   marginal cost is decreasing
B)   total sales are maximised
C)   marginal cost is increasing
D)   price is less than marginal revenueE) A) and C)
F) All of the above

Question 13

The Wheeler Wheat Farm sells wheat to a grain broker. Since the market for wheat is generally considered to be competitive, the Wheeler Farm:

Accepted Answer

A)   does not choose the quantity of wheat to produce
B)   does not have any fixed costs of production
C)   is not able to earn an accounting profit
D)   does not choose the price at which it sells its wheatE) A) and C)
F) A) and B)

Question 14

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

Accepted Answer

A)   total cost must exceed total revenue
B)   economic profits must be zero
C)   banks must be unprepared to forgive bad debts
D)   regulations to enter the market must be very onerousE) A) and B)
F) A) and C)

Question 15

Graph 14-9
 
-Refer to Graph 14-9. If the market starts in equilibrium at point C in panel (b) , a decrease in demand will ultimately lead to:

Accepted Answer

A)   more firms in the industry, but lower levels of production for each firm
B)   a new long-run equilibrium at point D in panel (b) 
C)   fewer firms in the market
D)   none of the aboveE) A) and B)
F) C) and D)

Question 16

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Accepted Answer

It could not sell any more of ...

Question 17

In a competitive market, no single producer can influence the market price because:

Accepted Answer

A)   many other sellers are offering a product that is essentially identical
B)   consumers have more influence over the market price than producers do
C)   producers agree not to change the price
D)   government intervention prevents firms from influencing priceE) B) and C)
F) A) and B)

Question 18

Graph 14-3
  This graph depicts the cost structure of a profit-maximising firm in a competitive market. Use the graph to answer the following question(s) .
-Refer to Graph 14-3. If the firm is in a short-run position where P < AVC, it is most likely to be on what segment of its supply curve?

Accepted Answer

A)   BC
B)   CD
C)   DE
D)   none of the aboveE) A) and B)
F) A) and C)

Question 19

In the long run, a competitive market with 1000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Accepted Answer

A) True 
 B)False

Question 20

Explain what it means if a firm in a competitive market is labelled as a price-taker.

Accepted Answer

A price-taker is a firm whose production...

Exam 14: Firms in Competitive Markets

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Correct Answer
verified

Graph 14-9 -Refer to Graph 14-9. If the market starts in equilibrium at point C in panel (b) , a decrease in demand will ultimately lead to:

Correct Answer
verified

When business managers of firms in a competitive market observe falling profits, they are likely to infer that the market is characterised by:

Correct Answer
verified

Correct Answer
verified

Profit-maximising producers in a competitive market in general, produce output at a point where:

Correct Answer
verified

Graph 14-3 This graph depicts the cost structure of a profit-maximising firm in a competitive market. Use the graph to answer the following question(s) . -Refer to Graph 14-3. If the firm is in a short-run position where P < AVC, it is most likely to be on what segment of its supply curve?

Correct Answer
verified

The Wheeler Wheat Farm sells wheat to a grain broker. Since the market for wheat is generally considered to be competitive, the Wheeler Farm:

Correct Answer
verified

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Correct Answer
verified
It could not sell any more of ...
View Answer

When a forester is making a long-run decision about whether or not to exit an industry, the cost of the land used for the plantation:

Correct Answer
verified

Which of the following statements best reflects the production decision of a profit-maximising firm in a competitive market when price falls below the minimum of average variable cost?

Correct Answer
verified

In the long run, a competitive market with 1000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct Answer
verified

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

Correct Answer
verified

When firms think at the margin and make incremental adjustments to the level of production, they are naturally led to a level of production where:

Correct Answer
verified

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

Correct Answer
verified

It is not possible for the marginal firm in a competitive market to make an economic profit in the long-run.

Correct Answer
verified

A profit-maximising firm in a competitive market will not increase production when average revenue exceeds marginal cost.

Correct Answer
verified

In a competitive market, no single producer can influence the market price because:

Correct Answer
verified

Marginal adjustments to production end when firms in competitive markets experience a price equal to marginal revenue.

Correct Answer
verified

For any given price, a firm in a competitive market will maximise profit by selecting the level of output in which price intersects the:

Correct Answer
verified

Explain what it means if a firm in a competitive market is labelled as a price-taker.

Correct Answer
verified
A price-taker is a firm whose production...
View Answer

Exam 14: Firms in Competitive Markets

In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market.

Correct AnswerverifiedShow Answer

Graph 14-9 -Refer to Graph 14-9. If the market starts in equilibrium at point C in panel (b) , a decrease in demand will ultimately lead to:

Correct AnswerverifiedShow Answer

When business managers of firms in a competitive market observe falling profits, they are likely to infer that the market is characterised by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Profit-maximising producers in a competitive market in general, produce output at a point where:

Correct AnswerverifiedShow Answer

Graph 14-3 This graph depicts the cost structure of a profit-maximising firm in a competitive market. Use the graph to answer the following question(s) . -Refer to Graph 14-3. If the firm is in a short-run position where P < AVC, it is most likely to be on what segment of its supply curve?

Correct AnswerverifiedShow Answer

The Wheeler Wheat Farm sells wheat to a grain broker. Since the market for wheat is generally considered to be competitive, the Wheeler Farm:

Correct AnswerverifiedShow Answer

Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?

Correct AnswerverifiedIt could not sell any more of ...View AnswerShow Answer

When a forester is making a long-run decision about whether or not to exit an industry, the cost of the land used for the plantation:

Correct AnswerverifiedShow Answer

Which of the following statements best reflects the production decision of a profit-maximising firm in a competitive market when price falls below the minimum of average variable cost?

Correct AnswerverifiedShow Answer

In the long run, a competitive market with 1000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When firms think at the margin and make incremental adjustments to the level of production, they are naturally led to a level of production where:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

It is not possible for the marginal firm in a competitive market to make an economic profit in the long-run.

Correct AnswerverifiedShow Answer

A profit-maximising firm in a competitive market will not increase production when average revenue exceeds marginal cost.

Correct AnswerverifiedShow Answer

In a competitive market, no single producer can influence the market price because:

Correct AnswerverifiedShow Answer

Marginal adjustments to production end when firms in competitive markets experience a price equal to marginal revenue.

Correct AnswerverifiedShow Answer

For any given price, a firm in a competitive market will maximise profit by selecting the level of output in which price intersects the:

Correct AnswerverifiedShow Answer

Explain what it means if a firm in a competitive market is labelled as a price-taker.

Correct AnswerverifiedA price-taker is a firm whose production...View AnswerShow Answer

Correct Answer
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It could not sell any more of ...
View Answer

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
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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
A price-taker is a firm whose production...
View Answer