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Question;Multiple Choice;Identify the;choice that best completes the statement or answers the question.;1. In a competitive market;the actions of any single buyer or seller will;a. have a negligible impact on;the market price.;b. have little effect on overall;production but will ultimately change final product price.;c. cause a noticeable change in;overall production and a change in final product price.;d. adversely affect the;profitability of more than one firm in the market.;Table;14-1;Quantity Price;1 13;2 13;3 13;4 13;5 13;6 13;7 13;8 13;9 13;2.Refer to Table;14-1.;The price and quantity relationship in the table is most likely that faced by a;firm in a;a. monopoly.;b. concentrated market.;c. competitive market.;d. strategic market.;3. When buyers in a;competitive market take the selling price as given, they are said to be;a. market entrants.;b. monopolists.;c. free riders.;d. price takers.;4. Of the following;characteristics of competitive markets, which are necessary for firms to be;price takers?;(i) There are many sellers.;(ii) Firms can freely enter or;exit the market.;(iii) Goods offered for sale are;largely the same.;a. (i) and (ii) only;b. (i) and (iii) only;c. (ii) only;d. All are necessary.;Name;ID: A;2;5. 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?;a. $5 and 50;b. $5 and 100;c. $10 and 50;d. $10 and 100;6. Total profit for a firm;is calculated as;a. (marginal revenue) minus;(average cost).;b. (average revenue) minus;(average cost).;c. (marginal revenue) minus;(marginal cost).;d. (price minus average cost);times (quantity of output).;7. As a general rule;profit-maximizing producers in a competitive market produce output at a point where;a. marginal cost is increasing.;b. marginal cost is decreasing.;c. marginal revenue is;increasing.;d. price is less than marginal;revenue.;Figure;14-1;The graph below depicts the cost;structure for a firm in a competitive market.;8.Refer to Figure;14-1.;When price falls from P3to P1, the firm;finds that;a. fixed cost is higher at a;production level of Q1than it is at Q3.;b. it should produce Q1;units;of output.;c. it should produce Q3;units;of output.;d. it should shut down;immediately.;9. When price is greater;than marginal cost for a firm in a competitive market;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.;Name;ID: A;3;10. 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;a. sunk cost.;b. average fixed cost.;c. average variable cost.;d. marginal cost.;11. In the long run, a;profit-maximizing firm will choose to exit a market when;a. average fixed cost is falling.;b. variable costs exceed sunk;costs.;c. marginal cost exceeds marginal;revenue at the current level of production.;d. total revenue is less than;total cost.;12. A profit-maximizing firm;in a competitive market is currently producing 200 units of output. It has;average revenue of $9 and average total cost of $7. It follows that the firm's;a. average total cost curve;intersects the marginal cost curve at an output level of less than;200 units. b. average variable;cost curve intersects the marginal cost curve at an output level of less than;200 units.;c. profit is $400.;d. All of the above are correct.;13. A profit-maximizing firm;in a competitive market is able to sell its product for $7. At its current;level of;output, the firm's average total;cost is $10. The firm?s marginal cost curve crosses its marginal revenue curve;at an output level of 9 units.;The firm experiences a;a. profit of more than $27.;b. profit of exactly $27.;c. loss of more than $27.;d. loss of exactly $27.;14. The following table;gives the average total cost of production for various levels of output for a;competitive;firm;Q 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 its profit?;a. 1;b. 2;c. 3;d. 4;Name;ID: A;4;15. Which of the following;represents the firm's short-run condition for shutting down?;a. Shut down if TR < TC;b. Shut down if TR < FC;c. Shut down if P < ATC;d. Shut down if TR < VC;16. 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.;a. Mrs. Smith should shut down;her business in the short run but continue to operate in the;long run..;b. Mrs. Smith should continue to;operate in the short run but shut down in the long run.;c. Mrs. Smith should continue to;operate in both the short run and long run.;d. Mrs. Smith should shut down in;both the short run and long run.;17. In a competitive market;the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC =;$8.;How much economic profit is the;firm earning in the short run?;a. $0 per unit;b. $1 per unit;c. $2 per unit;d. $3 per unit;Figure;14-6;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.;18.Refer to Figure;14-6.;If at a market price of $1.75, 52,500 units of output are supplied to this;market, how;many identical firms are;participating in this market?;a. 75;b. 100;c. 250;d. 300;Name;ID: A;5;19.;If the figure in panel (a) reflects;the long-run equilibrium of a profit-maximizing firm in a competitive;market, the figure in panel (b);most likely reflects;a. perfectly inelastic long-run;market supply.;b. the idea that free entry and;exit of firms in the market lead to only one market price in;the long run.;c. the product of the individual;supply curves of all firms in the market.;d. the fact that zero profits;cannot be sustained in the long run.;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;a. market supply curve is equal;to the sum of marginal cost.;b. supply curve for the market;must slope downward.;c. market supply curve must slope;upward.;d. supply curve for the market is;horizontal and equal to the minimum of long-run average;cost for each firm.;21. When entry and exit;behavior of firms in an industry does not affect a firm's cost structure;a. the long-run market supply;curve must be horizontal.;b. the long-run market supply;curve must be upward-sloping.;c. the long-run market supply;curve must be downward-sloping.;d. we can't tell anything about;the shape of the long-run market supply curve.;22. Suppose a competitive;market is comprised of firms that face identical cost curves. The firms;experience an;increase in demand that results;in positive profits for the firms. Which of the following events are then most;likely to occur?;(i) New firms will enter the;market.;(ii) In the short run, price will;rise, in the long run, price will rise further.;(iii) In the long run, all firms;will be producing at their efficient scale.;a. (i) and (ii) only;b. (i) and (iii) only;c. (ii) and (iii) only;d. (i), (ii) and (iii);Name;ID: A;6;23. Regardless of the cost;structure of firms in a competitive market, in the long run;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.;24. A market might have an;upward-sloping long-run supply curve if;a. firms have different costs.;b. consumers exercise market power;over producers.;c. all factors of production are;essentially available in unlimited supply.;d. the entry of new firms into;the market has no effect on the cost structure of firms in the;market.;25. When new entrants into a;competitive market have higher costs than existing firms;a. accounting profits will be the;primary determinant of entry into the market.;b. sunk costs become an important;determinant of the short-run entry strategy.;c. market price must be rising.;d. all firms will earn zero economic;profit once the new equilibrium is reached.

 

Paper#57949 | Written in 18-Jul-2015

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