AP Micro Ch 14

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if

price is less than average total cost.

Refer to Table 14-8. The firm will produce a quantity greater than 3 because at 3 units of output, marginal cost

is less than marginal revenue.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs.

A profit-maximizing firm will shut down in the short run when

price is less than average variable cost.

Refer to Figure 14-1. If the market price is $6.30, the firm will earn

zero economic profits in the short run.

Refer to Figure 14-5. In the short run, if the market price is P4, individual firms in a competitive industry will earn

zero profits.

A key characteristic of a competitive market is that

producers sell nearly identical products.

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

$12.

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, total revenue will be

$2,400.

Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above

$4.50.

Refer to Figure 14-5. When market price is P7, a profit-maximizing firm's short-run profits can be represented by the area figure 14-5

(P7 - P5) × Q3.

Refer to Table 14-8. In order to maximize profits, the firm will produce Quantity Total Revenue Total Cost 0 $0 $3 1 $6 $5 2 $12 $8 3 $18 $12 4 $24 $17 5 $30 $23 6 $36 $30 7 $42 $38

5 units of output because marginal revenue equals marginal cost.

Refer to Table 14-8. The firm should not produce an output level beyond Quantity Total Revenue Total Cost 0 $0 $3 1 $6 $5 2 $12 $8 3 $18 $12 4 $24 $17 5 $30 $23 6 $36 $30 7 $42 $38

5 units.

Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2. Which of the following could explain this observation?

An increase in market demand from D0 to D1.

Refer to Figure 14-14. Suppose a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2. Which of the following could explain this observation? figure 14-14

An increase in market demand from D0 to D1.

Refer to Figure 14-5. When market price is P2, a profit-maximizing firm's losses can be represented by the area

At a market price of P2 the firm has losses, but the reference points in the figure don't identify the losses.

Refer to Table 14-1. Over which range of output is average revenue equal to price? quantity Price 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5

Average revenue is equal to price over the entire range of output.

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

Buyers and sellers are price takers.

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

Buyers and sellers are price takers..

Which of the following is not a characteristic of a competitive market?

Entry is limited.

Refer to Table 14-1. If the firm doubles its output from 3 to 6 units, total revenue will quantity Price 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5

increase by exactly $15.

Which of the following is not a characteristic of a perfectly competitive market?

Many firms have market power.

Refer to Table 14-1. Over what range of output is marginal revenue declining? 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5

Marginal revenue is constant over the entire range of output.

Refer to Figure 14-5. Firms would be encouraged to enter this market for all prices that exceed

P4.

Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is not correct?

Point Y is a long-run equilibrium point.

Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b) and that panel (a) illustrates the cost curves facing individual firms. Suppose that demand increases from D0 to D1. Which of the following statements is correct? Figure 14-14

Points W and Z represent long-run equilibria.

Refer to Table 14-7. If the firm is maximizing profit, how much profit is it earning? table 14-7

There is insufficient data to determine the firm's profit.

Firms have difficulty entering the market.

Which of the following is not a characteristic of a perfectly competitive market?

Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is

above $6.30.

Refer to Figure 14-14. Assume that the market starts in equilibrium at point W in panel (b). An increase in demand from D0 to D1 will result in

an eventual increase in the number of firms in the market and a new long-run equilibrium at point Z.

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

average total cost exceeds the price.

Who is a price taker in a competitive market?

both buyers and sellers

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 quantity Price 0 $5 1 $5 2 $5 3 $5 4 $5 5 $5 6 $5 7 $5 8 $5 9 $5

competitive market.

Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners?

continue to operate at 14 units

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

fewer firms in the market.

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

firm's profit-maximizing level of output is less than 100 units.

Competitive markets are characterized by

free entry and exit by firms.

In a competitive market, the actions of any single buyer or seller will

have a negligible impact on the market price.

Refer to Figure 14-14. When the market is in long-run equilibrium at point W in panel (b), the firm represented in panel (a) will

have a zero economic profit.

A firm will shut down in the short run if, for all positive levels of output,

its losses exceed its fixed costs. its total revenue is less than its variable costs. the price of its product is less than its average variable cost. All of the above are correct.*****

Refer to Figure 14-1. The firm should shut down if the market price is

less than $4.50.

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

less than $6.30 but more than $4.50.

Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn

losses but will remain in business.

Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn Figure 14-5

losses but will remain in business.

Refer to Figure 14-1. If the market price is $4.00, the firm will earn

negative economic profits and shut down.

Refer to Figure 14-1. If the market price falls below $4.50, the firm will earn

negative economic profits in the short run and shut down.

Refer to Figure 14-1. If the market price is $5.00, the firm will earn

negative economic profits in the short run but remain in business.

Free entry means that

no legal barriers prevent a firm from entering an industry.

Refer to Figure 14-1. If the market price rises above $6.30, the firm will earn

positive economic profits in the short run.

Refer to Figure 14-5. In the short run,if the market price is higher than P4 but less than P6, individual firms in a competitive industry will earn

positive profits.

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

production of the 100th unit of output increases the firm's profit by $1

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. It follows that the

production of the 100th unit of output increases the firm's profit by $1.

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

total revenue exceeds total cost. the price exceeds average total cost. the firm can earn economic profits. All of the above are correct.****

In the long run, a profit-maximizing firm will choose to exit a market when

total revenue is less than total cost.

A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its

variable costs