Microeconomics Chapter 14
(i) and (ii) only
Comparing marginal revenue to marginal cost
6 units
At what quantity will Bob maximize his profit?
Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.This answer is correct.
Refer to Figure 14-13. If the price is P2 in the short run, what will happen in the long run?
should shut down immediately.
Refer to Figure 14-4. When price falls from P3 to P1, the firm finds that it
80,000
Refer to Figure 14-9. If there are 400 identical firms in this market, what is the value of Q2?
60,000
Refer to Figure 14-9. If there are 600 identical firms in this market, what is the value of Q1?
$5,000.
Refer to Scenario 14-2. At Q = 1,000, the firm's profits equal
$7.
Refer to Table 14-10. This firm should continue to produce and sell units as long as the marginal cost of production is less than or equal to
is less than marginal revenue.
Refer to Table 14-8. The firm will produce a quantity greater than 4 because at 4 units of output, marginal cost
increase production to maximize profit.
Refer to Table 14-9. If the firm's marginal cost is $5, it should
some resources are available only in limited quantities.
The long-run supply curve for a competitive industry may be upward sloping if
Only for competitive firms does average revenue equal marginal revenue.
Which of the following statements is correct?
both buyers and sellers
Who is a price taker in a competitive market?
increase the firm's average variable cost by $0.44.
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
quantity of output is higher than it was previously.
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
sell all he wants at the going price, so he has little reason to charge less.
A seller in a competitive market can Selected:
some firms will exit from the market.
Carol owns a running shoe store that operates in a perfectly competitive market. If running shoes sell for $120 per pair and the average total cost per pair of shoes is $125 at the profit-maximizing output level, then in the long run
continue flying until the lease expires and then drop the run.
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
supply of the good.
Entry into a market by new firms will increase the
decreasing output would increase the firm's profit.
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then
exactly triple.
If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will
produce 5 units of output in the short run and face competition from new market entrants in the long run.
If the market price is $16, this firm will
6 units
If the market price is $8, how many units of output should the firm produce to maximize profit?
many other sellers are offering a product that is essentially identical.
In a competitive market, no single producer can influence the market price because
have a negligible impact on the market price.
In a competitive market, the actions of any single buyer or seller will
All of the above are correct.
In a long-run equilibrium, the marginal firm has
average total cost of production.
Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible
210,000
Refer to Figure 14-10. If there are 700 identical firms in this market, what is the value of Q1?
(i) and (iii) only
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?
32
Suppose a firm in a competitive market produces and sells 8 units of output and has a marginal revenue of $8.00. What would be the firm's total revenue if it instead produced and sold 4 units of output?
exactly $2.50
Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?
price at which it sells its milk.
The Doris Dairy Farm sells milk to a dairy broker in Prairie du Chien, Wisconsin. Because the market for milk is generally considered to be competitive, the Doris Dairy Farm does not choose the
think at the margin.
The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people
price is below the firm's average variable cost.
When a perfectly competitive firm decides to shut down, it is most likely that
can safely ignore fixed costs when deciding how much output to produce.
When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm
the long-run market supply curve must be horizontal.
When entry and exit behavior of firms in an industry does not affect a firm's cost structure,
Profit = (P - ATC) ´ Q
Which of the following could be used to calculate the profit for a firm?
Buyers and sellers are price takers.
Which of the following is a characteristic of a competitive market?
