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Exam 14: Firms in Competitive Markets

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Question 131

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What is one of the most important determinants of the success of free-market capitalism

A) enlightened governments selecting firms that should not be allowed to exit a market
B) free entry and exit in markets
C) government regulation of market participants
D) having a few large firms rather than thousands of small ones

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Question 132

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A profit-maximizing firm in a competitive market discovers that,at its current level of production,price is greater than marginal cost.What should it do

A) It should shut down.
B) It should reduce its output, but continue operating.
C) It should keep output the same.
D) It should increase its output.

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Question 133

Multiple Choice

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When a perfectly competitive firm makes a decision to shut down,which is most likely

Figure 14-6 -Refer to Figure 14-6.When market price is P4,which area represents a profit-maximizing firm's total cost

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

When a firm in a competitive market receives $5000 in total revenue,it has a marginal revenue of $100.What is the average revenue,and how many units were sold

Scenario 14-2 As part of an estate settlement, Mary received $1 million.She decided to use the money to purchase a small business.If Mary had invested the $1 million in a risk-free bond fund she could have made $80,000 each year.She also quit her $75,000 per year job to devote all of her time to her new business. -Refer to Scenario 14-2.How large would Mary's accounting profits need to be to allow her to attain zero economic profit

The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale.

The market for craft art used in home decoration is a very competitive market.In this market,costs vary since some people work faster than others and have more artistic talent in producing craft art.In this competitive market,what would we expect to observe

Which business decision best describes the irrelevance of sunk costs

When a profit-maximizing firm in a competitive market is unable to generate enough revenue to pay all of its fixed costs,what should it do in the short run

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits.Can this scenario be maintained in the long run Carefully explain your answer.

A firm’s short-run supply curve is given in the following table: The firm is selling its product in a perfectly competitive market, where there are 100 identical firms and the market demand curve is given by the table below: What is the market equilibrium price and quantity?

Consider a competitive market with a large number of identical firms.What happens to the price if the demand increases in this market

Market demand is given as Q_D = 250 - P.Market supply is given as Q_S = 1.5P.Each identical firm has MC = 10Q and ATC = 8Q.What is a firm's profit

At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm’s marginal-cost curve crosses the marginal-revenue curve at an output level of 1000 units. What is the firm’s current profit? What is likely to occur in this market, and why?

Which statement explains the relationship between average revenue,marginal revenue,and price in a competitive market

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

The short-run supply curve in a competitive market must be more elastic than the long-run supply curve.

Market demand is given as Q_D = 40 - P.Market supply is given as Q_S = 3P.Each identical firm has MC = 5Q and ATC = 3Q.What is a firm's profit