Exam 14: Firms in Competitive Markets

A) at the point where average variable cost equals marginal cost.
B) at the minimum point on their marginal cost curves.
C) at their efficient scale.
D) where accounting profit is zero.

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A) experience losses but will continue to produce rubber bands.
B) shut down.
C) earn both economic and accounting profits.
D) raise the price of its product.

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False

A) zero accounting profits.
B) zero economic profits.
C) positive economic profits.
D) Both a and b are correct.

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A) -$150,000
B) -$50,000
C) -$25,000
D) $25,000

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C

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True

A) lower the market price.
B) necessarily raise the costs for the firms that remain in the market.
C) raise the profits of the firms that remain in the market.
D) shift the demand for the product to the left.

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For a competitive firm, price ...

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A) Because demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output.
B) If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units.
C) By lowering its price below the market price, the firm will benefit from selling more units at the lower price than it could have sold by charging the market price.
D) For all firms, average revenue equals the price of the good.

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A) For all firms, marginal revenue equals the price of the good.
B) Only for competitive firms does average revenue equal the price of the good.
C) Marginal revenue can be calculated as total revenue divided by the quantity sold.
D) Only for competitive firms does average revenue equal marginal revenue.

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A) Points W, Y, and Z represent both short-run and long-run equilibria.
B) Points W, Y, Z, and X represent short-run equilibria.
C) Points W, Y, and Z represent long-run equilibria.
D) Points W and Z represent long-run equilibria.

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A) total revenue exceeds total cost.
B) the price exceeds average total cost.
C) average total cost exceeds the price.
D) Both a and b are correct.

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A) marginal revenue curve, but only the portion where marginal revenue exceeds marginal cost.
B) marginal cost curve.
C) marginal cost curve, but only the portion above the minimum of average total cost.
D) marginal cost curve, but only the portion above the minimum of average variable cost.

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A) total revenue exceeds total cost.
B) the price exceeds average total cost.
C) the firm can earn economic profits.
D) All of the above are correct.

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A) a small number of sellers.
B) a large number of buyers and a small number of sellers.
C) a similar product.
D) significant advertising by firms to promote their products.

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A) can sell all he wants at the going price, so he has little reason to charge less.
B) will lose all his customers to other sellers if he raises his price.
C) considers the market price to be a "take it or leave it" price.
D) All of the above are correct.

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A) There are many buyers and many sellers in the market.
B) Because of firm location or product differences, some firms can charge a higher price than other firms and still maintain their sales volume.
C) Price and average revenue are equal.
D) Price and marginal revenue are equal.

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