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Exam 14: Firms in Competitive Markets

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Question 51

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Profit-maximizing firms enter a competitive market when existing firms in that market have

A) total revenues that exceed fixed costs.
B) total revenues that exceed total variable costs.
C) average total costs that exceed average revenue.
D) average total costs less than market price.

E) All of the above
F) B) and C)

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Question 52

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In competitive markets,firms that raise their prices are typically rewarded with larger profits.

A) True
B) False

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Question 53

Multiple Choice

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If there is an increase in market demand in a perfectly competitive market,then in the short run prices will

Which of the following firms is the closest to being a perfectly competitive firm?

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

Table 14-5 -Refer to Table 14-5.If the firm finds that its marginal cost is $5,it should

Figure 14-4 -Refer to Figure 14-4.In the short run,if the market price is higher than P1 but less than P4,individual firms in a competitive industry will earn

Table 14-5 -Refer to Table 14-5.If the firm finds that its marginal cost is $11,it should

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets.Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior.

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

A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin.

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

Suppose that firms in each of the two markets listed below were to increase their prices by 20 percent.Which pair represents the example where customers would decrease their quantity purchased dramatically in one market and only slightly in the other market due to differences in market structure?

Which of the following represents the firm's long-run condition for exiting a market?

The competitive firm's short-run supply curve is its

The entry of new firms into a competitive market will

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its variable costs.

Scenario 14-2 Assume a certain firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $20 and its average total cost equals $25.The firm sells its output for $30 per unit. -Refer to Scenario 14-2.At Q = 999,the firm's profits equal

Consider a competitive market with 50 identical firms.Suppose the market demand is given by the equation Q^D = 200 - 10P and the market supply is given by the equation Q^S = 10P.In addition,suppose the following table shows the marginal cost of production for various levels of output for firms in this market. How many units should a firm in this market produce to maximize profit?