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Scenario 14-1. A competitive firm sells its output for $20 per unit. When the firm produces 200 units of output, average variable cost is $16, marginal cost is $18, and average total cost is $23. -Refer to Scenario 14-1. Compare the firm's profit or loss at 200 units of output with its profit or loss if it were to shut down.

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In the transition from the short run to the long run, the number of firms in a competitive industry is


A) fixed.
B) increasing at a constant rate.
C) decreasing.
D) able to adjust to market conditions.

E) A) and C)
F) B) and D)

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A sunk cost is one that


A) changes as the level of output changes in the short run.
B) was paid in the past and will not change regardless of the present decision.
C) should determine the rational course of action in the future.
D) has the most impact on profit-making decisions.

E) B) and C)
F) None of the above

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In a perfectly competitive market,


A) no one seller can influence the price of the product.
B) price exceeds marginal revenue for each unit sold.
C) average revenue exceeds marginal revenue for each unit sold.
D) All of the above are correct.

E) A) and B)
F) A) and C)

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Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces A) 2 units. B) 3 units. C) 4 units. D) 5 units. -Refer to Table 14-11. Marginal revenue equals marginal cost when the firm produces


A) 2 units.
B) 3 units.
C) 4 units.
D) 5 units.

E) A) and B)
F) A) and C)

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Table 14-5 The table represents a demand curve faced by a firm in a competitive market. Table 14-5 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-5. For this firm, the price of the product is A) $9. B) $11. C) $13. D) $15. -Refer to Table 14-5. For this firm, the price of the product is


A) $9.
B) $11.
C) $13.
D) $15.

E) A) and B)
F) A) and C)

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In the short run for a particular market, there are 300 firms. Each firm has a marginal cost of $30 when it produces 200 units of output. $30 is above every firm's average variable cost. One point on the market supply curve is


A) quantity = 300; price = $30.
B) quantity = 600,000; price = $90,000.
C) quantity = 100,000; price = $30.
D) quantity = 60,000; price = $30.

E) A) and B)
F) None of the above

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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


A) marginal revenue is lower than it was previously.
B) marginal cost is lower than it was previously.
C) quantity of output is higher than it was previously.
D) All of the above are correct.

E) B) and C)
F) A) and B)

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Table 14-12 Bill's Birdhouses Table 14-12 Bill's Birdhouses -Refer to Table 14-12. What is the marginal cost of the 5th unit? A) $55 B) $60 C) $68 D) $80 -Refer to Table 14-12. What is the marginal cost of the 5th unit?


A) $55
B) $60
C) $68
D) $80

E) All of the above
F) None of the above

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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run? A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. D) Because the price is below the firm's average variable costs, the firms will shut down. -Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?


A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
D) Because the price is below the firm's average variable costs, the firms will shut down.

E) A) and B)
F) A) and C)

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Winona's Fudge Shoppe is maximizing profits by producing 1,000 pounds of fudge per day. If Winona's fixed costs unexpectedly increase and the market price remains constant, then the short run profit-maximizing level of output


A) is less than 1,000 pounds.
B) is still 1,000 pounds.
C) is more than 1,000 pounds.
D) becomes zero.

E) None of the above
F) A) and D)

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Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has taken in $3,500 in monthly revenue. In the short run, Susan should


A) shut down her business, and in the long run she should exit the industry.
B) continue to operate her business, but in the long run she should exit the industry.
C) continue to operate her business, but in the long run she will probably face competition from newly entering firms.
D) continue to operate her business, and she is also in long-run equilibrium.

E) None of the above
F) All of the above

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The idea of "spilt milk" is associated with what type of cost?

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The idea of "spilt m...

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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3. If the market price is $10, what is the firm's total cost? A) $15 B) $30 C) $35 D) $50 -Refer to Figure 14-3. If the market price is $10, what is the firm's total cost?


A) $15
B) $30
C) $35
D) $50

E) A) and B)
F) B) and D)

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​Table 14-16 The table represents the demand information for a firm in a competitive market. ​Table 14-16 The table represents the demand information for a firm in a competitive market. ​ -​Refer to Table 14-16. For this firm, marginal revenue at an output of 10 units is A) ​$15. B) ​$150. C) ​$1500. D) ​$0. ​ -​Refer to Table 14-16. For this firm, marginal revenue at an output of 10 units is


A) ​$15.
B) ​$150.
C) ​$1500.
D) ​$0.

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

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Figure 14-11 Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve? A) A only B) A and C only C) B only D) B and D only -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve? Figure 14-11 -Refer to Figure 14-11. The figure above is for a firm operating in a competitive industry. If there were four identical firms in the industry, which of the following price-quantity combinations would be on the market supply curve? A) A only B) A and C only C) B only D) B and D only


A) A only
B) A and C only
C) B only
D) B and D only

E) B) and C)
F) A) and C)

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Figure 14-7 Figure 14-7 -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is A) $80 at Q = 270. B) $100 at Q = 322. C) $175 at Q = 515. D) None of the above are correct. -Refer to Figure 14-7. Let Q represent the quantity of output and suppose the price of the good is $125. Then marginal revenue is


A) $80 at Q = 270.
B) $100 at Q = 322.
C) $175 at Q = 515.
D) None of the above are correct.

E) None of the above
F) A) and B)

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Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run? A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry. B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry. C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry. D) Because the price is below the firm's average variable costs, the firms will shut down. -Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run?


A) Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
B) Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
C) Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
D) Because the price is below the firm's average variable costs, the firms will shut down.

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

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A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a


A) profit of more than $27.
B) profit of exactly $27.
C) loss of more than $27.
D) loss of exactly $27.

E) B) and C)
F) A) and C)

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Scenario 14-4 The information below applies to a competitive firm that sells its output for $40 per unit. • When the firm produces and sells 150 units of output, its average total cost is $24.50. • When the firm produces and sells 151 units of output, its average total cost is $24.55. -Refer to Scenario 14-4. Suppose the firm is producing 150 units of output and its fixed cost is $975. Then its variable cost amounts to


A) $2,360.25.
B) $2,500.00.
C) $2,612.75.
D) $2,700.00.

E) A) and B)
F) B) and D)

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