Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
10-158
45
5,500
60
5,125
75
4,500
95
4,200
120
3,600
150
2,400
Based on all these data, the equilibrium price of the product in the market will be
264.
Total Product
Total
Fixed Cost
Total
Variable Cost
0
$150
$ 0
1
150
50
2
150
75
3
150
105
4
150
145
5
150
200
6
150
270
7
150
360
8
150
475
9
150
620
10
150
800
The first table shows cost data for a single firm. Now suppose that there are 600 identical firms
in this industry, each with the same cost data.
Suppose, too, that the demand curve for this
industry is as shown in the second table.
10-159
Price
Quantity
Demanded
$20
6,800
30
5,975
45
5,500
60
5,125
75
4,500
95
4,200
120
3,600
150
2,400
When the market is in equilibrium, each of the firms will be producing
265.
Total Product
Total
Fixed Cost
Total
Variable Cost
0
$150
$ 0
1
150
50
2
150
75
3
150
105
4
150
145
5
150
200
6
150
270
7
150
360
8
150
475
9
150
620
10-160
10
150
800
The first table shows cost data for a single firm. Now suppose that there are 600 identical firms
in this industry, each with the same cost data.
Suppose, too, that the demand curve for this
industry is as shown in the second table.
Price
Quantity
Demanded
$20
6,800
30
5,975
45
5,500
60
5,125
75
4,500
95
4,200
120
3,600
150
2,400
At equilibrium, each firm will realize
266.
The firm represented in this diagram, which gives short-run data, is selling under conditions of
267.
The provided graph gives short-run data for a firm. If the product price is P2, the firm will
268.
The provided graph gives short-run data for a firm. Which of the following statements is
correct?
269. In the short run, fixed costs for a profitable competitive firm are
10-164
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. irrelevant in determining the optimal level of output.
270.
If the supply and demand curves in the provided graph represent the market supply and demand
for a purely competitive industry, then the demand
curve that an individual firm in the industry
faces
10-165
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
D i f f i c u lt y :
02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as
its supply curve.
Test Bank: II
Topic:
Marginal Cost and Short-Run Supply
271.
In pure competition, price is determined where the industry
272.
If the market demand for the product increases, in the short run a purely competitive firm
273.
The prices of raw materials increase in a purely competitive industry. This change will
result in a(n)
274.
Technological advance improves productivity in a purely competitive industry. This
change will result in a shift
275.
The resource cost falls in a purely competitive industry. This change will result in a(n)
10-167
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u lt y :
02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as
its supply curve.
Test Bank: II
Topic:
Marginal Cost and Short-Run Supply
276.
Assume that labor is a variable input. The average wage of workers increases in a purely
competitive industry. This change will result in a(n)
277.
Which of the following changes will not affect the market supply or the market demand in
a purely competitive industry?
10-168
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic:
Marginal Cost and Short-Run Supply
278.
A competitive firm faces fixed costs even if it produces zero output. If it starts producing
and selling some output, which of the following would
happen?
True / False Questions
279.
If there are many firms in an industry, then it must be a purely competitive market.
280.
The basic difference between pure competition and monopolistic competition is in the
number of firms in the industry.
10-169
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 10-01 Give the names and summarize the main characteristics of the four
basic market models.
Test Bank: II
Topic:
Four Market Models
281.
Competitive firms are price takers largely because of intensive advertising by their
competitors.
282.
For a purely competitive firm, the demand curve facing it is the same as its marginal
revenue curve.
283.
In pure competition, the industry demand curve is infinitely price elastic.
284.
For an individual firm in pure competition, the firm's average revenue and marginal
revenue at any output level are both equal to the product's price.
285.
If a purely competitive firm is producing a level of output greater than its profit-
maximizing output, then its profits must be negative.
286.
As long as its total revenues are greater than its total costs, a firm will earn positive
economic profits.
287.
If the firm produces an output level below its break-even point, then the firm will earn
negative economic profits.
288.
If a purely competitive firm is producing a level of output where the marginal revenue is
less than the marginal cost, then its profits must be negative.
289.
As long as an additional unit of output yields a marginal revenue larger than its marginal
cost, it will be adding to total profits of the firm.
290.
If MR > MC for a competitive firm, it should reduce its level of output in order to make
MR equal to MC.
10-172
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y :
Keyboard Navigation
Blooms: Understand
D i f f i c u lt y :
02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–
marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: II
Topic:
Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
291.
In the short run, a competitive firm will not produce unless price is at least equal to
average total costs.
292.
In the short run, fixed costs are important in determining a competitive firm's optimal level
of output.
293.
In pure competition, a competitive firm‘s supply curve is that section of its marginal cost
curve above ATC, and at any price below the average cost,
the firm will produce nothing.
10-173
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
D i f f i c u lt y :
02 Medium
Learning Objective: 10-03 Explain how demand is seen by a purely competitive seller.
Test Bank: II
Topic:
Demand as Seen by a Purely Competitive Seller
