Quiz 6 - Practice Questions

Quiz 6 - Practice Questions Dr. Frank Table 14-3 Quantity Total Revenue 0 $0 1 $7 2 $14 3 $21 4 $28 1. Refer to Table 14-3. For a firm operating in a competitive market, the price is a. $0. b. $7. c. $14. d. $21. Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: 2. Refer to Figure 14-1. The firm will earn a positive total profit in the short run if the market price is a. above $6.30. b. less than $6.30 but more than $4.50. c. less than $4.50. d. exactly $6.30. MC ATC AVC 4.5 6.3 1 2 3 4 5 6 7 8 9 10 11 Quantity 1 2 3 4 5 6 7 8 9 10 11 12 13 Price

2 Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: 3. Refer to Figure 14-2. Which of the four prices corresponds to a firm earning zero total profit in the short run? a. P1 b. P2 c. P3 d. P4 Figure 14-5 Suppose a firm operating in a competitive market has the following cost curves: 4. Refer to Figure 14-5 . When market price is P7, a profit-maximizing firm's total profit can be represented by the area a. P7 x Q5. b. P7 x Q3. c. (P7 - P5) x Q3. d. We are unable to determine the firm's profits because the quantity that the firm would produce is not labeled on the graph. MC ATC AVC P1 P3 P4 P2 1 2 3 4 5 6 7 8 Quantity 1 2 3 4 5 6 7 8 9 10 Price MC ATC AVC P7 P4 Q2 Q5 P1 Q1 Q4 P6 P2 Q3 P3 P5 Quantity Price

3 Figure 14-14 5. Refer to Figure 14-14 . Assume that the market starts in equilibrium at point A in panel (b). An increase in demand from D0 to D1 will result in a. a new market equilibrium at point D. b. an eventual increase in the number of firms in the market and a new long-run equilibrium at point C. c. rising prices and falling profits for existing firms in the market. d. falling prices and falling profits for existing firms in the market. 6. Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers. b. Each firm sells a virtually identical product. c. Entry is limited. d. Each firm chooses an output level that maximizes profits. Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: MC ATC P1 Q1 (a) P0 P2 Q2 Quantity Price P1 QA (b) P0 P2 QC QB QD S0 S1 D0 D1 A B C D Quantity Price MC ATC 1 2 3 4 5 6 7 8 Quantity 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Price