Question 1

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the total revenue from selling 4 units?

Accepted Answer

To find the total revenue from selling 4 units, we need to look at the row where the Quantity Sold is 4. The Price per Unit is $80, so the total revenue from selling 4 units is 4*$80 = $320. Therefore, the best choice is B.

Question 2

Mrs.Smith is operating a firm in a competitive market.The market price is $6.50. At her profit-maximizing level of output,her average total cost of production is $7.00 and her average variable cost of production is $6.00.

Accepted Answer

In the short run, Mrs. Smith should continue to operate even though she is earning a loss. This is because her marginal revenue, which is equal to the price in a competitive market like this, is still greater than her average variable cost. By continuing to operate, she can at least cover her variable costs and contribute towards her fixed costs. If she shuts down, she will still have to pay her fixed costs which will result in a greater loss. However, in the long run, Mrs. Smith will need to consider whether it is feasible to stay in business and make changes to reduce her costs or improve her products.

Question 3

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.At what quantity does John's Vineyard maximize profits?

Accepted Answer

The answer of Table 14-4
The following table presents cost and...

Question 4

Competitive firms that earn a loss in the short run should

Accepted Answer

If a competitive firm is earning a loss in the short run, it should shut down if the price (P) is less than the average variable cost (AVC). This is because continuing to produce at a loss will only deepen the losses. By shutting down, the firm would avoid incurring variable costs and be able to minimize their losses. Raising prices or lowering output would not be effective in this scenario as the market is competitive, and the firm has no control over prices.

Question 5

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is John's Vineyard's economic profit at its profit-maximizing output level?

Accepted Answer

John's Vineyard's economic profit is the difference between its total revenue and its total cost. At its profit-maximizing output level, John's Vineyard's total revenue is $200 and its total cost is $85. Therefore, John's Vineyard's economic profit is $200 - $85 = $115.

Question 6

Mrs.Smith operates a business in a competitive market.The current market price is $8.50,and at her profit-maximizing level of production,the average variable cost is $8.00 and the average total cost is $8.25.

Accepted Answer

In the short run, Mrs. Smith should continue to operate as long as she is able to cover her variable costs. In this case, her average variable cost is $8.00, which is less than the market price of $8.50. This means that she is able to cover her variable costs and make a contribution toward her fixed costs. As long as she is able to cover her variable costs, she should continue to operate in the short run.

In the long run, Mrs. Smith should continue to operate as long as she is able to cover her total costs, including her fixed costs. Her average total cost is $8.25, which is less than the market price of $8.50. This means that she is making a small profit, but still enough to cover her fixed costs. As long as she is able to cover her total costs, she should continue to operate in the long run. Therefore, the best choice is C.

Question 7

In a competitive market the current price is $7,and the typical firm in the market has ATC = $7.50 and AVC = $7.15.

Accepted Answer

In the short run, firms will shut down because they are making losses (P < ATC). In the long run, firms will leave the market because there are no profits to be made (P = ATC).

Question 8

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal revenue from selling the 1st unit?

Accepted Answer

The answer of Table 14-4
The following table presents cost and...

Question 9

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

Accepted Answer

In the long run, firms in a competitive market will adjust their production to meet the demand for the product. If a firm is operating in the short run at a price above its average total cost of production, it is earning profits. This, in turn, will attract new firms to enter the market, as they also seek to earn profits. As a result, the market supply will increase, leading to a fall in the market price. This fall in price will result in a decrease in the profits earned by the existing firm. Therefore, all of the above options are possible consequences that the firm should expect in the long run.

Question 10

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

Accepted Answer

In the short run, Davis Golf Course should continue to stay open, as shutting down would incur a higher cost. The total revenue generated ($145,000) covers the total variable cost ($130,000), and still leaves some contribution towards the total fixed cost ($75,000). Therefore, the golf course can continue to operate and cover some of its fixed costs. It might not be making an economic profit, but it is able to cover its variable costs and make some contribution to fixed costs.

Question 11

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal cost of the 8th unit?

Accepted Answer

The marginal cost is the additional cost incurred by producing one more unit. The cost of the 8th unit is $120.

Question 12

You purchase a $30,nonrefundable ticket to a play at a local theater.Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show.Alternatively you could leave the theater and go home and watch TV or read a book.You place an $8 value on watching TV and a $6 value on reading a book.

Accepted Answer

The answer of You purchase a $30,nonrefundable ticket to a...

Question 13

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

Accepted Answer

The economic profit is calculated as (Price - Average Cost) * Quantity. Given the economic profit is $240, average cost is $5, and quantity is 40, we can set up the equation: (P - 5) * 40 = 240. Solving for P gives P = 11.

Question 14

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Accepted Answer

Economic profit per unit is calculated as price minus average total cost (ATC). Given the price is $8 and ATC is $6, the economic profit per unit is $8 - $6 = $2.

Question 15

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the total revenue from selling 7 units?

Accepted Answer

The answer of Table 14-4
The following table presents cost and...

Question 16

Consider a competitive market with 50 identical firms.Suppose the market demand is given by the equation Qᴰ = 200 - 10P and the market supply is given by the equation Qˢ = 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?

Accepted Answer

The answer of Consider a competitive market with 50 identical...

Question 17

When determining whether to shutdown in the short run,a competitive firm should

Accepted Answer

The answer of When determining whether to shutdown in the...

Question 18

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal revenue from selling the 5th unit?

Accepted Answer

Marginal revenue is the change in total revenue from selling one more unit. In this case, the marginal revenue from selling the 5th unit is $80.

Question 19

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the marginal cost of the 5th unit?

Accepted Answer

The marginal cost of the 5th unit is $68, which is the difference between the total cost of producing 5 units and the total cost of producing 4 units.

Question 20

Table 14-4
The following table presents cost and revenue information for John's Vineyard.
 
-Refer to Table 14-4.What is the average revenue when 4 units are sold?

Accepted Answer

The average revenue when 4 units are sold is $80. This is calculated by dividing the total revenue of $320 by the number of units sold, which is 4.

Quiz 14: Firms in Competitive Markets

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the total revenue from selling 4 units?

Mrs.Smith is operating a firm in a competitive market.The market price is $6.50. At her profit-maximizing level of output,her average total cost of production is $7.00 and her average variable cost of production is $6.00.

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.At what quantity does John's Vineyard maximize profits?

Competitive firms that earn a loss in the short run should

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is John's Vineyard's economic profit at its profit-maximizing output level?

Mrs.Smith operates a business in a competitive market.The current market price is $8.50,and at her profit-maximizing level of production,the average variable cost is $8.00 and the average total cost is $8.25.

In a competitive market the current price is $7,and the typical firm in the market has ATC = $7.50 and AVC = $7.15.

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 1st unit?

Suppose a firm operates in the short run at a price above its average total cost of production.In the long run the firm should expect

The accountants hired by Davis Golf Course have determined total fixed cost to be $75,000,total variable cost to be $130,000,and total revenue to be $145,000.Because of this information,in the short run,Davis Golf Course should

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal cost of the 8th unit?

Consider a firm operating in a competitive market.The firm is producing 40 units of output,has an average cost of production equal to $5,and is earning $240 economic profit in the short run.What is the current market price?

In a competitive market the price is $8.A typical firm in the market has ATC = $6,AVC = $5,and MC = $8.How much economic profit is the firm earning in the short run?

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the total revenue from selling 7 units?

When determining whether to shutdown in the short run,a competitive firm should

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal revenue from selling the 5th unit?

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the marginal cost of the 5th unit?

Table 14-4 The following table presents cost and revenue information for John's Vineyard. -Refer to Table 14-4.What is the average revenue when 4 units are sold?