11. What will the entry of new rms into a competitive market do to market supply and market prices? a. It will increase market supply and increase market prices. b. It will increase market supply and decrease market prices. c. It will decrease market supply and increase market prices. d. It will decrease market supply and decrease market prices. 12. In calculating accounting prot, what do accountants typically exclude? a. longrun costs b. sunk costs c. explicit costs of production d. opportunity costs that do not involve an outflow of money 13. When rms in a perfectly competitive market face the same costs, how must they be operating in the long run? a. under diseconomies of scale h. under constant return to scale c. at their efcient scale d. under economies of scale (a) (b) Price Price Supply1 MC ATC P2 -.. P2 PA Po Po * Q1 Q2 Quantity Quantity 14. Refer to the above figure. What would likely cause an increase in market supply from Supply0 to Supply1? a existing firms changing their cost structure b. existing firms in the market increasing their level of production beyond Q1 C. the entrance of new firms in the market d. existing firms adding new product lines(I!) 15. Refer to the above gure. Assume that the market starts in equilibrium at point A in panel (b). What will result from an increase in demand from DemandO to Demandl? a. a new market equilibrium at point D b. an eventual increase in the number of rms in the market and a new longrun equilibrium at point C c. rising prices and falling prots for existing rms in the market d. falling prices and falling prots for existing rms in the market (b) 16. Refer to the above gure. If the market starts in equilibrium at point C in panel (b), what will a decrease in demand ultimately lead to in the long run? a. more rms in the industry, but lower levels of production for each rm b. fewer rms in the market, and lower levels of production for each rm c. more rms in the industry, and higher levels of production for each rm d. fewer rms in the market, but higher levels of production for each rm 17. In a perfectly competitive market, when will the process of entry and exit end for rms in the market? a. when price is equal to average variable cost b. when marginal revenue is equal to average variable cost c. when economic prots are zero d. when marginal revenue equals zero 18. Which curve is a rm's short-run supply curve part of? a. ma rginal-revenue b. average-variable-cost c. average-total-cost d. ma rginal-cost 19. In the long run equilibrium of a competitive market with identical rms, what is the relationship between price P, marginal cost MC, and average total cost ATC? a. P>MC and P>ATC b. P>MC and P=ATC c. P=MC and P>ATC d. P=MC and P=ATC 20. A prot-maximizing rm in a competitive market is able to sell its product for 58. At its current level of output the rm's average total cost is $11. Its marginal-cost curve crosses the marginal revenue curve at an output level of 10 units. At that point, what does the rm experience? a. a loss of more than 530 b. a loss of exactly 530 c. a prot of exactly 530 d. a prot of more than $30 21. Which expression is correct for a competitive rm? a. Prot = Total revenue Total variable cost b. Marginal revenue = (Change in total revenue) + (Change in quantity of output) c. Average revenue = Total revenue + Marginal revenue d. Total revenue = Marginal revenue + Average revenue 22. What happens if a competitive rm is currently producing a level of output at which marginal revenue exceeds marginal cost? a. A one-unit increase in output will increase the rm's prot. b. A one-unit decrease in output will increase the rm's prot. c. Total revenue exceeds total cost. d. Total cost exceeds total revenue. 23. When a rm in a competitive market receives $8000 in total revenue, it has a marginal revenue of $20. What is the average revenue, and how many units were sold? a. $5 and 1000 units b. $10 and 500 units c. 520 and 100 units d. 520 and 400 units