Question 1

ABC company will choose to shut down rather than operate as long as:

Accepted Answer

A) it earns the same amount as its expenses. 
B) average fixed cost is less than average variable cost. 
C) total revenue is less than or equal to fixed cost. 
D) total revenue is less than or equal to variable cost. 
A) it earns the same amount as its expenses. 
B) average fixed cost is less than average variable cost. 
C) total revenue is less than or equal to fixed cost. 
D) total revenue is less than or equal to variable cost.

Question 2

-Refer to Figure 9.6.At a market price of $20,this profit maximizing firm would earn $ ________ economic profit.

Accepted Answer

A) 30 
B) 25 
C) 20 
D) 0 
A) 30 
B) 25 
C) 20 
D) 0

Question 3

Assume that Bright Lights Inc.is part of a perfectly competitive market.If Bright Lights Inc.decides to raise their prices for the vanity light fixtures by 20%,which of the following is most likely to result?

Accepted Answer

A) Bright Lights Inc.'s supply curve will shift to the left and they will produce less output. 
B) Bright Lights Inc.will increase the price of their output to compensate for the rise in their rent. 
C) Bright Lights Inc.will earn less profit but will produce the same amount of output. 
D) Bright Lights Inc.will shut down immediately. 
A) Bright Lights Inc.'s supply curve will shift to the left and they will produce less output. 
B) Bright Lights Inc.will increase the price of their output to compensate for the rise in their rent. 
C) Bright Lights Inc.will earn less profit but will produce the same amount of output. 
D) Bright Lights Inc.will shut down immediately.

Question 4

Suppose all firms in an industry are earning positive economic profit.We would expect to find that in the future:

Accepted Answer

A) the market price will fall. 
B) the market supply curve will shift to the left. 
C) there will be no further entry or exit. 
D) the market demand curve will shift to the right. 
A) the market price will fall. 
B) the market supply curve will shift to the left. 
C) there will be no further entry or exit. 
D) the market demand curve will shift to the right.

Question 5

-Refer to Figure 9.3.If this farmer is producing the profit-maximizing level of output,his profit is:

Accepted Answer

A) $0. 
B) $2,800. 
C) $3,000. 
D) $12,000. 
A) $0. 
B) $2,800. 
C) $3,000. 
D) $12,000.

Question 6

Assume that a smartphone maker operates in a perfectly competitive market producing 25,000 smartphones per day.At this output level,price is less than this firm's marginal cost.It follows that producing one more smartphone will cause this firm's:

Accepted Answer

A) total cost to decrease. 
B) profits to increase. 
C) profits to decrease. 
D) profits to remain unchanged. 
A) total cost to decrease. 
B) profits to increase. 
C) profits to decrease. 
D) profits to remain unchanged.

Question 7

With respect to price,in a perfectly competitive market,firms can:

Accepted Answer

A) affect the market price. 
B) set the market price. 
C) take the market price. 
D) negotiate the market price to certain extent. 
A) affect the market price. 
B) set the market price. 
C) take the market price. 
D) negotiate the market price to certain extent.

Question 8

Recall the application of the upward jump and downward slide of wine prices,what can you determine from the price soared for the pinot noir wine grown in the Willamette Valley in Oregon and for other brands the price tripled?

Accepted Answer

A) Wine consumers are not eager to pay high prices. 
B) Producers were unable to increase production in the long run. 
C) In the short run,the supply of wine is inflexible. 
D) The demand is unit elastic. 
A) Wine consumers are not eager to pay high prices. 
B) Producers were unable to increase production in the long run. 
C) In the short run,the supply of wine is inflexible. 
D) The demand is unit elastic.

Question 9

Lentz's,Incorporated sells paper in a perfectly competitive market at a price of $2 per ream.At the profit-maximizing (cost-minimizing)level of output,average total cost is $2.50 per ream and average variable cost is $1.95 per ream.Should the firm continue to operate in the short run? Explain.

Accepted Answer

Yes.The price of the firm's product ($2)

Question 10

-Refer to Table 9.1.If the market price is $90,then for this firm to maximize profits it should produce ________ units of output.

Accepted Answer

A) four 
B) five 
C) six 
D) three 
A) four 
B) five 
C) six 
D) three

Question 11

The firm faces the market demand curve in a monopolistic competition industry.

Accepted Answer

A) True 
 B)False

Question 12

Sara sells beer in a perfectly competitive market.This week Sara receives a lower price for a keg of beer than she did last week.Which of the following statements could explain this?

Accepted Answer

A) The market demand for beer increased. 
B) The market demand for beer decreased. 
C) Firms exited the market. 
D) Sara's costs have increased. 
A) The market demand for beer increased. 
B) The market demand for beer decreased. 
C) Firms exited the market. 
D) Sara's costs have increased.

Question 13

At all prices below the shutdown point,optimal short-run output is zero.

Accepted Answer

A) True 
 B)False

Question 14

Is it possible for a firm to maximize profit and yet incur a loss? Explain.

Accepted Answer

Yes,sometimes the highest prof

Question 15

Claudia,the owner of a printing plant,is trying to decide whether to stay open for business or to shut down.She needs to decide which costs are relevant and which ones are irrelevant when making her decision.Which of the following costs are irrelevant to Claudia?

Accepted Answer

A) machinery operation costs 
B) paper 
C) rent 
D) A and C are irrelevant. 
A) machinery operation costs 
B) paper 
C) rent 
D) A and C are irrelevant.

Question 16

The long-run supply curve can be used to determine the long-run price after an increase in demand.

Accepted Answer

A) True 
 B)False

Question 17

In a short-run equilibrium for a perfectly competitive market,the quantity supplies equals the quantity demanded and firms maximize profit.

Accepted Answer

A) True 
 B)False

Question 18

For firms in perfect competition,price is equal to marginal cost at all levels of output.

Accepted Answer

A) True 
 B)False

Question 19

In the long run,after Hurricane Andrew struck the southeastern U.S. ,the price of ice:

Accepted Answer

A) rose. 
B) did not change. 
C) fell. 
D) became negative. 
A) rose. 
B) did not change. 
C) fell. 
D) became negative.

Question 20

-Refer to Figure 9.4.If this farmer is producing the profit maximizing level of output,her profit is:

Accepted Answer

A) $0. 
B) $1,000. 
C) $3,000. 
D) $2,000. 
A) $0. 
B) $1,000. 
C) $3,000. 
D) $2,000.

ABC company will choose to shut down rather than operate as long as:

-Refer to Figure 9.6.At a market price of $20,this profit maximizing firm would earn $ ________ economic profit.

Assume that Bright Lights Inc.is part of a perfectly competitive market.If Bright Lights Inc.decides to raise their prices for the vanity light fixtures by 20%,which of the following is most likely to result?

Suppose all firms in an industry are earning positive economic profit.We would expect to find that in the future:

-Refer to Figure 9.3.If this farmer is producing the profit-maximizing level of output,his profit is:

Assume that a smartphone maker operates in a perfectly competitive market producing 25,000 smartphones per day.At this output level,price is less than this firm's marginal cost.It follows that producing one more smartphone will cause this firm's:

With respect to price,in a perfectly competitive market,firms can:

Recall the application of the upward jump and downward slide of wine prices,what can you determine from the price soared for the pinot noir wine grown in the Willamette Valley in Oregon and for other brands the price tripled?

Lentz's,Incorporated sells paper in a perfectly competitive market at a price of $2 per ream.At the profit-maximizing (cost-minimizing)level of output,average total cost is $2.50 per ream and average variable cost is $1.95 per ream.Should the firm continue to operate in the short run? Explain.

-Refer to Table 9.1.If the market price is $90,then for this firm to maximize profits it should produce ________ units of output.

The firm faces the market demand curve in a monopolistic competition industry.

Sara sells beer in a perfectly competitive market.This week Sara receives a lower price for a keg of beer than she did last week.Which of the following statements could explain this?

At all prices below the shutdown point,optimal short-run output is zero.

Is it possible for a firm to maximize profit and yet incur a loss? Explain.

Claudia,the owner of a printing plant,is trying to decide whether to stay open for business or to shut down.She needs to decide which costs are relevant and which ones are irrelevant when making her decision.Which of the following costs are irrelevant to Claudia?

The long-run supply curve can be used to determine the long-run price after an increase in demand.

In a short-run equilibrium for a perfectly competitive market,the quantity supplies equals the quantity demanded and firms maximize profit.

For firms in perfect competition,price is equal to marginal cost at all levels of output.

In the long run,after Hurricane Andrew struck the southeastern U.S. ,the price of ice:

-Refer to Figure 9.4.If this farmer is producing the profit maximizing level of output,her profit is:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 9: Perfect Competition

ABC company will choose to shut down rather than operate as long as:

-Refer to Figure 9.6.At a market price of $20,this profit maximizing firm would earn $ ________ economic profit.

Assume that Bright Lights Inc.is part of a perfectly competitive market.If Bright Lights Inc.decides to raise their prices for the vanity light fixtures by 20%,which of the following is most likely to result?

Suppose all firms in an industry are earning positive economic profit.We would expect to find that in the future:

-Refer to Figure 9.3.If this farmer is producing the profit-maximizing level of output,his profit is:

Assume that a smartphone maker operates in a perfectly competitive market producing 25,000 smartphones per day.At this output level,price is less than this firm's marginal cost.It follows that producing one more smartphone will cause this firm's:

With respect to price,in a perfectly competitive market,firms can:

Recall the application of the upward jump and downward slide of wine prices,what can you determine from the price soared for the pinot noir wine grown in the Willamette Valley in Oregon and for other brands the price tripled?

Lentz's,Incorporated sells paper in a perfectly competitive market at a price of $2 per ream.At the profit-maximizing (cost-minimizing)level of output,average total cost is $2.50 per ream and average variable cost is $1.95 per ream.Should the firm continue to operate in the short run? Explain.

-Refer to Table 9.1.If the market price is $90,then for this firm to maximize profits it should produce ________ units of output.

The firm faces the market demand curve in a monopolistic competition industry.

Sara sells beer in a perfectly competitive market.This week Sara receives a lower price for a keg of beer than she did last week.Which of the following statements could explain this?

At all prices below the shutdown point,optimal short-run output is zero.

Is it possible for a firm to maximize profit and yet incur a loss? Explain.

Claudia,the owner of a printing plant,is trying to decide whether to stay open for business or to shut down.She needs to decide which costs are relevant and which ones are irrelevant when making her decision.Which of the following costs are irrelevant to Claudia?

The long-run supply curve can be used to determine the long-run price after an increase in demand.

In a short-run equilibrium for a perfectly competitive market,the quantity supplies equals the quantity demanded and firms maximize profit.

For firms in perfect competition,price is equal to marginal cost at all levels of output.

In the long run,after Hurricane Andrew struck the southeastern U.S. ,the price of ice:

-Refer to Figure 9.4.If this farmer is producing the profit maximizing level of output,her profit is:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters