Question 1

Marginal cost is the increase in total cost associated with a one-unit

Accepted Answer

A) Increase in production. 
B) Decrease in production. 
C) Increase in input usage. 
D) Decrease in input usage. 
A) Increase in production. 
B) Decrease in production. 
C) Increase in input usage. 
D) Decrease in input usage.

Question 2

A firm should shut down production when

Accepted Answer

A) P  minimum AVC. 
C) P = minimum ATC. 
D) P = MC. 
A) P  minimum AVC. 
C) P = minimum ATC. 
D) P = MC.

Question 3

The competitive market model is important because

Accepted Answer

A) It characterizes all the markets in the U.S.economy. 
B) It shows how laissez faire can overcome market failures. 
C) Many industries function much like the competitive model. 
D) It shows that firms can earn economic profits in the long run. 
A) It characterizes all the markets in the U.S.economy. 
B) It shows how laissez faire can overcome market failures. 
C) Many industries function much like the competitive model. 
D) It shows that firms can earn economic profits in the long run.

Question 4

The exit of firms from a market,ceteris paribus,

Accepted Answer

A) Shifts the market supply curve to the right. 
B) Reduces the economic losses of remaining firms in the market. 
C) Increases the equilibrium output in the market. 
D) Shifts the market demand curve to the left. 
A) Shifts the market supply curve to the right. 
B) Reduces the economic losses of remaining firms in the market. 
C) Increases the equilibrium output in the market. 
D) Shifts the market demand curve to the left.

Question 5

Technological improvements shift the average total cost curve and the marginal cost curve downward.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a consequence of competition?

Accepted Answer

A) An unrelenting squeeze on prices and profit. 
B) Positive economic profit in the long run. 
C) Elimination of the most efficient firms. 
D) Price-gouging behavior. 
A) An unrelenting squeeze on prices and profit. 
B) Positive economic profit in the long run. 
C) Elimination of the most efficient firms. 
D) Price-gouging behavior.

Question 7

Refer to Figure 23.6 for a perfectly competitive firm.If this firm produces the level of output corresponding to point B in the short run,it will earn

Accepted Answer

A) The minimum loss possible. 
B) The maximum profit possible. 
C) A profit,although not the maximum profit possible. 
D) A loss greater than necessary. 
A) The minimum loss possible. 
B) The maximum profit possible. 
C) A profit,although not the maximum profit possible. 
D) A loss greater than necessary.

Question 8

High profits in a particular industry indicate that

Accepted Answer

A) Consumers want less of that industry's goods. 
B) Consumers are satisfied with the level of production of that industry's goods. 
C) Consumers want more of that industry's goods. 
D) Producers are satisfied with the level of production of that industry's goods. 
A) Consumers want less of that industry's goods. 
B) Consumers are satisfied with the level of production of that industry's goods. 
C) Consumers want more of that industry's goods. 
D) Producers are satisfied with the level of production of that industry's goods.

Question 9

Explain why technological progress will,at best,only temporarily allow a perfectly competitive firm to earn an economic profit.

Accepted Answer

Technological progress shifts a firm's M

Question 10

Perfectly competitive firms tend to invest heavily in advertisements because it increases their revenue.

Accepted Answer

A) True 
 B)False

Question 11

To determine the market supply,the quantities

Accepted Answer

A) Demanded at each price by each demander are added together. 
B) Supplied at each price by each supplier are added together. 
C) Demanded at each price by each demander and supplied at each price by each supplier are added together. 
D) Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier. 
A) Demanded at each price by each demander are added together. 
B) Supplied at each price by each supplier are added together. 
C) Demanded at each price by each demander and supplied at each price by each supplier are added together. 
D) Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier.

Question 12

If price is above the long-run competitive equilibrium level,

Accepted Answer

A) Firms will enter the market. 
B) Firms will shut down. 
C) Firms will incur losses. 
D) The market supply will shift to the left. 
A) Firms will enter the market. 
B) Firms will shut down. 
C) Firms will incur losses. 
D) The market supply will shift to the left.

Question 13

In a perfectly competitive industry,economic profit:

Accepted Answer

A) Can persist in the long run because of barriers to entry. 
B) Can persist in the long run because of homogeneous products. 
C) Will approach zero in the long run as prices are driven to zero. 
D) Will approach zero in the long run as prices are driven to the level of average production costs. 
A) Can persist in the long run because of barriers to entry. 
B) Can persist in the long run because of homogeneous products. 
C) Will approach zero in the long run as prices are driven to zero. 
D) Will approach zero in the long run as prices are driven to the level of average production costs.

Question 14

Most product markets are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 15

In perfectly competitive markets,economic losses are the signal for firms to exit from the industry.

Accepted Answer

A) True 
 B)False

Question 16

Marginal cost pricing means that a firm

Accepted Answer

A) Produces up to the output where P = MC for a given market price. 
B) Lowers market price to marginal cost for a given output. 
C) Lets marginal cost rise to the market price for a given output. 
D) Produces up to the output level at which MC = 0 for a given market price. 
A) Produces up to the output where P = MC for a given market price. 
B) Lowers market price to marginal cost for a given output. 
C) Lets marginal cost rise to the market price for a given output. 
D) Produces up to the output level at which MC = 0 for a given market price.

Question 17

One World View article is titled "Flat Panels,Thin Margins." New firms continue to enter the industry even though prices are falling because

Accepted Answer

A) Normal profits are being earned. 
B) Total costs equal total revenues. 
C) Total costs are greater than total revenues. 
D) Economic profits are being earned. 
A) Normal profits are being earned. 
B) Total costs equal total revenues. 
C) Total costs are greater than total revenues. 
D) Economic profits are being earned.

Question 18

When a firm is earning positive economic profits,this is an indication that the firm

Accepted Answer

A) Should leave this market in the long run. 
B) Is using its resources in the best possible way. 
C) Is using its resources in one of a number of ways that would yield positive economic profits. 
D) Is producing at the minimum ATC. 
A) Should leave this market in the long run. 
B) Is using its resources in the best possible way. 
C) Is using its resources in one of a number of ways that would yield positive economic profits. 
D) Is producing at the minimum ATC.

Question 19

In a perfectly competitive market in the long run,which of the following is not correct?

Accepted Answer

A) Firms are attempting to maximize profit. 
B) Economic profits are zero. 
C) There are no better uses for the firm's resources. 
D) Firms are maximizing total revenue. 
A) Firms are attempting to maximize profit. 
B) Economic profits are zero. 
C) There are no better uses for the firm's resources. 
D) Firms are maximizing total revenue.

Question 20

Economic losses are a signal to producers

Accepted Answer

A) That they are using resources in the most efficient way. 
B) That they are not using resources in the best way. 
C) That consumer demand is being satisfied. 
D) That consumers are content with the allocation of resources. 
A) That they are using resources in the most efficient way. 
B) That they are not using resources in the best way. 
C) That consumer demand is being satisfied. 
D) That consumers are content with the allocation of resources.

Exam 23: Competitive Markets

Marginal cost is the increase in total cost associated with a one-unit

A firm should shut down production when

The competitive market model is important because

The exit of firms from a market,ceteris paribus,

Technological improvements shift the average total cost curve and the marginal cost curve downward.

Which of the following is a consequence of competition?

Refer to Figure 23.6 for a perfectly competitive firm.If this firm produces the level of output corresponding to point B in the short run,it will earn

High profits in a particular industry indicate that

Explain why technological progress will,at best,only temporarily allow a perfectly competitive firm to earn an economic profit.

Perfectly competitive firms tend to invest heavily in advertisements because it increases their revenue.

To determine the market supply,the quantities

If price is above the long-run competitive equilibrium level,

In a perfectly competitive industry,economic profit:

Most product markets are perfectly competitive.

In perfectly competitive markets,economic losses are the signal for firms to exit from the industry.

Marginal cost pricing means that a firm

One World View article is titled "Flat Panels,Thin Margins." New firms continue to enter the industry even though prices are falling because

When a firm is earning positive economic profits,this is an indication that the firm

In a perfectly competitive market in the long run,which of the following is not correct?

Economic losses are a signal to producers

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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