Question 1

The fact that a perfectly competitive firm's total revenue curve is an upward-sloping straight line implies that

Accepted Answer

A) The total profit curve is also an upward-sloping straight line. 
B) Product price is constant at all levels of output. 
C) Product price decreases as output increases,and demand is elastic. 
D) Product price increases at all output levels. 
A) The total profit curve is also an upward-sloping straight line. 
B) Product price is constant at all levels of output. 
C) Product price decreases as output increases,and demand is elastic. 
D) Product price increases at all output levels.

Question 2

An increased tax on profits leaves the optimal rate of output unchanged in the short run.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are ways a business can earn economic profits except

Accepted Answer

A) Discover new products. 
B) Maximize implicit costs but not explicit costs. 
C) Take above-average risks. 
D) Find new and better methods of production. 
A) Discover new products. 
B) Maximize implicit costs but not explicit costs. 
C) Take above-average risks. 
D) Find new and better methods of production.

Question 4

The basic incentive to supply goods and services is the expectation of profit.

Accepted Answer

A) True 
 B)False

Question 5

Refer to Figure 22.3 at quantity level B

Accepted Answer

A) The company is maximizing profit. 
B) Marginal cost is greater than marginal revenue,so it should cut production. 
C) The company is minimizing loss. 
D) Marginal revenue is greater than marginal cost,so the firm should expand production. 
A) The company is maximizing profit. 
B) Marginal cost is greater than marginal revenue,so it should cut production. 
C) The company is minimizing loss. 
D) Marginal revenue is greater than marginal cost,so the firm should expand production.

Question 6

The market price for any good or service sold in a perfectly competitive market is determined by

Accepted Answer

A) The largest firm in the industry. 
B) Supply and demand. 
C) Government regulation. 
D) Strategic interaction. 
A) The largest firm in the industry. 
B) Supply and demand. 
C) Government regulation. 
D) Strategic interaction.

Question 7

Refer to the data in Figure 22.1.The shape of the total revenue curve indicates that the price of this good

Accepted Answer

A) Falls as output rises. 
B) Rises as output rises. 
C) Stays the same as output rises. 
D) Falls at first as output rises,but then rises as output rises. 
A) Falls as output rises. 
B) Rises as output rises. 
C) Stays the same as output rises. 
D) Falls at first as output rises,but then rises as output rises.

Question 8

Market structure is determined by the

Accepted Answer

A) Annual revenue,costs,and profits for an industry. 
B) Number and relative size of the firms in an industry. 
C) Amount of compensation given to the CEOs. 
D) Price charged for the good or service produced. 
A) Annual revenue,costs,and profits for an industry. 
B) Number and relative size of the firms in an industry. 
C) Amount of compensation given to the CEOs. 
D) Price charged for the good or service produced.

Question 9

When the short-run marginal cost curve is upward-sloping,

Accepted Answer

A) The average total cost curve is upward-sloping. 
B) The average total cost curve is above the marginal cost curve. 
C) Diminishing returns occurs with greater output. 
D) There are diseconomies of scale. 
A) The average total cost curve is upward-sloping. 
B) The average total cost curve is above the marginal cost curve. 
C) Diminishing returns occurs with greater output. 
D) There are diseconomies of scale.

Question 10

The marginal cost curve

Accepted Answer

A) Is not affected by changes in the price of variable inputs. 
B) Slopes downward to the right as output increases. 
C) Is the long-run supply curve for a competitive firm at prices below the AVC curve. 
D) Is the short-run supply curve for a competitive firm at prices above the AVC curve. 
A) Is not affected by changes in the price of variable inputs. 
B) Slopes downward to the right as output increases. 
C) Is the long-run supply curve for a competitive firm at prices below the AVC curve. 
D) Is the short-run supply curve for a competitive firm at prices above the AVC curve.

Question 11

Refer to the data in Figure 22.1.The total fixed costs for this firm are approximately

Accepted Answer

A) $50. 
B) $100. 
C) $600. 
D) $200. 
A) $50. 
B) $100. 
C) $600. 
D) $200.

Question 12

Suppose a firm has an annual budget of $200,000 in wages and salaries,$75,000 in materials,$30,000 in new equipment,$20,000 in rented property,and $35,000 in interest costs on capital.The owner/manager does not choose to pay himself,but he could receive income of $90,000 by working elsewhere.The firm earns revenues of $360,000 per year.What are the annual economic costs for the firm described above?

Accepted Answer

A) $450,000. 
B) $120,000. 
C) $90,000. 
D) $360,000. 
A) $450,000. 
B) $120,000. 
C) $90,000. 
D) $360,000.

Question 13

In which of the following types of markets does a single firm have the most market power?

Accepted Answer

A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly. 
A) Perfect competition. 
B) Monopolistic competition. 
C) Oligopoly. 
D) Monopoly.

Question 14

A competitive firm should always continue to operate in the short run as long as

Accepted Answer

A) P  AVC. 
D) MR > MC. 
A) P  AVC. 
D) MR > MC.

Question 15

Which of the following should not be included when calculating accounting profit?

Accepted Answer

A) The cost of taxes. 
B) The return on the next best alternative investment opportunity. 
C) The cost of rent. 
D) The cost of utilities. 
A) The cost of taxes. 
B) The return on the next best alternative investment opportunity. 
C) The cost of rent. 
D) The cost of utilities.

Question 16

When payroll taxes are raised,the firm's marginal cost curve shifts

Accepted Answer

A) Upward,and supply increases. 
B) Downward,and supply increases. 
C) Upward,and supply decreases. 
D) Downward,and supply decreases. 
A) Upward,and supply increases. 
B) Downward,and supply increases. 
C) Upward,and supply decreases. 
D) Downward,and supply decreases.

Question 17

Which of the following affects the ATC curve for a firm but not the MC curve?

Accepted Answer

A) A change in property taxes. 
B) A change in payroll taxes. 
C) A change in profit taxes. 
D) A change in the price of the good. 
A) A change in property taxes. 
B) A change in payroll taxes. 
C) A change in profit taxes. 
D) A change in the price of the good.

Question 18

The profit motive encourages businesses to produce the goods and services that consumers desire.

Accepted Answer

A) True 
 B)False

Question 19

A firm maximizes profit when

Accepted Answer

A) Total costs exceed total revenue by the largest amount. 
B) Total revenues are maximized. 
C) Marginal costs are greater than marginal revenues. 
D) Total revenue exceeds total cost by the greatest amount. 
A) Total costs exceed total revenue by the largest amount. 
B) Total revenues are maximized. 
C) Marginal costs are greater than marginal revenues. 
D) Total revenue exceeds total cost by the greatest amount.

Question 20

In the News article,"Are Profits Bad?" most Americans feel that the profit motive

Accepted Answer

A) Is bad. 
B) Do not motivate better product results and lower prices. 
C) Is good. 
D) Cause firms to ignore social needs. 
A) Is bad. 
B) Do not motivate better product results and lower prices. 
C) Is good. 
D) Cause firms to ignore social needs.

Exam 22: The Competitive Firm

The fact that a perfectly competitive firm's total revenue curve is an upward-sloping straight line implies that

An increased tax on profits leaves the optimal rate of output unchanged in the short run.

All of the following are ways a business can earn economic profits except

The basic incentive to supply goods and services is the expectation of profit.

Refer to Figure 22.3 at quantity level B

The market price for any good or service sold in a perfectly competitive market is determined by

Refer to the data in Figure 22.1.The shape of the total revenue curve indicates that the price of this good

Market structure is determined by the

When the short-run marginal cost curve is upward-sloping,

The marginal cost curve

Refer to the data in Figure 22.1.The total fixed costs for this firm are approximately

In which of the following types of markets does a single firm have the most market power?

A competitive firm should always continue to operate in the short run as long as

Which of the following should not be included when calculating accounting profit?

When payroll taxes are raised,the firm's marginal cost curve shifts

Which of the following affects the ATC curve for a firm but not the MC curve?

The profit motive encourages businesses to produce the goods and services that consumers desire.

A firm maximizes profit when

In the News article,"Are Profits Bad?" most Americans feel that the profit motive

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

Competitive Markets

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

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