Question 1

Normal profit is zero when a firm's revenues just cover its economic cost.

Accepted Answer

A) True 
 B)False

Question 2

The supply curve is upward-sloping (i.e. ,it takes a higher price to induce greater production)because of

Accepted Answer

A) Increasing total costs. 
B) Increasing fixed costs. 
C) Increasing marginal costs. 
D) The decreasing skill level of additional workers. 
A) Increasing total costs. 
B) Increasing fixed costs. 
C) Increasing marginal costs. 
D) The decreasing skill level of additional workers.

Question 3

Which of the following is generally a fixed cost?

Accepted Answer

A) Property taxes on land used in production. 
B) Wages. 
C) Profit taxes. 
D) Utilities. 
A) Property taxes on land used in production. 
B) Wages. 
C) Profit taxes. 
D) Utilities.

Question 4

If a perfectly competitive firm is producing a rate of output at which MC exceeds price,then the firm

Accepted Answer

A) Must have an economic loss. 
B) Can increase its profit by increasing output. 
C) Can increase its profit by decreasing output. 
D) Is maximizing profit. 
A) Must have an economic loss. 
B) Can increase its profit by increasing output. 
C) Can increase its profit by decreasing output. 
D) Is maximizing profit.

Question 5

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 is the economic profit for the firm described above?

Accepted Answer

A) -$90,000. 
B) $0. 
C) $90,000. 
D) $200,000. 
A) -$90,000. 
B) $0. 
C) $90,000. 
D) $200,000.

Question 6

An In the News article,"Too Many Sellers: The Woes of T-Shirt Shops," states that if T-shirt shops are perfectly competitive firms,then each shop

Accepted Answer

A) Is a price setter. 
B) Has market power. 
C) Confronts a downward-sloping demand curve for its own output. 
D) Is a price taker. 
A) Is a price setter. 
B) Has market power. 
C) Confronts a downward-sloping demand curve for its own output. 
D) Is a price taker.

Question 7

Short-run profits are maximized at the rate of output where

Accepted Answer

A) Average total costs are minimized. 
B) Total revenue is maximized. 
C) Marginal revenue is zero. 
D) Marginal revenue is equal to marginal cost. 
A) Average total costs are minimized. 
B) Total revenue is maximized. 
C) Marginal revenue is zero. 
D) Marginal revenue is equal to marginal cost.

Question 8

To maximize profits,a firm should expand production as long as it is making profits.

Accepted Answer

A) True 
 B)False

Exam 22: The Competitive Firm

Normal profit is zero when a firm's revenues just cover its economic cost.

The supply curve is upward-sloping (i.e. ,it takes a higher price to induce greater production)because of

Which of the following is generally a fixed cost?

If a perfectly competitive firm is producing a rate of output at which MC exceeds price,then the firm

An In the News article,"Too Many Sellers: The Woes of T-Shirt Shops," states that if T-shirt shops are perfectly competitive firms,then each shop

Short-run profits are maximized at the rate of output where

To maximize profits,a firm should expand production as long as it is making profits.

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

International Finance

Global Poverty

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