Question 1

In a market economy, profits

Accepted Answer

A)  encourage productive projects and losses weed out unproductive ones. 
B)  discourage productive projects and losses encourage unproductive ones. 
C)  reduce the value of resources while losses increase their value. 
D)  indicate that producers gain at the expense of consumers. 
A)  encourage productive projects and losses weed out unproductive ones. 
B)  discourage productive projects and losses encourage unproductive ones. 
C)  reduce the value of resources while losses increase their value. 
D)  indicate that producers gain at the expense of consumers.

Question 2

Part of the entrepreneurial process in a competitive market economy involves

Accepted Answer

A)  obtaining governmental control over the market so that a new product has some chance of being successful. 
B)  knowing from the start the proper output and price to set for each new product. 
C)  choosing the best structure, size, and scope of production for the firm to produce a new product. 
D)  knowing in advance with certainty what products consumers will want to buy. 
A)  obtaining governmental control over the market so that a new product has some chance of being successful. 
B)  knowing from the start the proper output and price to set for each new product. 
C)  choosing the best structure, size, and scope of production for the firm to produce a new product. 
D)  knowing in advance with certainty what products consumers will want to buy.

Question 3

Figure 10-12        
-Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

Accepted Answer

A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d 
A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d

Question 4

A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that

Accepted Answer

A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are positive. 
C)  firms are likely to enter this market in the long run. 
D)  the firm would earn more profit by expanding output 
A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are positive. 
C)  firms are likely to enter this market in the long run. 
D)  the firm would earn more profit by expanding output

Question 5

If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output, it should

Accepted Answer

A)  raise the price of the product and expand its output. 
B)  raise the price of the product and reduce its output. 
C)  lower the price of the product and expand its output. 
D)  lower the price of the product and reduce its output. 
A)  raise the price of the product and expand its output. 
B)  raise the price of the product and reduce its output. 
C)  lower the price of the product and expand its output. 
D)  lower the price of the product and reduce its output.

Question 6

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

Accepted Answer

A)  MR = ATC in both price-taker and competitive price-searcher markets. 
B)  P = ATC in price-taker markets; P = MC in competitive price-searcher markets. 
C)  P = MC in both price-taker and competitive price-searcher markets. 
D)  P = ATC in both price-taker and competitive price-searcher markets. 
A)  MR = ATC in both price-taker and competitive price-searcher markets. 
B)  P = ATC in price-taker markets; P = MC in competitive price-searcher markets. 
C)  P = MC in both price-taker and competitive price-searcher markets. 
D)  P = ATC in both price-taker and competitive price-searcher markets.

Question 7

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

Accepted Answer

A)  new firms will enter the market, and the current firms will experience a decrease in demand for their products until zero economic profit is again restored. 
B)  new firms will enter the market, and the current firms will experience an increase in demand for their products until zero economic profit is again restored. 
C)  some existing firms will exit the market, and the remaining firms will experience an increase in demand for their products until zero economic profit is again restored. 
D)  some existing firms will exit the market, and the remaining firms will experience a decrease in demand for their products until zero economic profit is again restored. 
A)  new firms will enter the market, and the current firms will experience a decrease in demand for their products until zero economic profit is again restored. 
B)  new firms will enter the market, and the current firms will experience an increase in demand for their products until zero economic profit is again restored. 
C)  some existing firms will exit the market, and the remaining firms will experience an increase in demand for their products until zero economic profit is again restored. 
D)  some existing firms will exit the market, and the remaining firms will experience a decrease in demand for their products until zero economic profit is again restored.

Question 8

A profit-maximizing price searcher will expand output to the point where

Accepted Answer

A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals average total cost. 
D)  price equals marginal cost. 
A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals average total cost. 
D)  price equals marginal cost.

Question 9

Fracking, a technique for breaking up (or fracturing) rock deep under the earth to release natural gas, has

Accepted Answer

A)  increased the price of natural gas. 
B)  decreased the supply of natural gas. 
C)  contaminated natural gas so it is no longer a "clean" fuel. 
D)  decreased the price of natural gas. 
A)  increased the price of natural gas. 
B)  decreased the supply of natural gas. 
C)  contaminated natural gas so it is no longer a "clean" fuel. 
D)  decreased the price of natural gas.

Question 10

Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets?

Accepted Answer

A)  Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. 
B)  Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C)  Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. 
D)  Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero. 
A)  Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. 
B)  Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C)  Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. 
D)  Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero.

Question 11

If the firms in a competitive price-searcher market are earning zero economic profit, this indicates that the

Accepted Answer

A)  market is not in long-run equilibrium. 
B)  firms are earning the normal rate of return. 
C)  firms are performing worse than the firms in other markets. 
D)  firms are performing better than firms in other markets. 
A)  market is not in long-run equilibrium. 
B)  firms are earning the normal rate of return. 
C)  firms are performing worse than the firms in other markets. 
D)  firms are performing better than firms in other markets.

Question 12

Which of the following is true for firms that produce in markets where there are no barriers to entry?

Accepted Answer

A)  The firms will always make positive economic profits in the long run. 
B)  The firms will always make positive economic profits in the short run. 
C)  The firms will always make zero economic profits in the short run. 
D)  The firms will always make zero economic profits in the long run. 
A)  The firms will always make positive economic profits in the long run. 
B)  The firms will always make positive economic profits in the short run. 
C)  The firms will always make zero economic profits in the short run. 
D)  The firms will always make zero economic profits in the long run.

Question 13

If a market is contestable, the market will be characterized by

Accepted Answer

A)  minimum-cost production methods and a competitive (normal) profit rate. 
B)  high barriers to entry and a small number of suppliers. 
C)  prices in excess of production costs and mergers leading to monopoly. 
D)  a large number of suppliers offering a homogeneous product. 
A)  minimum-cost production methods and a competitive (normal) profit rate. 
B)  high barriers to entry and a small number of suppliers. 
C)  prices in excess of production costs and mergers leading to monopoly. 
D)  a large number of suppliers offering a homogeneous product.

Question 14

The supply of oil for users in the United States

Accepted Answer

A)  was never an issue of serious public concern until the 1970s. 
B)  has never been an issue of serious concern by political leaders. 
C)  has often been a topic for dire warnings and forecasts of oil depletion. 
D)  has been more and more in doubt since the early 1980s. 
A)  was never an issue of serious public concern until the 1970s. 
B)  has never been an issue of serious concern by political leaders. 
C)  has often been a topic for dire warnings and forecasts of oil depletion. 
D)  has been more and more in doubt since the early 1980s.

Question 15

Water shortages are usually the result of

Accepted Answer

A)  profit-seeking owners of the resource holding water off the market and refusing to trade. 
B)  bad forecasts by water planners. 
C)  monopoly fixing of water prices. 
D)  a lack of tradeable property rights in water. 
A)  profit-seeking owners of the resource holding water off the market and refusing to trade. 
B)  bad forecasts by water planners. 
C)  monopoly fixing of water prices. 
D)  a lack of tradeable property rights in water.

Question 16

Which of the following statements is true about the demand for and/or the supply of natural resources?

Accepted Answer

A)  The supply curve for natural resources is more elastic in the long run than in the short run. 
B)  The elasticity of demand for electricity, natural gas, and gasoline equals approximately 0.1 in both the short run and the long run. 
C)  Natural resources are demanded by consumers and producers in steadily growing amounts, so future shortages are inevitable. 
D)  The supply of many natural resources is finite; thus the long-run elasticity of supply must be zero. 
A)  The supply curve for natural resources is more elastic in the long run than in the short run. 
B)  The elasticity of demand for electricity, natural gas, and gasoline equals approximately 0.1 in both the short run and the long run. 
C)  Natural resources are demanded by consumers and producers in steadily growing amounts, so future shortages are inevitable. 
D)  The supply of many natural resources is finite; thus the long-run elasticity of supply must be zero.

Question 17

Forests in the United States have, in recent decades,

Accepted Answer

A)  expanded substantially in the amount of wood grown. 
B)  been steadily declining in acreage and in wood produced. 
C)  been cut and cleared at a faster and faster rate. 
D)  shown no trend in growth or shrinkage. 
A)  expanded substantially in the amount of wood grown. 
B)  been steadily declining in acreage and in wood produced. 
C)  been cut and cleared at a faster and faster rate. 
D)  shown no trend in growth or shrinkage.

Question 18

Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run?

Accepted Answer

A)  Both will sell their products at a price equal to average total cost, but only the price taker will produce at minimum average total cost. 
B)  Both will sell their products at a price equal to average total cost, but only the competitive price searcher will produce at minimum average total cost. 
C)  Only the price taker will sell its product at a price equal to average total cost. 
D)  Only the competitive price searcher will sell its product at a price equal to average total cost. 
A)  Both will sell their products at a price equal to average total cost, but only the price taker will produce at minimum average total cost. 
B)  Both will sell their products at a price equal to average total cost, but only the competitive price searcher will produce at minimum average total cost. 
C)  Only the price taker will sell its product at a price equal to average total cost. 
D)  Only the competitive price searcher will sell its product at a price equal to average total cost.

Question 19

When a competitive price-searcher market is in long-run equilibrium, the firms will

Accepted Answer

A)  earn economic profit. 
B)  operate at an output level that minimizes long-run average total cost. 
C)  charge a price that is equal to average total cost. 
D)  operate at an output level where price is equal to marginal cost. 
A)  earn economic profit. 
B)  operate at an output level that minimizes long-run average total cost. 
C)  charge a price that is equal to average total cost. 
D)  operate at an output level where price is equal to marginal cost.

Question 20

Entrepreneurial judgment

Accepted Answer

A)  is necessary to make business decisions when no fixed decision rule can be used. 
B)  is fully incorporated into modern economic models of business behavior. 
C)  requires decision makers to follow carefully defined rules regarding uncertainty, discovery, and business judgment. 
D)  requires government advice and regulation. 
A)  is necessary to make business decisions when no fixed decision rule can be used. 
B)  is fully incorporated into modern economic models of business behavior. 
C)  requires decision makers to follow carefully defined rules regarding uncertainty, discovery, and business judgment. 
D)  requires government advice and regulation.

In a market economy, profits

Part of the entrepreneurial process in a competitive market economy involves

Figure 10-12 -Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that

If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output, it should

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

A profit-maximizing price searcher will expand output to the point where

Fracking, a technique for breaking up (or fracturing) rock deep under the earth to release natural gas, has

Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets?

If the firms in a competitive price-searcher market are earning zero economic profit, this indicates that the

Which of the following is true for firms that produce in markets where there are no barriers to entry?

If a market is contestable, the market will be characterized by

The supply of oil for users in the United States

Water shortages are usually the result of

Which of the following statements is true about the demand for and/or the supply of natural resources?

Forests in the United States have, in recent decades,

Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run?

When a competitive price-searcher market is in long-run equilibrium, the firms will

Entrepreneurial judgment

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 10: Price-Searcher Markets With Low Entry Barriers

In a market economy, profits

Part of the entrepreneurial process in a competitive market economy involves

Figure 10-12 -Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that

If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output, it should

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

A profit-maximizing price searcher will expand output to the point where

Fracking, a technique for breaking up (or fracturing) rock deep under the earth to release natural gas, has

Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets?

If the firms in a competitive price-searcher market are earning zero economic profit, this indicates that the

Which of the following is true for firms that produce in markets where there are no barriers to entry?

If a market is contestable, the market will be characterized by

The supply of oil for users in the United States

Water shortages are usually the result of

Which of the following statements is true about the demand for and/or the supply of natural resources?

Forests in the United States have, in recent decades,

Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run?

When a competitive price-searcher market is in long-run equilibrium, the firms will

Entrepreneurial judgment

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters