Question 1

A market's structure is described by

Accepted Answer

A) the number of firms in the market. 
B) the ease with which firms can enter and exit the market. 
C) the ability of firms to differentiate their product. 
D) All of the above. 
A) the number of firms in the market. 
B) the ease with which firms can enter and exit the market. 
C) the ability of firms to differentiate their product. 
D) All of the above.

Question 2

If a specific (per unit)tax is implemented

Accepted Answer

A) the firm's average cost curve shifts up, resulting in lower profits. 
B) the after-tax marginal cost curve shifts, resulting in lower quantity produced. 
C) there is less profit per unit sold. 
D) All of the above. 
A) the firm's average cost curve shifts up, resulting in lower profits. 
B) the after-tax marginal cost curve shifts, resulting in lower quantity produced. 
C) there is less profit per unit sold. 
D) All of the above.

Question 3

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Accepted Answer

A) the demand curve for the firm's product is horizontal. 
B) there aren't many firms in the industry. 
C) the market is in long-run equilibrium. 
D) the firms in this industry are not profitable. 
A) the demand curve for the firm's product is horizontal. 
B) there aren't many firms in the industry. 
C) the market is in long-run equilibrium. 
D) the firms in this industry are not profitable.

Question 4

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

Accepted Answer

The firm's supply is q = 0.5p; market su

Question 5

In the short run

Accepted Answer

A) firms will shut down if operating at a loss. 
B) profit maximizing firms have identical short run supply curves. 
C) firms may choose to operate at a loss. 
D) most firms have short run supply curves that are the same as their long run supply curves. 
A) firms will shut down if operating at a loss. 
B) profit maximizing firms have identical short run supply curves. 
C) firms may choose to operate at a loss. 
D) most firms have short run supply curves that are the same as their long run supply curves.

Question 6

In the long run, firms in a competitive market

Accepted Answer

A) shut down because profit goes to zero. 
B) lose money. 
C) are not profit maximizing. 
D) earn zero economic profit. 
A) shut down because profit goes to zero. 
B) lose money. 
C) are not profit maximizing. 
D) earn zero economic profit.

Question 7

A firm will exit a competitive market when

Accepted Answer

A) costs force the marginal cost curve to shift to the left. 
B) the long-run profit would be negative. 
C) it can earn only earn a zero long-run profit. 
D) Both B and C. 
A) costs force the marginal cost curve to shift to the left. 
B) the long-run profit would be negative. 
C) it can earn only earn a zero long-run profit. 
D) Both B and C.

Question 8

The short run is

Accepted Answer

A) usually 3-6 months. 
B) dependent on the characteristics of the industry. 
C) when a firm has to decide whether or not to exit. 
D) identical to the long run for most firms. 
A) usually 3-6 months. 
B) dependent on the characteristics of the industry. 
C) when a firm has to decide whether or not to exit. 
D) identical to the long run for most firms.

Question 9

Producer surplus

Accepted Answer

A) is the minimum amount a firm must receive to engage in trade. 
B) is a measure of what a firm gains from trade. 
C) represents the opportunity cost of the firm. 
D) determines whether or not a firm will produce in the long run. 
A) is the minimum amount a firm must receive to engage in trade. 
B) is a measure of what a firm gains from trade. 
C) represents the opportunity cost of the firm. 
D) determines whether or not a firm will produce in the long run.

Question 10

When is the profit a firm earns equal to the producer surplus? Explain.

Accepted Answer

Profit equals producer surplus when the

Question 11

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

Accepted Answer

A) the firm will shut down. 
B) the firm will operate because its loss is less than if it shuts down. 
C) revenue is lower than variable costs. 
D) profit is positive and so the firm will operate. 
A) the firm will shut down. 
B) the firm will operate because its loss is less than if it shuts down. 
C) revenue is lower than variable costs. 
D) profit is positive and so the firm will operate.

Question 12

A firm should always shut down if its revenue is

Accepted Answer

A) declining. 
B) less than its average fixed costs. 
C) less than its total costs. 
D) less than its avoidable costs. 
A) declining. 
B) less than its average fixed costs. 
C) less than its total costs. 
D) less than its avoidable costs.

Question 13

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

Accepted Answer

A) They value consumer surplus more than producer surplus. 
B) They value producer surplus more than consumer surplus. 
C) They seek to avoid future regulation. 
D) They seek to minimize total surplus. 
A) They value consumer surplus more than producer surplus. 
B) They value producer surplus more than consumer surplus. 
C) They seek to avoid future regulation. 
D) They seek to minimize total surplus.

Question 14

In a short run competitive equilibrium

Accepted Answer

A) the market demand curve is horizontal. 
B) the market demand curve is downward sloping. 
C) the market demand curve is perfectly inelastic. 
D) All of the above are possible. 
A) the market demand curve is horizontal. 
B) the market demand curve is downward sloping. 
C) the market demand curve is perfectly inelastic. 
D) All of the above are possible.

Question 15

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

Accepted Answer

A) perfect information 
B) freedom of entry and exit 
C) price taking behavior 
D) homogeneous products 
A) perfect information 
B) freedom of entry and exit 
C) price taking behavior 
D) homogeneous products

Question 16

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

Accepted Answer

A) fall to $820. 
B) fall by $84. 
C) fall by $58. 
D) fall to $369. 
A) fall to $820. 
B) fall by $84. 
C) fall by $58. 
D) fall to $369.

Question 17

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). If the price were $2.50, consumer surplus would equal

Accepted Answer

A) $301.00. 
B) $924.50. 
C) $1,225.50. 
D) $0 
A) $301.00. 
B) $924.50. 
C) $1,225.50. 
D) $0

Question 18

In the long run

Accepted Answer

A) the firm shuts down if revenue is less than its avoidable costs. 
B) marginal profit is greater than zero. 
C) if economic profit is zero. 
D) supply curves are identical to the short run supply curves. 
A) the firm shuts down if revenue is less than its avoidable costs. 
B) marginal profit is greater than zero. 
C) if economic profit is zero. 
D) supply curves are identical to the short run supply curves.

Question 19

In a perfectly competitive market

Accepted Answer

A) buyers are price-takers. 
B) buyers view products from different firms as differentiated. 
C) individual buyers have horizontal demand curves. 
D) firms' demand curves are vertical. 
A) buyers are price-takers. 
B) buyers view products from different firms as differentiated. 
C) individual buyers have horizontal demand curves. 
D) firms' demand curves are vertical.

Question 20

Which of the following are NOT characteristics of a competitive market?

Accepted Answer

A) There is freedom of entry and exit. 
B) There are zero transaction costs. 
C) There are only one or two sellers. 
D) Buyers and sellers have complete information. 
A) There is freedom of entry and exit. 
B) There are zero transaction costs. 
C) There are only one or two sellers. 
D) Buyers and sellers have complete information.

A market's structure is described by

If a specific (per unit)tax is implemented

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q². Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

In the short run

In the long run, firms in a competitive market

A firm will exit a competitive market when

The short run is

Producer surplus

When is the profit a firm earns equal to the producer surplus? Explain.

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

A firm should always shut down if its revenue is

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

In a short run competitive equilibrium

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). If the price were $2.50, consumer surplus would equal

In the long run

In a perfectly competitive market

Which of the following are NOT characteristics of a competitive market?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 8: Competitive Firms and Markets

A market's structure is described by

If a specific (per unit)tax is implemented

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

In the short run

In the long run, firms in a competitive market

A firm will exit a competitive market when

The short run is

Producer surplus

When is the profit a firm earns equal to the producer surplus? Explain.

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

A firm should always shut down if its revenue is

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

In a short run competitive equilibrium

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). If the price were $2.50, consumer surplus would equal

In the long run

In a perfectly competitive market

Which of the following are NOT characteristics of a competitive market?

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q². Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?