Question 1

Long-run market supply curves are downward sloping if

Accepted Answer

A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above. 
A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above.

Question 2

Firms that exhibit price-taking behavior

Accepted Answer

A) wait for other firms to set price, take it as given, and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior in their own hands. 
D) are independently capable of setting price. 
A) wait for other firms to set price, take it as given, and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior in their own hands. 
D) are independently capable of setting price.

Question 3

Producer surplus equals

Accepted Answer

A) total revenue minus total variable cost. 
B) total revenue minus the sum of all marginal cost. 
C) profit plus fixed cost. 
D) All of the above. 
A) total revenue minus total variable cost. 
B) total revenue minus the sum of all marginal cost. 
C) profit plus fixed cost. 
D) All of the above.

Question 4

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

Accepted Answer

A) 50. 
B) 25. 
C) 12.50. 
D) 10. 
A) 50. 
B) 25. 
C) 12.50. 
D) 10.

Question 5

In a perfectly competitive market with 100 identical firms producing at market price p1

Accepted Answer

A) the supply curve is flatter than if there were only 50 identical firms. 
B) the supply curve is more elastic than if there were only 50 identical firms. 
C) the firms have identical marginal costs. 
D) All of the above. 
A) the supply curve is flatter than if there were only 50 identical firms. 
B) the supply curve is more elastic than if there were only 50 identical firms. 
C) the firms have identical marginal costs. 
D) All of the above.

Question 6

A profit maximizing firm selects output such that

Accepted Answer

A) average profit is maximized. 
B) total profit is maximized. 
C) marginal profit is maximized. 
D) Both A and B. 
A) average profit is maximized. 
B) total profit is maximized. 
C) marginal profit is maximized. 
D) Both A and B.

Question 7

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

Accepted Answer

A) some firms will enjoy long-run profits because they operate at minimum average cost. 
B) the long-run price will be $0.20 per pound. 
C) each consumer will purchase $100 worth of potatoes. 
D) the long-run price will be set just above $0.20 per pound. 
A) some firms will enjoy long-run profits because they operate at minimum average cost. 
B) the long-run price will be $0.20 per pound. 
C) each consumer will purchase $100 worth of potatoes. 
D) the long-run price will be set just above $0.20 per pound.

Question 8

Which of the following products would be sold in a competitive market?

Accepted Answer

A) Smartphones 
B) Shoes 
C) Brent crude oil 
D) Motorcycles 
A) Smartphones 
B) Shoes 
C) Brent crude oil 
D) Motorcycles

Question 9

If a market produces a level of output below the competitive equilibrium, then

Accepted Answer

A) social welfare is not maximized. 
B) consumer surplus might still be maximized. 
C) the actual price will be below the equilibrium price. 
D) social welfare might still be enhanced if a price ceiling keeps price below the competitive price. 
A) social welfare is not maximized. 
B) consumer surplus might still be maximized. 
C) the actual price will be below the equilibrium price. 
D) social welfare might still be enhanced if a price ceiling keeps price below the competitive price.

Question 10

With identical firms, constant input prices, and all the other characteristics of a competitive market

Accepted Answer

A) the long run equilibrium price is the minimum of the average cost curve. 
B) a shift in demand will change the equilibrium price and quantity. 
C) the long run and short run equilibria are identical. 
D) Both A and B. 
A) the long run equilibrium price is the minimum of the average cost curve. 
B) a shift in demand will change the equilibrium price and quantity. 
C) the long run and short run equilibria are identical. 
D) Both A and B.

Question 11

The competitive firm's supply curve is equal to

Accepted Answer

A) its marginal cost curve. 
B) the portion of its marginal cost curve that lies above AC. 
C) the portion of its marginal cost curve that lies above AVC. 
D) the portion of its marginal cost curve that lies above AFC. 
A) its marginal cost curve. 
B) the portion of its marginal cost curve that lies above AC. 
C) the portion of its marginal cost curve that lies above AVC. 
D) the portion of its marginal cost curve that lies above AFC.

Question 12

The short run is

Accepted Answer

A) a period of time in which at least one input cannot be varied. 
B) when firms are stuck with sunk costs, unlike the long run. 
C) treated the same way as the long run. 
D) a period of time when no inputs can be varied. 
A) a period of time in which at least one input cannot be varied. 
B) when firms are stuck with sunk costs, unlike the long run. 
C) treated the same way as the long run. 
D) a period of time when no inputs can be varied.

Question 13

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

Accepted Answer

A) producer surplus to increase. 
B) consumer surplus to drop. 
C) consumer surplus to remain unchanged, since they pay the price and only get the rebate later. 
D) producers to stop making "green" automobiles. 
A) producer surplus to increase. 
B) consumer surplus to drop. 
C) consumer surplus to remain unchanged, since they pay the price and only get the rebate later. 
D) producers to stop making "green" automobiles.

Question 14

Like the short run

Accepted Answer

A) the long run supply curve is the sum of the individual firms' supply curves. 
B) the maximum number of firms in the market is fixed. 
C) firms operate only if they make a positive profit. 
D) All of the above. 
A) the long run supply curve is the sum of the individual firms' supply curves. 
B) the maximum number of firms in the market is fixed. 
C) firms operate only if they make a positive profit. 
D) All of the above.

Question 15

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Derive the market supply curve.

Accepted Answer

For each MC = 2q and AVC = q.

Question 16

A horizontal demand curve for a firm implies that

Accepted Answer

A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products. 
A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products.

Question 17

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

Accepted Answer

A) buyers have full information about the firm's price. 
B) the transaction costs of doing business with this firm are low. 
C) there are many buyers. 
D) there is free entry and exit. 
A) buyers have full information about the firm's price. 
B) the transaction costs of doing business with this firm are low. 
C) there are many buyers. 
D) there is free entry and exit.

Question 18

A firm will enter a competitive market when

Accepted Answer

A) it can gather market share at the expense of incumbent firms. 
B) it would not be the last firm entering. 
C) it can earn a positive long-run profit. 
D) the long-run supply curve is upward sloping. 
A) it can gather market share at the expense of incumbent firms. 
B) it would not be the last firm entering. 
C) it can earn a positive long-run profit. 
D) the long-run supply curve is upward sloping.

Question 19

Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals

Accepted Answer

A) 50. 
B) 25. 
C) 12.50. 
D) 10. 
A) 50. 
B) 25. 
C) 12.50. 
D) 10.

Question 20

If firms in a competitive market are NOT identical, then an increase in cost will

Accepted Answer

A) shift marginal cost to the right. 
B) push the most inefficient firms out of the market. 
C) push the most efficient firms out of the market. 
D) Need more information. 
A) shift marginal cost to the right. 
B) push the most inefficient firms out of the market. 
C) push the most efficient firms out of the market. 
D) Need more information.

Long-run market supply curves are downward sloping if

Firms that exhibit price-taking behavior

Producer surplus equals

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

In a perfectly competitive market with 100 identical firms producing at market price p1

A profit maximizing firm selects output such that

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

Which of the following products would be sold in a competitive market?

If a market produces a level of output below the competitive equilibrium, then

With identical firms, constant input prices, and all the other characteristics of a competitive market

The competitive firm's supply curve is equal to

The short run is

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

Like the short run

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q². Derive the market supply curve.

A horizontal demand curve for a firm implies that

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

A firm will enter a competitive market when

Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals

If firms in a competitive market are NOT identical, then an increase in cost will

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

Long-run market supply curves are downward sloping if

Firms that exhibit price-taking behavior

Producer surplus equals

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

In a perfectly competitive market with 100 identical firms producing at market price p1

A profit maximizing firm selects output such that

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

Which of the following products would be sold in a competitive market?

If a market produces a level of output below the competitive equilibrium, then

With identical firms, constant input prices, and all the other characteristics of a competitive market

The competitive firm's supply curve is equal to

The short run is

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

Like the short run

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Derive the market supply curve.

A horizontal demand curve for a firm implies that

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

A firm will enter a competitive market when

Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals

If firms in a competitive market are NOT identical, then an increase in cost will

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. Derive the market supply curve.