Question 1

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Accepted Answer

A) Firms earn no economic profit in the long run. 
B) Marginal revenue does not have to equal marginal cost. 
C) p - MC = 0. 
D) Price equals marginal revenue. 
A) Firms earn no economic profit in the long run. 
B) Marginal revenue does not have to equal marginal cost. 
C) p - MC = 0. 
D) Price equals marginal revenue.

Question 2

Market consumer surplus

Accepted Answer

A) is the area under the demand curve and above market price, up to the quantity actually bought. 
B) is equal to total market revenue minus cost. 
C) does not depend on the quantity sold. 
D) is the area under the market price and above the marginal cost curve. 
A) is the area under the demand curve and above market price, up to the quantity actually bought. 
B) is equal to total market revenue minus cost. 
C) does not depend on the quantity sold. 
D) is the area under the market price and above the marginal cost curve.

Question 3

An increase in the cost of an input will result in

Accepted Answer

A) a leftward shift in the firm's supply curve. 
B) an upward shift of the firm's marginal cost curve. 
C) a leftward shift of the market supply curve. 
D) All of the above. 
A) a leftward shift in the firm's supply curve. 
B) an upward shift of the firm's marginal cost curve. 
C) a leftward shift of the market supply curve. 
D) All of the above.

Question 4

Assuming a horizontal long-run market supply curve, which of the following statements is (are)TRUE about competitive firms in the long run?

Accepted Answer

A) p = MC 
B) p = AC 
C) profit = 0 
D) All of the above. 
A) p = MC 
B) p = AC 
C) profit = 0 
D) All of the above.

Question 5

If a firm cannot earn profits in the short run, it will shut down.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) social welfare will be higher. 
B) producer surplus will be higher. 
C) marginal cost will exceed price. 
D) All of the above. 
A) social welfare will be higher. 
B) producer surplus will be higher. 
C) marginal cost will exceed price. 
D) All of the above.

Question 7

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). At the current price of $0.35 per minute, consumer surplus equals

Accepted Answer

A) $301.00. 
B) $924.50. 
C) $1,225.50. 
D) $1,250.00. 
A) $301.00. 
B) $924.50. 
C) $1,225.50. 
D) $1,250.00.

Question 8

Consumer surplus

Accepted Answer

A) is the difference between what a consumer pays for a good and the producer's cost. 
B) is the extra money a consumer pays above the minimum necessary price for the producer to produce it. 
C) is the difference between what a consumer would willingly pay for a good and the price actually paid. 
D) equals zero in the long run. 
A) is the difference between what a consumer pays for a good and the producer's cost. 
B) is the extra money a consumer pays above the minimum necessary price for the producer to produce it. 
C) is the difference between what a consumer would willingly pay for a good and the price actually paid. 
D) equals zero in the long run.

Question 9

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

Accepted Answer

A) the firm will shut down. 
B) revenue covers variable costs and some of the fixed costs and profit is positive. 
C) revenue covers variable costs and some of the fixed costs, although profit is negative. 
D) economic profit is zero. 
A) the firm will shut down. 
B) revenue covers variable costs and some of the fixed costs and profit is positive. 
C) revenue covers variable costs and some of the fixed costs, although profit is negative. 
D) economic profit is zero.

Question 10

The model of perfect competition is valuable for

Accepted Answer

A) prediction. 
B) comparison to other markets. 
C) Either A or B. 
D) None of the above. 
A) prediction. 
B) comparison to other markets. 
C) Either A or B. 
D) None of the above.

Question 11

Producer surplus is equal to

Accepted Answer

A) the area under the supply curve. 
B) the difference between price and average cost for all units sold. 
C) the difference between price and marginal cost for all units sold. 
D) the firm's profit when fixed costs exist. 
A) the area under the supply curve. 
B) the difference between price and average cost for all units sold. 
C) the difference between price and marginal cost for all units sold. 
D) the firm's profit when fixed costs exist.

Question 12

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves. If there are 100 identical firms, the market supply curve is best represented by

Accepted Answer

A) curve A. 
B) curve B. 
C) curve C. 
D) either curve A or B, but definitely not C. 
A) curve A. 
B) curve B. 
C) curve C. 
D) either curve A or B, but definitely not C.

Question 13

Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product

Accepted Answer

A) is maximized. 
B) can't be calculated. 
C) equals zero. 
D) Need more information. 
A) is maximized. 
B) can't be calculated. 
C) equals zero. 
D) Need more information.

Question 14

In the long run, profits will equal zero in a competitive market because of

Accepted Answer

A) constant returns to scale. 
B) identical products being produced by all firms. 
C) the availability of information. 
D) free entry and exit. 
A) constant returns to scale. 
B) identical products being produced by all firms. 
C) the availability of information. 
D) free entry and exit.

Question 15

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

Accepted Answer

A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost. 
A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost.

Question 16

The long-run supply curve in a competitive market is upward-sloping.

Accepted Answer

A) True 
 B)False

Question 17

If a market is NOT perfectly competitive, then government intervention

Accepted Answer

A) is always justifiable. 
B) will usually decrease economic well-being. 
C) guarantees that societal well-being will be maximized. 
D) may increase economic well-being. 
A) is always justifiable. 
B) will usually decrease economic well-being. 
C) guarantees that societal well-being will be maximized. 
D) may increase economic well-being.

Question 18

A competitive firm's supply curve is identical to its marginal cost curve.

Accepted Answer

A) True 
 B)False

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Market consumer surplus

An increase in the cost of an input will result in

Assuming a horizontal long-run market supply curve, which of the following statements is (are)TRUE about competitive firms in the long run?

If a firm cannot earn profits in the short run, it will shut down.

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

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). At the current price of $0.35 per minute, consumer surplus equals

Consumer surplus

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

The model of perfect competition is valuable for

Producer surplus is equal to

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves. If there are 100 identical firms, the market supply curve is best represented by

Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product

In the long run, profits will equal zero in a competitive market because of

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

The long-run supply curve in a competitive market is upward-sloping.

If a market is NOT perfectly competitive, then government intervention

A competitive firm's supply curve is identical to its marginal cost curve.

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

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Market consumer surplus

An increase in the cost of an input will result in

Assuming a horizontal long-run market supply curve, which of the following statements is (are)TRUE about competitive firms in the long run?

If a firm cannot earn profits in the short run, it will shut down.

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

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). At the current price of $0.35 per minute, consumer surplus equals

Consumer surplus

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

The model of perfect competition is valuable for

Producer surplus is equal to

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves. If there are 100 identical firms, the market supply curve is best represented by

Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product

In the long run, profits will equal zero in a competitive market because of

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

The long-run supply curve in a competitive market is upward-sloping.

If a market is NOT perfectly competitive, then government intervention

A competitive firm's supply curve is identical to its marginal cost curve.

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