Question 1

In a competitive market,there are a ________ number of buyers and a ________ number of sellers.

Accepted Answer

A)  large; small 
B)  small; large 
C)  small; small 
D)  large; large 
A)  large; small 
B)  small; large 
C)  small; small 
D)  large; large

Question 2

The total cost of production refers to the ________.

Accepted Answer

A)  sum of variable costs and fixed costs 
B)  product of variable costs and fixed costs 
C)  difference between variable costs and fixed costs 
D)  ratio of variable costs to fixed costs 
A)  sum of variable costs and fixed costs 
B)  product of variable costs and fixed costs 
C)  difference between variable costs and fixed costs 
D)  ratio of variable costs to fixed costs

Question 3

Price in a perfectly competitive market is ________.

Accepted Answer

A)  affected by government policies 
B)  determined by the dominant seller 
C)  affected by the combined decision of all buyers and sellers 
D)  determined by buyers alone 
A)  affected by government policies 
B)  determined by the dominant seller 
C)  affected by the combined decision of all buyers and sellers 
D)  determined by buyers alone

Question 4

Explain the impact on producer surplus of an increase in the demand for Good X with the help of a suitable diagram.

Accepted Answer

@#IMG-DLM& 
See the above figure.Change in produce

Question 5

The following table shows the output and cost figures for a bakery.Calculate the missing values in the table.

Accepted Answer

The values

Question 6

The figure below shows the supply and the demand for a good (left) and the cost curves of an individual firm in this market (right). Assume that all firms in this market, including the potential entrants, have identical cost curves. Initially, the market is in equilibrium at point A.
  
-Refer to the figure above.Suppose that the market has reached the long-run equilibrium.Then,due to news of the product's defects and recall,the demand falls by 4 units at each price.At the new equilibrium,each firm in the market earns ________ and there will be ________.

Accepted Answer

A)  positive economic profit; entries of new firms 
B)  negative economic profit; exit of existing firms 
C)  zero economic profit; neither entry nor exit of firms 
D)  zero accounting profit; both entry and exit of firms 
A)  positive economic profit; entries of new firms 
B)  negative economic profit; exit of existing firms 
C)  zero economic profit; neither entry nor exit of firms 
D)  zero accounting profit; both entry and exit of firms

Question 7

Scenario: A perfectly competitive firm has the following cost functions:
Total cost: TC(q) = $10,000 = $100q = $10q²,
Marginal cost: MC(q) = $100 + $20q,
and it faces a market price of $900 per unit. The average and total cost curves are shown in the following figure.
  
-Refer to the scenario above.The firm's average total cost is given by ________.

Accepted Answer

A)  $10,000 
B)  $100 + $20q 
C)  $100 + $10q 
D)  $10,000/q + $100 + $10q 
A)  $10,000 
B)  $100 + $20q 
C)  $100 + $10q 
D)  $10,000/q + $100 + $10q

Question 8

A ________ is a payment or a tax break used as an incentive for an agent to complete an activity.

Accepted Answer

A)  tariff 
B)  subsidy 
C)  wage 
D)  rent 
A)  tariff 
B)  subsidy 
C)  wage 
D)  rent

Question 9

According to the U.S. Internal Revenue Service, "A section 501(c)(3) [a.k.a. non-profit] organization must not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization."
-Refer to the scenario above.The IRS rule implies that ________.

Accepted Answer

A)  it is illegal for a nonprofit organization to make a profit 
B)  a nonprofit organization must make zero profit (break even) 
C)  it is illegal for a nonprofit organization to maximize the profit 
D)  a nonprofit organization can use its profit only to further its mission 
A)  it is illegal for a nonprofit organization to make a profit 
B)  a nonprofit organization must make zero profit (break even) 
C)  it is illegal for a nonprofit organization to maximize the profit 
D)  a nonprofit organization can use its profit only to further its mission

Question 10

A firm ________.

Accepted Answer

A)  includes many people and cannot consist of only one person. 
B)  is a business entity that produces goods or services 
C)  is a business entity that is owned by the government 
D)  is always a price taker 
A)  includes many people and cannot consist of only one person. 
B)  is a business entity that produces goods or services 
C)  is a business entity that is owned by the government 
D)  is always a price taker

Question 11

In the figure below,the firm's total producer surplus,if it is producing 18 units of output and receiving a price of $36 per unit,is ________.

Accepted Answer

A)  $0 
B)  $162 
C)  $324 
D)  $648 
A)  $0 
B)  $162 
C)  $324 
D)  $648

Question 12

A firm should shut down in the short run if the price of a good is less than its ________.

Accepted Answer

A)  average fixed cost 
B)  average total cost 
C)  average variable cost 
D)  marginal cost 
A)  average fixed cost 
B)  average total cost 
C)  average variable cost 
D)  marginal cost

Question 13

Scenario: Kellog's makes Raisin Bran, Granola Raisin & Honey Frosted Flakes cereal, Apple Jacks cereal, and Smorz cereal, among others-in all more than forty varieties of breakfast cereal. General Mills, one of Kellog's many competitors, make Cheerios, Chex, Trix, and so on.
-Refer to the scenario above.Which condition of a perfectly competitive market could most directly be violated in the market for breakfast cereal?

Accepted Answer

A)  Each seller produces a negligible fraction of the total market supply. 
B)  Each seller produces an identical good or service. 
C)  Free entry to and exit from the market. 
D)  None. The market for cereals satisfies all the condition for perfect competition. 
A)  Each seller produces a negligible fraction of the total market supply. 
B)  Each seller produces an identical good or service. 
C)  Free entry to and exit from the market. 
D)  None. The market for cereals satisfies all the condition for perfect competition.

Question 14

A firm uses workers,land,and machinery in its production process.Which of the following statements is true in the long run?

Accepted Answer

A)  The only way the firm can change its output level is by changing the number of workers. 
B)  The only way the firm can change its output level is by changing the amount of land it owns. 
C)  The only way the firm can change its output level is by changing the amount of machinery it owns. 
D)  The firm can change its output level by changing any or all of its three inputs. 
A)  The only way the firm can change its output level is by changing the number of workers. 
B)  The only way the firm can change its output level is by changing the amount of land it owns. 
C)  The only way the firm can change its output level is by changing the amount of machinery it owns. 
D)  The firm can change its output level by changing any or all of its three inputs.

Question 15

Which of the following statements is true of a perfectly competitive market?

Accepted Answer

A)  Sellers in the market produce differentiated goods. 
B)  There is free entry and exit in the market. 
C)  There are only a few buyers and sellers in the market. 
D)  Sellers and buyers both set prices to compete in the market. 
A)  Sellers in the market produce differentiated goods. 
B)  There is free entry and exit in the market. 
C)  There are only a few buyers and sellers in the market. 
D)  Sellers and buyers both set prices to compete in the market.

Question 16

Which of the following situations depicts diseconomies of scale?

Accepted Answer

A)  The average total cost of a firm increasing from $50 to $55 when it increases its production from 10 units to 20 units 
B)  The average total cost of a firm decreasing from $50 to $40 when it increases its production from 10 units to 20 units 
C)  The average total cost of a firm remaining at $50 when it increases its production from 10 units to 20 units 
D)  The average total cost of a firm remaining at $50 when it decreases its production from 20 units to 10 units 
A)  The average total cost of a firm increasing from $50 to $55 when it increases its production from 10 units to 20 units 
B)  The average total cost of a firm decreasing from $50 to $40 when it increases its production from 10 units to 20 units 
C)  The average total cost of a firm remaining at $50 when it increases its production from 10 units to 20 units 
D)  The average total cost of a firm remaining at $50 when it decreases its production from 20 units to 10 units

Question 17

Which of the following is an example of specialization?

Accepted Answer

A)  The output of workers in a chocolate factory doubling when a new manager was appointed 
B)  The cost of production of a light bulb making factory decreasing as its capacity increased 
C)  Different workers in a shoe factory being allotted different parts of shoe making instead of a worker making an entire shoe 
D)  The import of better technology and machinery from developed countries greatly increasing the number of laser printers manufactured by a company 
A)  The output of workers in a chocolate factory doubling when a new manager was appointed 
B)  The cost of production of a light bulb making factory decreasing as its capacity increased 
C)  Different workers in a shoe factory being allotted different parts of shoe making instead of a worker making an entire shoe 
D)  The import of better technology and machinery from developed countries greatly increasing the number of laser printers manufactured by a company

Question 18

Billy runs an accounting firm.He has three full-time employees who are paid an annual salary of $135,000 each.For 4 weeks during the tax preparation season,Billy hires additional staff on a temporary basis to meet the surge in demand for his firm's service.Billy must also pay a premium for professional liability insurance for the whole firm every month.For Billy's firm,________.

Accepted Answer

A)  the full-time employees and the liability insurance are fixed inputs 
B)  all employees, full-time and temporary, are variable inputs 
C)  the liability insurance is a variable input 
D)  all inputs are variable 
A)  the full-time employees and the liability insurance are fixed inputs 
B)  all employees, full-time and temporary, are variable inputs 
C)  the liability insurance is a variable input 
D)  all inputs are variable

Question 19

The marginal cost curve intersects ________.

Accepted Answer

A)  the total cost curve, the fixed cost curve, and the variable cost curve at their minimums 
B)  the average fixed cost curve at its maximum 
C)  the average fixed cost curve at its minimum 
D)  both the average variable cost curve and the average total cost curve at their minimums 
A)  the total cost curve, the fixed cost curve, and the variable cost curve at their minimums 
B)  the average fixed cost curve at its maximum 
C)  the average fixed cost curve at its minimum 
D)  both the average variable cost curve and the average total cost curve at their minimums

Question 20

If new firms enter an existing market,________.

Accepted Answer

A)  the market price is likely to fall 
B)  the market demand is likely to increase 
C)  the market supply is likely to fall 
D)  the profits of all firms are likely to increase 
A)  the market price is likely to fall 
B)  the market demand is likely to increase 
C)  the market supply is likely to fall 
D)  the profits of all firms are likely to increase

In a competitive market,there are a number of buyers and a number of sellers.

The total cost of production refers to the ________.

Price in a perfectly competitive market is ________.

Explain the impact on producer surplus of an increase in the demand for Good X with the help of a suitable diagram.

The following table shows the output and cost figures for a bakery.Calculate the missing values in the table.

A ________ is a payment or a tax break used as an incentive for an agent to complete an activity.

A firm ________.

In the figure below,the firm's total producer surplus,if it is producing 18 units of output and receiving a price of $36 per unit,is ________.

A firm should shut down in the short run if the price of a good is less than its ________.

A firm uses workers,land,and machinery in its production process.Which of the following statements is true in the long run?

Which of the following statements is true of a perfectly competitive market?

Which of the following situations depicts diseconomies of scale?

Which of the following is an example of specialization?

The marginal cost curve intersects ________.

If new firms enter an existing market,________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 6: Sellers and Incentives

In a competitive market,there are a ________ number of buyers and a ________ number of sellers.

The total cost of production refers to the ________.

Price in a perfectly competitive market is ________.

Explain the impact on producer surplus of an increase in the demand for Good X with the help of a suitable diagram.

The following table shows the output and cost figures for a bakery.Calculate the missing values in the table.

A ________ is a payment or a tax break used as an incentive for an agent to complete an activity.

A firm ________.

In the figure below,the firm's total producer surplus,if it is producing 18 units of output and receiving a price of $36 per unit,is ________.

A firm should shut down in the short run if the price of a good is less than its ________.

A firm uses workers,land,and machinery in its production process.Which of the following statements is true in the long run?

Which of the following statements is true of a perfectly competitive market?

Which of the following situations depicts diseconomies of scale?

Which of the following is an example of specialization?

The marginal cost curve intersects ________.

If new firms enter an existing market,________.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

In a competitive market,there are a number of buyers and a number of sellers.