Question 1

The total producer surplus in the entire market is given by the ________.

Accepted Answer

A)  product of all the individual sellers' producer surplus 
B)  sum of all the individual sellers' producer surplus 
C)  area between the market supply curve and the market demand curve 
D)  area between the market demand curve and the price line 
A)  product of all the individual sellers' producer surplus 
B)  sum of all the individual sellers' producer surplus 
C)  area between the market supply curve and the market demand curve 
D)  area between the market demand curve and the price line

Question 2

The figure below shows the cost curves of a firm in a competitive market. The firm always makes the choice to maximize its profit.
  
-Refer to the figure above.If the price is more than $1.50 but at most $2.00,the firm should produce ________.

Accepted Answer

A)  0 units to avoid paying the variable cost 
B)  0 units to break even 
C)  the quantity at which the marginal cost equals the price to avoid paying the fixed cost 
D)  the quantity at which the marginal cost equals the price, even though the firm would make a loss 
A)  0 units to avoid paying the variable cost 
B)  0 units to break even 
C)  the quantity at which the marginal cost equals the price to avoid paying the fixed cost 
D)  the quantity at which the marginal cost equals the price, even though the firm would make a loss

Question 3

When the price of a good increases by 300 percent,the quantity supplied of the good increases from 200 units to 900 units.The price elasticity of supply of the good is ________.

Accepted Answer

A)  1.17 
B)  1.5 
C)  3 
D)  4.5 
A)  1.17 
B)  1.5 
C)  3 
D)  4.5

Question 4

Free entry is said to exist in an industry when ________.

Accepted Answer

A)  all firms entering the industry enjoy economies of scale 
B)  entry to the industry is unfettered by any special legal or technical barriers 
C)  equal amounts of inputs are available to all firms entering the industry 
D)  the government subsidizes costs for all new firms entering the industry 
A)  all firms entering the industry enjoy economies of scale 
B)  entry to the industry is unfettered by any special legal or technical barriers 
C)  equal amounts of inputs are available to all firms entering the industry 
D)  the government subsidizes costs for all new firms entering the industry

Question 5

Which of the following is the difference between variable costs and fixed costs?

Accepted Answer

A)  Variable costs are the costs incurred on variable factors of production, whereas fixed costs are the costs incurred on all factors of production. 
B)  Variable costs of a firm are zero after a firm shuts down, whereas the firm continues to incur the fixed costs of production in the short run. 
C)  Variable costs exist even when production is zero, whereas fixed costs exist only when there is some positive level of production. 
D)  Variable costs are incurred by a firm only in the long run, whereas the firm incurs some fixed costs in both the short run and the long run. 
A)  Variable costs are the costs incurred on variable factors of production, whereas fixed costs are the costs incurred on all factors of production. 
B)  Variable costs of a firm are zero after a firm shuts down, whereas the firm continues to incur the fixed costs of production in the short run. 
C)  Variable costs exist even when production is zero, whereas fixed costs exist only when there is some positive level of production. 
D)  Variable costs are incurred by a firm only in the long run, whereas the firm incurs some fixed costs in both the short run and the long run.

Question 6

Which of the following statements is true?

Accepted Answer

A)  The marginal entrant in a market earns the highest profit. 
B)  The marginal entrant has the lowest cost among all the firms in a market. 
C)  Differences in technology and experience can lead to firms having different costs even under perfect competition. 
D)  In a market that has identical cost structures for all firms, there is a possibility of positive economic profits in both the short run and the long run. 
A)  The marginal entrant in a market earns the highest profit. 
B)  The marginal entrant has the lowest cost among all the firms in a market. 
C)  Differences in technology and experience can lead to firms having different costs even under perfect competition. 
D)  In a market that has identical cost structures for all firms, there is a possibility of positive economic profits in both the short run and the long run.

Question 7

The exit of a firm ________.

Accepted Answer

A)  is a short-run decision by the firm to not produce anything 
B)  is a long-run decision by the firm to leave a market 
C)  refers to a refusal to work organized by a group of the firm's employees 
D)  refers to the temporary decision of the firm not to hire any new employees 
A)  is a short-run decision by the firm to not produce anything 
B)  is a long-run decision by the firm to leave a market 
C)  refers to a refusal to work organized by a group of the firm's employees 
D)  refers to the temporary decision of the firm not to hire any new employees

Question 8

Scenario: 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). Initially, all firms in this market have identical cost curves MC₁ and ATC₁, and the market is in equilibrium at point A. Subsequently, a new production technology has been developed for this product. Some of the existing firms as well as some new firms have adopted the new technology, and their cost curves are MC₂ and ATC₂.
  
-Refer to the figure above.At the initial equilibrium A,________.

Accepted Answer

A)  only the firms with new technology enter the market 
B)  only the firms with old technology enter the market 
C)  both firms with old and new technologies enter the market 
D)  existing firms (with old technology) exit the market 
A)  only the firms with new technology enter the market 
B)  only the firms with old technology enter the market 
C)  both firms with old and new technologies enter the market 
D)  existing firms (with old technology) exit the market

Question 9

A good with a perfectly inelastic supply has a price elasticity of supply that is ________.

Accepted Answer

A)  equal to zero 
B)  between zero and one 
C)  equal to one 
D)  greater than one 
A)  equal to zero 
B)  between zero and one 
C)  equal to one 
D)  greater than one

Question 10

The total cost of a firm is $50,the average variable cost is $2,and the average fixed cost is $3.How many units of output does the firm produce?

Accepted Answer

A)  5 units 
B)  10 units 
C)  15 units 
D)  18 units 
A)  5 units 
B)  10 units 
C)  15 units 
D)  18 units

Question 11

The firm maximizes profits by ________.

Accepted Answer

A)  shutting down 
B)  producing 11 units of output 
C)  producing 40 units of output 
D)  producing 80 units of output 
A)  shutting down 
B)  producing 11 units of output 
C)  producing 40 units of output 
D)  producing 80 units of output

Question 12

Specialization is the result of ________.

Accepted Answer

A)  hiring experienced workers 
B)  paying higher wages to experienced workers 
C)  workers developing a certain skill set 
D)  increased demand for a firm's commodity 
A)  hiring experienced workers 
B)  paying higher wages to experienced workers 
C)  workers developing a certain skill set 
D)  increased demand for a firm's commodity

Question 13

Which of the following is an example of a sunk cost?

Accepted Answer

A)  The cost of painting a new office area 
B)  The wages paid to workers in a mill 
C)  The cost of the raw materials used in a factory 
D)  The cost of the electricity used in an office 
A)  The cost of painting a new office area 
B)  The wages paid to workers in a mill 
C)  The cost of the raw materials used in a factory 
D)  The cost of the electricity used in an office

Question 14

The following figure shows the cost curves on a firm that operates in a competitive market. Assume that all the firms in this market have identical cost structure.
  
-Refer to the graph above.Which of the following graphs,correctly represents this competitive market's demand and supply in the long run?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 15

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves.
  
-Refer to the figure above.The firm is currently producing at point B.An increase in its capital may be represented by ________.

Accepted Answer

A)  a movement to A 
B)  a movement to C 
C)  a movement to D 
D)  a movement to E 
A)  a movement to A 
B)  a movement to C 
C)  a movement to D 
D)  a movement to E

Question 16

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank.
  
-Refer to the table above.What is the fixed cost of this firm when it produces 14 units of output?

Accepted Answer

A)  $100 
B)  $120 
C)  $0 
D)  $15 
A)  $100 
B)  $120 
C)  $0 
D)  $15

Question 17

Differentiate between the terms "revenue" and "profit." Assume that a firm sells 20 units of a good at a price of $5 per unit.If the average total cost of the firm is $3 per unit,calculate the firm's profit.

Accepted Answer

The revenue of a firm is equal to the pr

Question 18

The equilibrium price of a good sold in a competitive market is $10.If an individual firm decides to sell its product at a price higher than $10,________.

Accepted Answer

A)  the firm's profits will increase 
B)  the firm's revenue will increase 
C)  the firm will lose all its consumers 
D)  the firm's cost of production will decrease 
A)  the firm's profits will increase 
B)  the firm's revenue will increase 
C)  the firm will lose all its consumers 
D)  the firm's cost of production will decrease

Question 19

Scenario: David runs a janitorial service company. The following table shows the total number of rooms that can be cleaned by the specified number of workers and industrial vacuum cleaners.
  
-Refer to the scenario above.There is a(n)________ relationship between the variable input and the output in this production process.

Accepted Answer

A)  increasing 
B)  decreasing 
C)  increasing at first, and then decreasing 
D)  decreasing at first, and then increasing 
A)  increasing 
B)  decreasing 
C)  increasing at first, and then decreasing 
D)  decreasing at first, and then increasing

Question 20

Scenario: 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). Initially, all firms in this market have identical cost curves MC₁ and ATC₁, and the market is in equilibrium at point A. Subsequently, a new production technology has been developed for this product. Some of the existing firms as well as some new firms have adopted the new technology, and their cost curves are MC₂ and ATC₂.
  
-Refer to the figure above.At the long-run equilibrium,________.

Accepted Answer

A)  only the firms with new technology will be in the market 
B)  only the firms with old technology will be in the market 
C)  both firms with new and old technology will be in the market 
D)  firms with old technology will re-enter the market 
A)  only the firms with new technology will be in the market 
B)  only the firms with old technology will be in the market 
C)  both firms with new and old technology will be in the market 
D)  firms with old technology will re-enter the market

The total producer surplus in the entire market is given by the ________.

The figure below shows the cost curves of a firm in a competitive market. The firm always makes the choice to maximize its profit. -Refer to the figure above.If the price is more than $1.50 but at most $2.00,the firm should produce ________.

When the price of a good increases by 300 percent,the quantity supplied of the good increases from 200 units to 900 units.The price elasticity of supply of the good is ________.

Free entry is said to exist in an industry when ________.

Which of the following is the difference between variable costs and fixed costs?

Which of the following statements is true?

The exit of a firm ________.

A good with a perfectly inelastic supply has a price elasticity of supply that is ________.

The total cost of a firm is $50,the average variable cost is $2,and the average fixed cost is $3.How many units of output does the firm produce?

The firm maximizes profits by ________.

Specialization is the result of ________.

Which of the following is an example of a sunk cost?

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves. -Refer to the figure above.The firm is currently producing at point B.An increase in its capital may be represented by ________.

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank. -Refer to the table above.What is the fixed cost of this firm when it produces 14 units of output?

Differentiate between the terms "revenue" and "profit." Assume that a firm sells 20 units of a good at a price of $5 per unit.If the average total cost of the firm is $3 per unit,calculate the firm's profit.

The equilibrium price of a good sold in a competitive market is $10.If an individual firm decides to sell its product at a price higher than $10,________.

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

The total producer surplus in the entire market is given by the ________.

The figure below shows the cost curves of a firm in a competitive market. The firm always makes the choice to maximize its profit. -Refer to the figure above.If the price is more than $1.50 but at most $2.00,the firm should produce ________.

When the price of a good increases by 300 percent,the quantity supplied of the good increases from 200 units to 900 units.The price elasticity of supply of the good is ________.

Free entry is said to exist in an industry when ________.

Which of the following is the difference between variable costs and fixed costs?

Which of the following statements is true?

The exit of a firm ________.

A good with a perfectly inelastic supply has a price elasticity of supply that is ________.

The total cost of a firm is $50,the average variable cost is $2,and the average fixed cost is $3.How many units of output does the firm produce?

The firm maximizes profits by ________.

Specialization is the result of ________.

Which of the following is an example of a sunk cost?

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves. -Refer to the figure above.The firm is currently producing at point B.An increase in its capital may be represented by ________.

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank. -Refer to the table above.What is the fixed cost of this firm when it produces 14 units of output?

Differentiate between the terms "revenue" and "profit." Assume that a firm sells 20 units of a good at a price of $5 per unit.If the average total cost of the firm is $3 per unit,calculate the firm's profit.

The equilibrium price of a good sold in a competitive market is $10.If an individual firm decides to sell its product at a price higher than $10,________.

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