Question 1

When new firms enter a competitive price-taker market,

Accepted Answer

A) economic profits of existing firms will continue to be zero. 
B) entering firms will earn zero economic profit upon entry into the market. 
C) existing firms may see their costs rise as more firms compete for limited resources. 
D) prices will rise as existing firms raise prices to keep new firms out of the market. 
A) economic profits of existing firms will continue to be zero. 
B) entering firms will earn zero economic profit upon entry into the market. 
C) existing firms may see their costs rise as more firms compete for limited resources. 
D) prices will rise as existing firms raise prices to keep new firms out of the market. C

Question 2

A price-taker firm is currently producing 50 units of output at an average total cost of $3 per unit.If the market price is $7,then the firm's total economic profit is

Accepted Answer

A) $4. 
B) $150. 
C) $200. 
D) $350. 
A) $4. 
B) $150. 
C) $200. 
D) $350. C

Question 3

In a price-taker market,the short-run market supply curve is the

Accepted Answer

A) vertical sum of the marginal cost curves of all firms in the market. 
B) vertical sum of the average variable cost curves of all firms. 
C) horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D) horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price. 
A) vertical sum of the marginal cost curves of all firms in the market. 
B) vertical sum of the average variable cost curves of all firms. 
C) horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D) horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price. C

Question 4

Figure 9-15

-At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

Accepted Answer

A) $40 and 80 
B) $8 and 70 
C) $4 and 40 
D) $40 and 70 
E) $8 and zero output 
A) $40 and 80 
B) $8 and 70 
C) $4 and 40 
D) $40 and 70 
E) $8 and zero output

Question 5

If a firm is a price taker and wants to earn as much profit as possible,it should expand output

Accepted Answer

A) to the quantity at which marginal cost is minimized. 
B) as long as marginal cost is less than price. 
C) to the quantity at which average total costs are minimized. 
D) to try to sell all the output it can produce so that its average fixed costs will be minimized. 
A) to the quantity at which marginal cost is minimized. 
B) as long as marginal cost is less than price. 
C) to the quantity at which average total costs are minimized. 
D) to try to sell all the output it can produce so that its average fixed costs will be minimized.

Question 6

The short-run supply curve in a price-taking industry is the

Accepted Answer

A) horizontal summation of the individual firms' MC curves above ATC. 
B) horizontal summation of the individual firms' MC curves above AVC. 
C) horizontal summation of the individual firms' AVC curves above MC. 
D) vertical summation of ATC curves above AVC. 
A) horizontal summation of the individual firms' MC curves above ATC. 
B) horizontal summation of the individual firms' MC curves above AVC. 
C) horizontal summation of the individual firms' AVC curves above MC. 
D) vertical summation of ATC curves above AVC.

Question 7

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Accepted Answer

A) vertical. 
B) more inelastic. 
C) more elastic. 
D) of unitary elasticity. 
A) vertical. 
B) more inelastic. 
C) more elastic. 
D) of unitary elasticity.

Question 8

Regarding costs of production,can a firm ever be at a point that is not on the marginal cost curve? Explain.

Accepted Answer

A profit-maximizing,price-taker firm alw

Question 9

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Accepted Answer

A) MC curves above AVC. 
B) AVC curves above marginal revenue. 
C) MC curves above ATC. 
D) MC curves between AVC and ATC. 
A) MC curves above AVC. 
B) AVC curves above marginal revenue. 
C) MC curves above ATC. 
D) MC curves between AVC and ATC.

Question 10

Amy runs a business in a market where all firms are price takers.Bill suggests that she lower her price to attract even more business.Should Amy follow Bill's suggestion,or should she even consider raising her price?

Accepted Answer

If Amy lowers her price,this will reduce

Question 11

Figure 9-5
  
-If the market price in Figure 9-5 fell to $2.50,what should the firm do?

Accepted Answer

A) raise its price 
B) shut down and wait for conditions to improve 
C) continue operating in the short run if it expects conditions to improve 
D) go out of business immediately 
A) raise its price 
B) shut down and wait for conditions to improve 
C) continue operating in the short run if it expects conditions to improve 
D) go out of business immediately

Question 12

The schedule of total costs for a chair-manufacturing firm is presented in the table below.If the market price of chairs is $100,which of the output levels should this price-taker firm produce in order to maximize profit?

Accepted Answer

A) 10 
B) 20 
C) 30 
D) 40 
A) 10 
B) 20 
C) 30 
D) 40

Question 13

When a firm in a price-taker industry is in long-run equilibrium,the market price equals

Accepted Answer

A) marginal cost but may be greater or less than average total cost. 
B) both average total cost and marginal cost. 
C) average total cost but may be greater or less than marginal cost. 
D) marginal revenue but may be greater or less than both average total cost and marginal cost. 
A) marginal cost but may be greater or less than average total cost. 
B) both average total cost and marginal cost. 
C) average total cost but may be greater or less than marginal cost. 
D) marginal revenue but may be greater or less than both average total cost and marginal cost.

Question 14

Table 9-1
  
-Refer to Table 9-1.If the Tuckers are profit maximizers,how many tomatoes should they produce when the market price is $500 per ton?

Accepted Answer

A) 6 
B) 7 
C) 8 
D) 9 
A) 6 
B) 7 
C) 8 
D) 9

Question 15

In the long run,in a price-taker market,the price of a good is determined primarily by the

Accepted Answer

A) average total cost of producing it. 
B) decision of buyers in determining how much they are willing to pay for the good. 
C) elasticity of supply. 
D) number of firms in the industry. 
A) average total cost of producing it. 
B) decision of buyers in determining how much they are willing to pay for the good. 
C) elasticity of supply. 
D) number of firms in the industry.

Question 16

In competitive price-taker markets,firms

Accepted Answer

A) can sell all of their output at the market price. 
B) produce differentiated products. 
C) can influence the market price by altering their output level. 
D) are large relative to the total market. 
A) can sell all of their output at the market price. 
B) produce differentiated products. 
C) can influence the market price by altering their output level. 
D) are large relative to the total market.

Question 17

A firm in competitive price-taker market is maximizing profit at Q = 3,000.Then its fixed cost increases.The profit-maximizing output is now

Accepted Answer

A) greater than 3,000 and profit decreases 
B) less than 3,000 and profit decreases 
C) greater than 3,000 and profit is unchanged 
D) equal to 3,000 and profit decreases 
E) equal to 3,000 and profit increases 
A) greater than 3,000 and profit decreases 
B) less than 3,000 and profit decreases 
C) greater than 3,000 and profit is unchanged 
D) equal to 3,000 and profit decreases 
E) equal to 3,000 and profit increases

Question 18

For a certain firm,the 100th unit of output that the firm produces has marginal revenue equal to $10 and a marginal cost of $7.It follows that

Accepted Answer

A) the production of the 100th unit of output increases the firm's profit by $3. 
B) the production of the 100th unit of output increases the firm's average total cost by $7. 
C) the firm's profit-maximizing level of output is less than 100 units. 
D) the production of the 110th unit of output must increase the firm's profit by less than $3. 
A) the production of the 100th unit of output increases the firm's profit by $3. 
B) the production of the 100th unit of output increases the firm's average total cost by $7. 
C) the firm's profit-maximizing level of output is less than 100 units. 
D) the production of the 110th unit of output must increase the firm's profit by less than $3.

Question 19

Why is it considered "ideal" for price to just equal marginal cost?

Accepted Answer

When price equals marginal cost,the cost

Question 20

Scenario 9-1
Assume a certain competitive price-taker firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit.
-Refer to Scenario 9-1.At Q = 999,the firm's profit amounts to

Accepted Answer

A) $993. 
B) $997. 
C) $1,003. 
D) $1,007. 
A) $993. 
B) $997. 
C) $1,003. 
D) $1,007.

Exam 22: Aprice Takers and the Competitive Process

When new firms enter a competitive price-taker market,

A price-taker firm is currently producing 50 units of output at an average total cost of $3 per unit.If the market price is $7,then the firm's total economic profit is

In a price-taker market,the short-run market supply curve is the

Figure 9-15 -At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

If a firm is a price taker and wants to earn as much profit as possible,it should expand output

The short-run supply curve in a price-taking industry is the

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Regarding costs of production,can a firm ever be at a point that is not on the marginal cost curve? Explain.

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Amy runs a business in a market where all firms are price takers.Bill suggests that she lower her price to attract even more business.Should Amy follow Bill's suggestion,or should she even consider raising her price?

Figure 9-5 -If the market price in Figure 9-5 fell to $2.50,what should the firm do?

The schedule of total costs for a chair-manufacturing firm is presented in the table below.If the market price of chairs is $100,which of the output levels should this price-taker firm produce in order to maximize profit?

When a firm in a price-taker industry is in long-run equilibrium,the market price equals

Table 9-1 -Refer to Table 9-1.If the Tuckers are profit maximizers,how many tomatoes should they produce when the market price is $500 per ton?

In the long run,in a price-taker market,the price of a good is determined primarily by the

In competitive price-taker markets,firms

A firm in competitive price-taker market is maximizing profit at Q = 3,000.Then its fixed cost increases.The profit-maximizing output is now

For a certain firm,the 100th unit of output that the firm produces has marginal revenue equal to $10 and a marginal cost of $7.It follows that

Why is it considered "ideal" for price to just equal marginal cost?

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output.At Q = 1,000,the firm's marginal cost equals $15 and its average total cost equals $11.The firm sells its output for $12 per unit. -Refer to Scenario 9-1.At Q = 999,the firm's profit amounts to

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

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Creating an Environment for Growth and Prosperity

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Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Price-Searcher Markets With Low Entry Barriers

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The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

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Difficult Environmental Cases and the Role of Government

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