Question 1

Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called

Accepted Answer

A) price searchers. 
B) price leaders. 
C) purely competitive. 
D) price takers. 
A) price searchers. 
B) price leaders. 
C) purely competitive. 
D) price takers.

Question 2

Which of the following is true?

Accepted Answer

A) When firms in a price-taker market are earning zero economic profit,they will shut down. 
B) When firms in a price-taker market are earning positive economic profits,new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C) When firms in a price-taker market are earning economic losses,some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D) Both b and c are true. 
A) When firms in a price-taker market are earning zero economic profit,they will shut down. 
B) When firms in a price-taker market are earning positive economic profits,new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C) When firms in a price-taker market are earning economic losses,some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D) Both b and c are true.

Question 3

Suppose wheat farmers are price takers.If wheat farmers are currently making economic profits,over time we would expect that

Accepted Answer

A) existing wheat farmers would plant more acres of wheat. 
B) farmers growing other crops would switch some of their land from these crops to the growing of wheat. 
C) the wheat farmers will continue to earn economic profits because they would be driven out of business without such profit. 
D) both a and b are correct. 
A) existing wheat farmers would plant more acres of wheat. 
B) farmers growing other crops would switch some of their land from these crops to the growing of wheat. 
C) the wheat farmers will continue to earn economic profits because they would be driven out of business without such profit. 
D) both a and b are correct.

Question 4

Suppose the equilibrium price in a competitive price-taker market is $10 and a firm in the industry charges $9.Which of the following is true?

Accepted Answer

A) The firm will not be able to sell any output. 
B) The firm will sell less output than its competitors. 
C) The firm will make more profit than it could at the $10 price. 
D) The firm will make less profit than it could at the $10 price. 
A) The firm will not be able to sell any output. 
B) The firm will sell less output than its competitors. 
C) The firm will make more profit than it could at the $10 price. 
D) The firm will make less profit than it could at the $10 price.

Question 5

The price-taker firm should discontinue production immediately if

Accepted Answer

A) the market price exceeds the firm's average total costs. 
B) the market price is less than the firm's average variable costs. 
C) the market price is less than the firm's average total costs but greater than its average variable cost. 
D) its accounting statement indicates that it is suffering losses. 
A) the market price exceeds the firm's average total costs. 
B) the market price is less than the firm's average variable costs. 
C) the market price is less than the firm's average total costs but greater than its average variable cost. 
D) its accounting statement indicates that it is suffering losses.

Question 6

If marginal revenue exceeds marginal cost at the current level of output,profit will increase when output is expanded because

Accepted Answer

A) other firms in the industry will shut down as the firm expands output. 
B) the market price will rise as the firm expands output. 
C) producing and selling an additional unit will add more to total revenue than it adds to total cost. 
D) marginal cost will decline as output is expanded. 
A) other firms in the industry will shut down as the firm expands output. 
B) the market price will rise as the firm expands output. 
C) producing and selling an additional unit will add more to total revenue than it adds to total cost. 
D) marginal cost will decline as output is expanded.

Question 7

Figure 9-9
  
-When the market price is $60 in Figure 9-9,the firm's maximum daily profit will be approximately

Accepted Answer

A) zero. 
B) $100. 
C) $900. 
D) $1,200. 
A) zero. 
B) $100. 
C) $900. 
D) $1,200.

Question 8

Figure 9-7
  
-The average total cost (ATC)and marginal costs (MC)of a firm producing in a price-taker industry are depicted in Figure 9-7.If the current market price of the firm's product is $3,what output should this firm produce per week?

Accepted Answer

A) 5,000 
B) 7,500 
C) 10,000 
D) 12,500 
A) 5,000 
B) 7,500 
C) 10,000 
D) 12,500

Question 9

If the demand and marginal revenue curves confronting firm A are identical,it may be concluded that firm A is a

Accepted Answer

A) monopolistic competitor. 
B) price taker. 
C) price searcher. 
D) monopolist. 
A) monopolistic competitor. 
B) price taker. 
C) price searcher. 
D) monopolist.

Question 10

The entry of new firms into a competitive market will

Accepted Answer

A) increase market supply and increase market prices. 
B) increase market supply and decrease market prices. 
C) decrease market supply and increase market prices. 
D) decrease market supply and decrease market prices. 
A) increase market supply and increase market prices. 
B) increase market supply and decrease market prices. 
C) decrease market supply and increase market prices. 
D) decrease market supply and decrease market prices.

Question 11

Figure 9-8
  
-At the market price of $3 in Figure 9-8,indicate the firm's total revenue and total cost at its profit-maximizing level of output.

Accepted Answer

A) total revenue,$45;total cost,$37 (approx. ) 
B) total revenue,$45;total cost,$45 
C) total revenue,$60;total cost,$45 
D) total revenue,$80;total cost,$65 (approx. ) 
A) total revenue,$45;total cost,$37 (approx. ) 
B) total revenue,$45;total cost,$45 
C) total revenue,$60;total cost,$45 
D) total revenue,$80;total cost,$65 (approx. )

Question 12

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits)because

Accepted Answer

A) firms will keep their prices low under fear of government regulation. 
B) with firms able to enter and leave the industry freely,competition will drive prices down to the level of production costs. 
C) by definition,production costs always rise to equal the market price. 
D) mismanagement on the part of owners generally results in the firms not equating marginal revenue and marginal cost. 
A) firms will keep their prices low under fear of government regulation. 
B) with firms able to enter and leave the industry freely,competition will drive prices down to the level of production costs. 
C) by definition,production costs always rise to equal the market price. 
D) mismanagement on the part of owners generally results in the firms not equating marginal revenue and marginal cost.

Question 13

If profit-seeking entrepreneurs are going to be successful,they must

Accepted Answer

A) produce a product that the consumers value more than the resources required for its production. 
B) produce the product more cheaply than their rivals regardless of quality. 
C) maximize the salaries of high-level management so they will be able to attract people who will work hard. 
D) charge a higher price than their competitors so they can make economic profits in the long run. 
A) produce a product that the consumers value more than the resources required for its production. 
B) produce the product more cheaply than their rivals regardless of quality. 
C) maximize the salaries of high-level management so they will be able to attract people who will work hard. 
D) charge a higher price than their competitors so they can make economic profits in the long run.

Question 14

Figure 9-3
  
-For Figure 9-3,if the market price is $30,indicate the firm's profit-maximizing output and maximum profit.

Accepted Answer

A) profit-maximizing output,125;maximum profit,zero 
B) profit-maximizing output,125;maximum profit,between $1,000 and $1,250 
C) profit-maximizing output,150;maximum profit,$1,500 
D) profit-maximizing output,150;maximum profit,between $1,250 and $1,500 
A) profit-maximizing output,125;maximum profit,zero 
B) profit-maximizing output,125;maximum profit,between $1,000 and $1,250 
C) profit-maximizing output,150;maximum profit,$1,500 
D) profit-maximizing output,150;maximum profit,between $1,250 and $1,500

Question 15

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

Accepted Answer

A) the firms will earn long-run economic profit. 
B) additional firms will be attracted into the market until price falls to the level of per-unit production cost. 
C) the firms will earn short-run economic profits that will be offset by long-run economic losses. 
D) the existing firms must be colluding or rigging the market,otherwise,they would be unable to charge such high prices. 
A) the firms will earn long-run economic profit. 
B) additional firms will be attracted into the market until price falls to the level of per-unit production cost. 
C) the firms will earn short-run economic profits that will be offset by long-run economic losses. 
D) the existing firms must be colluding or rigging the market,otherwise,they would be unable to charge such high prices.

Question 16

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive price-taker market when price falls below the minimum of average variable cost?

Accepted Answer

A) The firm will continue to produce to attempt to pay fixed costs. 
B) The firm will stop production to minimize its losses. 
C) The firm will stop production as soon as it is able to pay its sunk costs. 
D) The firm will continue to produce in the short run but will likely exit the market in the long run. 
A) The firm will continue to produce to attempt to pay fixed costs. 
B) The firm will stop production to minimize its losses. 
C) The firm will stop production as soon as it is able to pay its sunk costs. 
D) The firm will continue to produce in the short run but will likely exit the market in the long run.

Question 17

Table 9-2
  
-Refer to Table 9-2.This table provides information on a competitive price-taker firm's output,marginal revenue,and marginal cost.If the firm is currently producing 14 units,what would you advise them to do?

Accepted Answer

A) Decrease quantity to 13 units. 
B) Increase quantity to 17 units. 
C) Continue to operate at 14 units. 
D) Increase quantity to 16 units. 
A) Decrease quantity to 13 units. 
B) Increase quantity to 17 units. 
C) Continue to operate at 14 units. 
D) Increase quantity to 16 units.

Question 18

Which of the following conditions will be present when a price-taker market is in long-run equilibrium?

Accepted Answer

A) Price will exceed marginal revenue. 
B) Firms will earn economic profit. 
C) Marginal revenue will exceed marginal cost. 
D) Average total cost will be at a minimum. 
A) Price will exceed marginal revenue. 
B) Firms will earn economic profit. 
C) Marginal revenue will exceed marginal cost. 
D) Average total cost will be at a minimum.

Question 19

If an amusement park that is highly profitable during the summer months is unable to cover its variable costs during the winter months,it should

Accepted Answer

A) raise its prices during the winter months. 
B) lower its prices during the summer months. 
C) operate during the summer but shut down during the winter months. 
D) operate during all months of the year as long as its profits during the summer exceed its losses during the winter. 
A) raise its prices during the winter months. 
B) lower its prices during the summer months. 
C) operate during the summer but shut down during the winter months. 
D) operate during all months of the year as long as its profits during the summer exceed its losses during the winter.

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 total cost amounts to

Accepted Answer

A) $10,985. 
B) $10,990. 
C) $10,995. 
D) $10,999. 
A) $10,985. 
B) $10,990. 
C) $10,995. 
D) $10,999.

Exam 22: Aprice Takers and the Competitive Process

Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called

Which of the following is true?

Suppose wheat farmers are price takers.If wheat farmers are currently making economic profits,over time we would expect that

Suppose the equilibrium price in a competitive price-taker market is $10 and a firm in the industry charges $9.Which of the following is true?

The price-taker firm should discontinue production immediately if

If marginal revenue exceeds marginal cost at the current level of output,profit will increase when output is expanded because

Figure 9-9 -When the market price is $60 in Figure 9-9,the firm's maximum daily profit will be approximately

Figure 9-7 -The average total cost (ATC)and marginal costs (MC)of a firm producing in a price-taker industry are depicted in Figure 9-7.If the current market price of the firm's product is $3,what output should this firm produce per week?

If the demand and marginal revenue curves confronting firm A are identical,it may be concluded that firm A is a

The entry of new firms into a competitive market will

Figure 9-8 -At the market price of $3 in Figure 9-8,indicate the firm's total revenue and total cost at its profit-maximizing level of output.

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits)because

If profit-seeking entrepreneurs are going to be successful,they must

Figure 9-3 -For Figure 9-3,if the market price is $30,indicate the firm's profit-maximizing output and maximum profit.

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive price-taker market when price falls below the minimum of average variable cost?

Table 9-2 -Refer to Table 9-2.This table provides information on a competitive price-taker firm's output,marginal revenue,and marginal cost.If the firm is currently producing 14 units,what would you advise them to do?

Which of the following conditions will be present when a price-taker market is in long-run equilibrium?

If an amusement park that is highly profitable during the summer months is unable to cover its variable costs during the winter months,it should

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 total cost 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

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

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

Aprice-Searcher Markets With High Entry Barriers

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

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

Filters