Question 1

Which of the following is a characteristic of a competitive price-taker market?

Accepted Answer

A) Profit maximizing firms in the market will expand output until price equals average variable cost. 
B) The market demand curve for the product is a horizontal line. 
C) There are many firms in the market,each producing a small share of total market output. 
D) The product produced by each of the firms is differentiated. 
A) Profit maximizing firms in the market will expand output until price equals average variable cost. 
B) The market demand curve for the product is a horizontal line. 
C) There are many firms in the market,each producing a small share of total market output. 
D) The product produced by each of the firms is differentiated.

Question 2

The competitive price-taker model is usually used to illustrate the competitive process.If firms cannot choose their price,where is the competition?

Accepted Answer

This is a good question.The firms do not

Question 3

If the expansion of output in an industry leads to unchanged resource prices,the industry is most likely to be

Accepted Answer

A) a decreasing cost industry. 
B) an increasing cost industry. 
C) a constant cost industry. 
D) an industry characterized by economies of scale. 
A) a decreasing cost industry. 
B) an increasing cost industry. 
C) a constant cost industry. 
D) an industry characterized by economies of scale.

Question 4

If a decrease in the demand for corn leads to economic losses for corn farmers,

Accepted Answer

A) some existing corn farmers will exit the industry. 
B) the price of corn will remain low in the long run due to the economic losses. 
C) the suppliers of corn will suffer long-run economic losses. 
D) all of the above are correct. 
A) some existing corn farmers will exit the industry. 
B) the price of corn will remain low in the long run due to the economic losses. 
C) the suppliers of corn will suffer long-run economic losses. 
D) all of the above are correct.

Question 5

A firm is currently operating where the MC of the last unit produced is $64,and the MR of this unit is $70.Which of the following would increase profit?

Accepted Answer

A) Shut down. 
B) Increase output. 
C) Stay at current output. 
D) Decrease output. 
E) Decrease price. 
A) Shut down. 
B) Increase output. 
C) Stay at current output. 
D) Decrease output. 
E) Decrease price.

Question 6

If the demand for pizza falls,pizza suppliers will suffer economic losses,and some firms will leave the industry.Why is this considered good? Shouldn't we feel sorry for these business owners?

Accepted Answer

As humans,we can certainly feel sorry fo

Question 7

When a firm is operating in a price-taker market,marginal revenue is

Accepted Answer

A) equal to price. 
B) always less than price. 
C) equal to zero when the market is in long-run equilibrium. 
D) equal to the change in output divided by the change in total revenue. 
A) equal to price. 
B) always less than price. 
C) equal to zero when the market is in long-run equilibrium. 
D) equal to the change in output divided by the change in total revenue.

Question 8

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect

Accepted Answer

A) the demand for the products of this industry to increase. 
B) the market price of the products of this industry to decrease in the short run but not in the long run. 
C) the firms in the industry to make long-run economic profit. 
D) competition to force producers to pass the lower production costs on to consumers in the long run. 
A) the demand for the products of this industry to increase. 
B) the market price of the products of this industry to decrease in the short run but not in the long run. 
C) the firms in the industry to make long-run economic profit. 
D) competition to force producers to pass the lower production costs on to consumers in the long run.

Question 9

For a price-taker firm,marginal revenue is

Accepted Answer

A) equal to price. 
B) equal to zero when the market is in long-run equilibrium. 
C) equal to the change in total revenue divided by the change in output. 
D) both a and c. 
A) equal to price. 
B) equal to zero when the market is in long-run equilibrium. 
C) equal to the change in total revenue divided by the change in output. 
D) both a and c.

Question 10

A firm in a price-taker market

Accepted Answer

A) must take the price that is determined in the market. 
B) must reduce its price if it wants to sell a larger quantity. 
C) must be large relative to the total market. 
D) can exert a major influence on the market price. 
A) must take the price that is determined in the market. 
B) must reduce its price if it wants to sell a larger quantity. 
C) must be large relative to the total market. 
D) can exert a major influence on the market price.

Question 11

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.To maximize its profit,the firm should

Accepted Answer

A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output,but continue to produce. 
D) shut down. 
A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output,but continue to produce. 
D) shut down.

Question 12

Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum per-unit cost?

Accepted Answer

A) homogeneous products. 
B) few sellers. 
C) firms face downward-sloping demand curves. 
D) free entry and exit. 
A) homogeneous products. 
B) few sellers. 
C) firms face downward-sloping demand curves. 
D) free entry and exit.

Question 13

Table 9-1
  
-Refer to Table 9-1.If the market price of tomatoes rose to $570 per ton,how many tons per month would the Tuckers produce if they were maximizing profit?

Accepted Answer

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

Question 14

If a product is manufactured under conditions of constant cost,an increase in the demand for the product will increase

Accepted Answer

A) both equilibrium quantity and equilibrium price in the long run. 
B) equilibrium price,but equilibrium quantity will be unchanged in the long run. 
C) equilibrium quantity,but equilibrium price will be unchanged in the long run. 
D) equilibrium quantity but reduce equilibrium price in the long run. 
A) both equilibrium quantity and equilibrium price in the long run. 
B) equilibrium price,but equilibrium quantity will be unchanged in the long run. 
C) equilibrium quantity,but equilibrium price will be unchanged in the long run. 
D) equilibrium quantity but reduce equilibrium price in the long run.

Question 15

If marginal revenue exceeds marginal cost,a price-taker firm should

Accepted Answer

A) expand output. 
B) reduce output. 
C) lower its price. 
D) do both a and c. 
A) expand output. 
B) reduce output. 
C) lower its price. 
D) do both a and c.

Question 16

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

Accepted Answer

A) The short-run average total costs of firms that are price takers will be constant. 
B) If a price taker increased its price,consumers would buy from other suppliers. 
C) Firms in a price-taker market will have to advertise in order to increase sales. 
D) There are no good substitutes for the product supplied by a firm that is a price taker. 
A) The short-run average total costs of firms that are price takers will be constant. 
B) If a price taker increased its price,consumers would buy from other suppliers. 
C) Firms in a price-taker market will have to advertise in order to increase sales. 
D) There are no good substitutes for the product supplied by a firm that is a price taker.

Question 17

Firms that are price takers

Accepted Answer

A) are small relative to the total market. 
B) produce products that are different than their competitors. 
C) can sell only a portion of their output at the market price. 
D) have downward-sloping demand curves. 
A) are small relative to the total market. 
B) produce products that are different than their competitors. 
C) can sell only a portion of their output at the market price. 
D) have downward-sloping demand curves.

Question 18

When competition is present,self-interested business decision makers have a strong incentive to

Accepted Answer

A) produce efficiently. 
B) ignore the wishes of customers who are also self-interested. 
C) adopt technological improvements slowly in order to avoid making wrong decisions 
D) maximize price in order to maximize profits. 
A) produce efficiently. 
B) ignore the wishes of customers who are also self-interested. 
C) adopt technological improvements slowly in order to avoid making wrong decisions 
D) maximize price in order to maximize profits.

Question 19

Beginning from a point of long-run equilibrium,an increase in the market demand for wheat would result in

Accepted Answer

A) an increase in the market price of wheat. 
B) existing wheat producers increasing output in the short run and earning positive economic profits. 
C) new firms entering the wheat industry in the long run. 
D) all of the above. 
A) an increase in the market price of wheat. 
B) existing wheat producers increasing output in the short run and earning positive economic profits. 
C) new firms entering the wheat industry in the long run. 
D) all of the above.

Question 20

Fun Time Inc.uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer.Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below.Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business.
 
Which of the following should Fun Time do if it wants to maximize its profit?

Accepted Answer

A) operate in both the winter and summer 
B) operate in the summer,but shut down during the winner 
C) operate in the winter,but shut down during the summer 
D) go out of business immediately 
A) operate in both the winter and summer 
B) operate in the summer,but shut down during the winner 
C) operate in the winter,but shut down during the summer 
D) go out of business immediately

Exam 22: Aprice Takers and the Competitive Process

Which of the following is a characteristic of a competitive price-taker market?

The competitive price-taker model is usually used to illustrate the competitive process.If firms cannot choose their price,where is the competition?

If the expansion of output in an industry leads to unchanged resource prices,the industry is most likely to be

If a decrease in the demand for corn leads to economic losses for corn farmers,

A firm is currently operating where the MC of the last unit produced is $64,and the MR of this unit is $70.Which of the following would increase profit?

If the demand for pizza falls,pizza suppliers will suffer economic losses,and some firms will leave the industry.Why is this considered good? Shouldn't we feel sorry for these business owners?

When a firm is operating in a price-taker market,marginal revenue is

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements,we would expect

For a price-taker firm,marginal revenue is

A firm in a price-taker market

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.To maximize its profit,the firm should

Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum per-unit cost?

Table 9-1 -Refer to Table 9-1.If the market price of tomatoes rose to $570 per ton,how many tons per month would the Tuckers produce if they were maximizing profit?

If a product is manufactured under conditions of constant cost,an increase in the demand for the product will increase

If marginal revenue exceeds marginal cost,a price-taker firm should

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

Firms that are price takers

When competition is present,self-interested business decision makers have a strong incentive to

Beginning from a point of long-run equilibrium,an increase in the market demand for wheat would result in

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