Question 1

In general,firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will

Accepted Answer

A) bring total revenue into equality with total cost. 
B) maximize the difference between the revenue received from the last unit and the cost incurred in producing the last unit. 
C) result in the lowest possible average total costs of production. 
D) maximize the firm's profit. 
A) bring total revenue into equality with total cost. 
B) maximize the difference between the revenue received from the last unit and the cost incurred in producing the last unit. 
C) result in the lowest possible average total costs of production. 
D) maximize the firm's profit.

Question 2

In a price-taker market,economic losses indicate that

Accepted Answer

A) some firms are using unfair tactics to harm others. 
B) some firms have miscalculated,producing goods that are less valuable than the resources used to make them. 
C) the situation is normal and firms need to make no adjustments. 
D) the firms in the industry are not minimizing their cost;they should expand output in order to fully realize the economies of scale in the industry. 
A) some firms are using unfair tactics to harm others. 
B) some firms have miscalculated,producing goods that are less valuable than the resources used to make them. 
C) the situation is normal and firms need to make no adjustments. 
D) the firms in the industry are not minimizing their cost;they should expand output in order to fully realize the economies of scale in the industry.

Question 3

Suppose that sharply lower coffee prices lead to a decrease in the demand for tea.Tea price decreases,and the tea producers experience short-run economic losses.If the tea industry is a price-taker market,after sufficient time is allowed for the market to adjust fully to the decrease in the demand for tea,one would expect the tea industry's output to

Accepted Answer

A) increase and economic losses to persist. 
B) decline and economic losses to persist. 
C) decline and economic losses to disappear. 
D) increase and economic losses to disappear 
A) increase and economic losses to persist. 
B) decline and economic losses to persist. 
C) decline and economic losses to disappear. 
D) increase and economic losses to disappear

Question 4

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized. 
A) total revenue is equal to variable cost. 
B) total revenue is equal to fixed cost. 
C) total revenue is equal to total cost. 
D) profit is maximized.

Question 5

There are 1,000 identical firms in a price-taker industry.In the short run,the total revenues of each firm are less than total costs.What will happen in the long run?

Accepted Answer

A) Nothing,because each firm is already maximizing its profits. 
B) Additional firms will enter the market,and price will be driven down to where each firm will be making just enough to stay in business (cover its variable costs). 
C) Additional firms will enter the market,but the price will remain the same because the existing firms will not allow it to decrease. 
D) Firms will exit the market,and the product price will rise. 
A) Nothing,because each firm is already maximizing its profits. 
B) Additional firms will enter the market,and price will be driven down to where each firm will be making just enough to stay in business (cover its variable costs). 
C) Additional firms will enter the market,but the price will remain the same because the existing firms will not allow it to decrease. 
D) Firms will exit the market,and the product price will rise.

Question 6

If the model of price-taking firms is so unrealistic and restrictive,why study it?

Accepted Answer

It may be somewhat unrealistic,but it do

Question 7

If a price-taker firm selling in a competitive market offers its product at a higher price than others,it will

Accepted Answer

A) increase its profits. 
B) maintain its profit base if the demand for the product is inelastic. 
C) be able to expand output. 
D) not be able to sell any output. 
A) increase its profits. 
B) maintain its profit base if the demand for the product is inelastic. 
C) be able to expand output. 
D) not be able to sell any output.

Question 8

Which of the following is a necessary condition for the presence of competition in a market?

Accepted Answer

A) government regulations that assure firms will make excess profits 
B) suppliers that offer a homogeneous product 
C) a price that always equals per-unit production costs 
D) low barriers to entry into the market 
A) government regulations that assure firms will make excess profits 
B) suppliers that offer a homogeneous product 
C) a price that always equals per-unit production costs 
D) low barriers to entry into the market

Question 9

Which of the following is a primary difference between price takers and price searchers that operate in markets with low barriers to entry?

Accepted Answer

A) The price searchers will maximize profits in the short run,but price takers will not.Price takers can only maximize profits in the long run. 
B) The price searchers will have to search for the price,while price takers will have to take the price determined in the market. 
C) The price searchers will be able to earn profit in the long run,but the price takers will not. 
D) The price searchers may be able to earn profit in the short run,but the price takers will not be able to do so. 
A) The price searchers will maximize profits in the short run,but price takers will not.Price takers can only maximize profits in the long run. 
B) The price searchers will have to search for the price,while price takers will have to take the price determined in the market. 
C) The price searchers will be able to earn profit in the long run,but the price takers will not. 
D) The price searchers may be able to earn profit in the short run,but the price takers will not be able to do so.

Question 10

A competitive price-taker market in long-run equilibrium is described as efficient because firms

Accepted Answer

A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable. 
A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable.

Question 11

At a firm's profit-maximizing level of output,its price is $200 and its short-run average total cost is $225.The firm

Accepted Answer

A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25. 
A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25.

Question 12

In the absence of government regulation,which of the following products would most closely fit the competitive price-taker (purely competitive)model?

Accepted Answer

A) beer because there are many consumers 
B) cigarettes because there are several alternative brands that look similar 
C) milk because there are many dairy farmers producing a virtually identical product 
D) automobiles because there are substantial economies of scale in production 
A) beer because there are many consumers 
B) cigarettes because there are several alternative brands that look similar 
C) milk because there are many dairy farmers producing a virtually identical product 
D) automobiles because there are substantial economies of scale in production

Question 13

Figure 9-9
  
-If the market price in Figure 9-9 increases to $60,what should the firm do?

Accepted Answer

A) produce 10 per day 
B) produce 15 per day 
C) produce 20 per day 
D) increase its price to $70 
A) produce 10 per day 
B) produce 15 per day 
C) produce 20 per day 
D) increase its price to $70

Question 14

When a competitive price-taker market is in long-run equilibrium

Accepted Answer

A) the firms in the market will earn zero economic profit. 
B) the average total cost of the firms in the market will be minimized. 
C) every unit of the relevant good that is valued more than its opportunity costs will be produced and sold. 
D) all of the above are correct. 
A) the firms in the market will earn zero economic profit. 
B) the average total cost of the firms in the market will be minimized. 
C) every unit of the relevant good that is valued more than its opportunity costs will be produced and sold. 
D) all of the above are correct.

Question 15

Suppose the minimum average total cost (ATC)of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC)was $.80 per unit.If the market price was $.75 per unit,a profit-seeking firm would

Accepted Answer

A) shut down immediately. 
B) produce where MR = MC in the short run. 
C) shut down in the long run but remain in business in the short run. 
D) do both b and c. 
A) shut down immediately. 
B) produce where MR = MC in the short run. 
C) shut down in the long run but remain in business in the short run. 
D) do both b and c.

Question 16

When entry barriers into a market are low,firms will tend to earn zero economic profit in the long run because

Accepted Answer

A) low entry barriers lead to rising costs. 
B) profit-seeking entrepreneurs will not enter a market when entry barriers are low. 
C) short-run profit attracts additional suppliers and drives down the market price. 
D) consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs. 
A) low entry barriers lead to rising costs. 
B) profit-seeking entrepreneurs will not enter a market when entry barriers are low. 
C) short-run profit attracts additional suppliers and drives down the market price. 
D) consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs.

Question 17

In the short run,a profit-maximizing firm in a price-taker market will definitely stop production if

Accepted Answer

A) economic profit is zero. 
B) price falls below average total cost. 
C) price is less than average variable cost. 
D) it cannot completely cover its fixed costs. 
A) economic profit is zero. 
B) price falls below average total cost. 
C) price is less than average variable cost. 
D) it cannot completely cover its fixed costs.

Question 18

Figure 9-16
  
-If the price-taker firm in Figure 9-16 is currently producing 6 units,then to maximize profit in the short run,it should

Accepted Answer

A) keep producing 6 units 
B) increase production to 12 units 
C) increase production to 14 units 
D) increase production to 8 units 
E) shut down 
A) keep producing 6 units 
B) increase production to 12 units 
C) increase production to 14 units 
D) increase production to 8 units 
E) shut down

Question 19

Suppose sharply higher coffee prices lead to an increase in demand for tea.As tea prices increase,tea producers experience short-run economic profits.If the tea industry is a price-taker industry and if sufficient time is allowed for the market to adjust fully to the increase in demand for tea,one would expect the tea industry's output to

Accepted Answer

A) increase,and economic profits to increase as well. 
B) increase,and economic profits to disappear. 
C) decline,and economic profits to increase. 
D) decline,and economic profits to disappear. 
A) increase,and economic profits to increase as well. 
B) increase,and economic profits to disappear. 
C) decline,and economic profits to increase. 
D) decline,and economic profits to disappear.

Question 20

In a price-taker market,

Accepted Answer

A) all firms in the market charge different prices depending upon their respective costs of production. 
B) there are generally a small number of very large firms. 
C) the firms all produce identical products. 
D) firms will usually make economic losses in the long run. 
A) all firms in the market charge different prices depending upon their respective costs of production. 
B) there are generally a small number of very large firms. 
C) the firms all produce identical products. 
D) firms will usually make economic losses in the long run.

Exam 22: Aprice Takers and the Competitive Process

In general,firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will

In a price-taker market,economic losses indicate that

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

There are 1,000 identical firms in a price-taker industry.In the short run,the total revenues of each firm are less than total costs.What will happen in the long run?

If the model of price-taking firms is so unrealistic and restrictive,why study it?

If a price-taker firm selling in a competitive market offers its product at a higher price than others,it will

Which of the following is a necessary condition for the presence of competition in a market?

Which of the following is a primary difference between price takers and price searchers that operate in markets with low barriers to entry?

A competitive price-taker market in long-run equilibrium is described as efficient because firms

At a firm's profit-maximizing level of output,its price is $200 and its short-run average total cost is $225.The firm

In the absence of government regulation,which of the following products would most closely fit the competitive price-taker (purely competitive)model?

Figure 9-9 -If the market price in Figure 9-9 increases to $60,what should the firm do?

When a competitive price-taker market is in long-run equilibrium

Suppose the minimum average total cost (ATC)of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC)was $.80 per unit.If the market price was $.75 per unit,a profit-seeking firm would

When entry barriers into a market are low,firms will tend to earn zero economic profit in the long run because

In the short run,a profit-maximizing firm in a price-taker market will definitely stop production if

Figure 9-16 -If the price-taker firm in Figure 9-16 is currently producing 6 units,then to maximize profit in the short run,it should

In a price-taker market,

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

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