Question 1

In short-run equilibrium,a competitive price-taker firm

Accepted Answer

A) may earn a profit or a loss. 
B) always earns a profit. 
C) never earns a profit. 
D) earns a profit only if the firm has no fixed cost. 
A) may earn a profit or a loss. 
B) always earns a profit. 
C) never earns a profit. 
D) earns a profit only if the firm has no fixed cost.

Question 2

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand,the long-run market supply curve for the product will

Accepted Answer

A) be perfectly elastic (a horizontal line). 
B) be perfectly inelastic (a vertical line). 
C) slope upward to the right. 
D) be more inelastic than the short-run supply curve for the product. 
A) be perfectly elastic (a horizontal line). 
B) be perfectly inelastic (a vertical line). 
C) slope upward to the right. 
D) be more inelastic than the short-run supply curve for the product.

Question 3

Figure 9-6
  
-If the market price in Figure 9-6 increases to $20,what should the firm do?

Accepted Answer

A) produce an output of 15 
B) expand output to 20 
C) expand output to 25 
D) increase its price to $25 
A) produce an output of 15 
B) expand output to 20 
C) expand output to 25 
D) increase its price to $25

Question 4

As market price increases,in the short run,a profit-maximizing firm in a price-taker market will expand output along its

Accepted Answer

A) marginal cost curve. 
B) average total cost curve. 
C) average variable cost curve. 
D) market demand curve. 
A) marginal cost curve. 
B) average total cost curve. 
C) average variable cost curve. 
D) market demand curve.

Question 5

In a competitive price taker market,a firm's short-run supply curve is its

Accepted Answer

A) average total cost curve above its average variable cost curve. 
B) marginal cost curve above its average variable cost curve. 
C) marginal cost curve above its average fixed cost curve. 
D) entire marginal cost curve. 
A) average total cost curve above its average variable cost curve. 
B) marginal cost curve above its average variable cost curve. 
C) marginal cost curve above its average fixed cost curve. 
D) entire marginal cost curve.

Question 6

Within the framework of the price-taker model,a price taker will always produce a quantity of output that

Accepted Answer

A) minimizes the per-unit cost of production. 
B) is expected to provide the largest possible total revenue. 
C) maximizes total revenue minus total cost. 
D) brings average total cost and price into equality. 
A) minimizes the per-unit cost of production. 
B) is expected to provide the largest possible total revenue. 
C) maximizes total revenue minus total cost. 
D) brings average total cost and price into equality.

Question 7

A firm that is a price taker can

Accepted Answer

A) substantially change the market price of its product by changing its level of production. 
B) sell all of its output at the market price. 
C) sell some of its output at a price higher than the market price. 
D) decide what price to charge for its product. 
A) substantially change the market price of its product by changing its level of production. 
B) sell all of its output at the market price. 
C) sell some of its output at a price higher than the market price. 
D) decide what price to charge for its product.

Question 8

Which of the following is a reason to study the decisions of price takers?

Accepted Answer

A) While there are not many price-taker markets,these few markets dominate the economy. 
B) The decision making of both price searchers and price takers is identical. 
C) The price-taker model enhances our knowledge of competition as a dynamic process. 
D) Price takers are the most common type of business in the real world. 
A) While there are not many price-taker markets,these few markets dominate the economy. 
B) The decision making of both price searchers and price takers is identical. 
C) The price-taker model enhances our knowledge of competition as a dynamic process. 
D) Price takers are the most common type of business in the real world.

Question 9

Figure 9-8
  
-If the market price in Figure 9-8 increases to $4,indicate the firm's profit-maximizing output and total revenue.

Accepted Answer

A) output,15;total revenue,$45 
B) output,15;total revenue,$60 
C) output,17;total revenue,$68 (approx. ) 
D) output,20;total revenue,$80 
A) output,15;total revenue,$45 
B) output,15;total revenue,$60 
C) output,17;total revenue,$68 (approx. ) 
D) output,20;total revenue,$80

Question 10

If the demand for a product increases in an increasing cost industry,as the market adjusts in the long run,

Accepted Answer

A) price will rise. 
B) the firm's per-unit costs will increase. 
C) the firm's per-unit costs will fall. 
D) the market price will return to its initial position. 
A) price will rise. 
B) the firm's per-unit costs will increase. 
C) the firm's per-unit costs will fall. 
D) the market price will return to its initial position.

Question 11

The owners of a firm are earning economic profit if

Accepted Answer

A) return on their capital is lower than the opportunity cost of employing that capital in their industry. 
B) their total revenues exceed the monetary payments to labor and other resources in the long run after all plant size adjustments are made. 
C) price exceeds average variable costs at the shutdown point. 
D) they are earning a return on their capital that is higher than what can generally be earned in other markets. 
A) return on their capital is lower than the opportunity cost of employing that capital in their industry. 
B) their total revenues exceed the monetary payments to labor and other resources in the long run after all plant size adjustments are made. 
C) price exceeds average variable costs at the shutdown point. 
D) they are earning a return on their capital that is higher than what can generally be earned in other markets.

Question 12

Figure 9-6
  
-The average total cost (ATC)and marginal costs (MC)of a firm producing in a price-taker industry are depicted in Figure 9-6.If the current market price of the firm's product is $15,what output should this firm produce?

Accepted Answer

A) 10 
B) 15 
C) 20 
D) 25 
A) 10 
B) 15 
C) 20 
D) 25

Question 13

If the market price in a price-taking industry was currently above the average total cost of production for firms in the industry,

Accepted Answer

A) firms in the industry would earn short-run economic profits that would be offset by long-run economic losses. 
B) new firms would enter the industry,which would drive price down to the average total cost of production in the long run. 
C) firms in the industry would earn positive economic profits in the long run. 
D) most firms in the industry would shut down in the long run. 
A) firms in the industry would earn short-run economic profits that would be offset by long-run economic losses. 
B) new firms would enter the industry,which would drive price down to the average total cost of production in the long run. 
C) firms in the industry would earn positive economic profits in the long run. 
D) most firms in the industry would shut down in the long run.

Question 14

Figure 9-4
  
-Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market.If the market price of the firm's product is $6,what action will maximize the firm's profit?

Accepted Answer

A) go out of business since it cannot make a profit 
B) produce an output of 3 million 
C) produce an output of 5 million 
D) produce an output of 6 million 
A) go out of business since it cannot make a profit 
B) produce an output of 3 million 
C) produce an output of 5 million 
D) produce an output of 6 million

Question 15

Figure 9-6
  
-When the market price in Figure 9-6 is $20,the firm's maximum profit will be approximately

Accepted Answer

A) zero. 
B) $3. 
C) $60. 
D) $400. 
A) zero. 
B) $3. 
C) $60. 
D) $400.

Question 16

The exit of existing firms from 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 17

Figure 9-13
  
-Refer to Figure 9-13.When price rises from P₃ to P₄,the firm finds that

Accepted Answer

A) fixed costs are lower at a production level of Q₄. 
B) it can earn a positive profit by increasing production to Q₄. 
C) profit is still maximized at a production level of Q₃. 
D) average revenue exceeds marginal revenue at a production level of Q₄. 
A) fixed costs are lower at a production level of Q₄. 
B) it can earn a positive profit by increasing production to Q₄. 
C) profit is still maximized at a production level of Q₃. 
D) average revenue exceeds marginal revenue at a production level of Q₄.

Question 18

Profit-maximizing firms enter a competitive market when,for existing firms in that market,

Accepted Answer

A) total revenue exceeds fixed costs. 
B) total revenue exceeds total variable costs. 
C) average total cost exceeds average revenue. 
D) price exceeds average total cost. 
A) total revenue exceeds fixed costs. 
B) total revenue exceeds total variable costs. 
C) average total cost exceeds average revenue. 
D) price exceeds average total cost.

Question 19

Figure 9-13
  
-Refer to Figure 9-13.When price falls from P₃ to P₁,the firm finds that

Accepted Answer

A) fixed cost is higher at a production level of Q₁ than it is at Q₃. 
B) it should produce Q₁ units of output. 
C) it should produce Q₃ units of output. 
D) it should shut down immediately. 
A) fixed cost is higher at a production level of Q₁ than it is at Q₃. 
B) it should produce Q₁ units of output. 
C) it should produce Q₃ units of output. 
D) it should shut down immediately.

Question 20

The long-run supply curve is

Accepted Answer

A) a horizontal line for a constant-cost industry. 
B) upward sloping for a decreasing-cost industry. 
C) downward sloping for an increasing-cost industry. 
D) all of the above. 
A) a horizontal line for a constant-cost industry. 
B) upward sloping for a decreasing-cost industry. 
C) downward sloping for an increasing-cost industry. 
D) all of the above.

Exam 22: Aprice Takers and the Competitive Process

In short-run equilibrium,a competitive price-taker firm

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand,the long-run market supply curve for the product will

Figure 9-6 -If the market price in Figure 9-6 increases to $20,what should the firm do?

As market price increases,in the short run,a profit-maximizing firm in a price-taker market will expand output along its

In a competitive price taker market,a firm's short-run supply curve is its

Within the framework of the price-taker model,a price taker will always produce a quantity of output that

A firm that is a price taker can

Which of the following is a reason to study the decisions of price takers?

Figure 9-8 -If the market price in Figure 9-8 increases to $4,indicate the firm's profit-maximizing output and total revenue.

If the demand for a product increases in an increasing cost industry,as the market adjusts in the long run,

The owners of a firm are earning economic profit if

Figure 9-6 -The average total cost (ATC)and marginal costs (MC)of a firm producing in a price-taker industry are depicted in Figure 9-6.If the current market price of the firm's product is $15,what output should this firm produce?

If the market price in a price-taking industry was currently above the average total cost of production for firms in the industry,

Figure 9-4 -Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market.If the market price of the firm's product is $6,what action will maximize the firm's profit?

Figure 9-6 -When the market price in Figure 9-6 is $20,the firm's maximum profit will be approximately

The exit of existing firms from a competitive market will

Figure 9-13 -Refer to Figure 9-13.When price rises from P₃ to P₄,the firm finds that

Profit-maximizing firms enter a competitive market when,for existing firms in that market,

Figure 9-13 -Refer to Figure 9-13.When price falls from P₃ to P₁,the firm finds that

The long-run supply curve is

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

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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

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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