Question 1

A firm would decide to shut down if its production resulted in

Accepted Answer

A) MR AVC. C) AFC > AVC. D) MR < AVC. A) MR AVC. C) AFC > AVC. D) MR < AVC. D

Question 2

Table 9-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$$ 
Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 9-1.If the market price of each camera case is $8,what is the profit-maximizing quantity?

Accepted Answer

A) 300 units 
B) 400 units 
C) 500 units 
D) 600 units 
A) 300 units 
B) 400 units 
C) 500 units 
D) 600 units B

Question 3

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Accepted Answer

A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses. 
A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses. C

Question 4

Figure 9-13
  
-Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium,

Accepted Answer

A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant. 
A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant.

Question 5

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Accepted Answer

A) The market price falls and the typical firm suffers an economic loss. 
B) The market supply increases to offset the fall in demand. 
C) The typical firm's average total cost curve shifts downward. 
D) The typical firm's marginal cost curve shifts to the left. 
A) The market price falls and the typical firm suffers an economic loss. 
B) The market supply increases to offset the fall in demand. 
C) The typical firm's average total cost curve shifts downward. 
D) The typical firm's marginal cost curve shifts to the left.

Question 6

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Accepted Answer

A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs. 
A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs.

Question 7

To maximize profit,a firm will produce the level of output where MR = MC.If a firm actually makes a profit depends on the relationship of price to average total cost.What are the three possible relationships between price and average total cost that determine if a firm will make a profit,experience a loss,or break even?

Accepted Answer

If P > ATC,the firm makes a pr

Question 8

Figure 9-5
   
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the amount of the firm's profit?

Accepted Answer

A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200 
A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200

Question 9

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Accepted Answer

A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question. 
A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question.

Question 10

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Accepted Answer

A)  is a fixed cost of operating the tattoo parlor. 
B)  is a variable cost of operating the tattoo parlor. 
C)  is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor. 
A)  is a fixed cost of operating the tattoo parlor. 
B)  is a variable cost of operating the tattoo parlor. 
C)  is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor.

Question 11

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve. 
A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve.

Question 12

An individual seller in perfect competition will not sell at a price lower than the market price because

Accepted Answer

A) demand for the product will exceed supply. 
B) the seller would start a price war. 
C) the seller can sell any quantity she wants at the prevailing market price. 
D) demand is perfectly inelastic. 
A) demand for the product will exceed supply. 
B) the seller would start a price war. 
C) the seller can sell any quantity she wants at the prevailing market price. 
D) demand is perfectly inelastic.

Question 13

Figure 9-11
  
-Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium

Accepted Answer

A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant. 
A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant.

Question 14

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Accepted Answer

A) True 
 B)False

Question 15

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 16

The delivery of first-class mail by the U.S.Postal Service is an example of

Accepted Answer

A) a monopoly. 
B) perfect competition because consumers have access to other methods of written communication; for example, email and text messaging. 
C) monopolistic competition, because mail delivery is a differentiated product provided by many firms. 
D) an oligopoly because a few other firms provide delivery of letters and packages. 
A) a monopoly. 
B) perfect competition because consumers have access to other methods of written communication; for example, email and text messaging. 
C) monopolistic competition, because mail delivery is a differentiated product provided by many firms. 
D) an oligopoly because a few other firms provide delivery of letters and packages.

Question 17

Figure 9-17
   
The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 9-17.Which of the following statements is true?

Accepted Answer

A) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit.New firms will enter the market and shift the market supply curve to the left. 
B) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve. 
C) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit.New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run. 
D) The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit.In the long run the firm will break even. 
A) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit.New firms will enter the market and shift the market supply curve to the left. 
B) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve. 
C) The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit.New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run. 
D) The firm will produce 30 thousands pounds of apples in the short run and earn an economic profit.In the long run the firm will break even.

Question 18

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both

Accepted Answer

A) fixed costs are lower than variable costs. 
B) there are many other suppliers of similar goods or services. 
C) the implicit costs of production exceed the explicit costs of production. 
D) average costs of production do not change when their industry expands. 
A) fixed costs are lower than variable costs. 
B) there are many other suppliers of similar goods or services. 
C) the implicit costs of production exceed the explicit costs of production. 
D) average costs of production do not change when their industry expands.

Question 19

Figure 9-9
   
Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.At price P₃,the firm would produce

Accepted Answer

A) Q₂ units 
B) Q₃ units. 
C) Q₄ units. 
D) Q₅ units. 
A) Q₂ units 
B) Q₃ units. 
C) Q₄ units. 
D) Q₅ units.

Question 20

Which of the following is a characteristic of a monopoly?

Accepted Answer

A) It is easy for new firms to enter the market. 
B) There is only one seller in the market. 
C) The product is not unique. 
D) The firm has no control over price. 
A) It is easy for new firms to enter the market. 
B) There is only one seller in the market. 
C) The product is not unique. 
D) The firm has no control over price.

A firm would decide to shut down if its production resulted in

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Figure 9-13 -Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium,

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the amount of the firm's profit?

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

The marginal revenue curve for a perfectly competitive firm

An individual seller in perfect competition will not sell at a price lower than the market price because

Figure 9-11 -Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

The delivery of first-class mail by the U.S.Postal Service is an example of

Figure 9-17 The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 9-17.Which of the following statements is true?

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₃,the firm would produce

Which of the following is a characteristic of a monopoly?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 9: Firms in Perfectly Competitive Markets

A firm would decide to shut down if its production resulted in

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Figure 9-13 -Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium,

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the amount of the firm's profit?

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

The marginal revenue curve for a perfectly competitive firm

An individual seller in perfect competition will not sell at a price lower than the market price because

Figure 9-11 -Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

The delivery of first-class mail by the U.S.Postal Service is an example of

Figure 9-17 The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 9-17.Which of the following statements is true?

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₃,the firm would produce

Which of the following is a characteristic of a monopoly?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters