Question 1

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.

Question 2

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 3

A price-taker firm is currently producing 50 units of output at an average total cost of $3 per unit. If the market price is $7, then the firm's total economic profit is

Accepted Answer

A) $4. 
B) $150. 
C) $200. 
D) $350. 
A) $4. 
B) $150. 
C) $200. 
D) $350.

Question 4

The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 5

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 6

For a firm in a price-taker market, the firm's demand curve is

Accepted Answer

A) a horizontal line at the market price that is equal to the firm's marginal revenue curve. 
B) an upward-sloping line that is equal to the firm's marginal cost above AVC. 
C) a downward-sloping line that lies below the firm's marginal revenue curve. 
D) undefined because it cannot determine the price it charges for its output. 
A) a horizontal line at the market price that is equal to the firm's marginal revenue curve. 
B) an upward-sloping line that is equal to the firm's marginal cost above AVC. 
C) a downward-sloping line that lies below the firm's marginal revenue curve. 
D) undefined because it cannot determine the price it charges for its output.

Question 7

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 8

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 9

Figure 9-1
  
-Figure 9-1 shows the marginal and average total cost curves for a firm producing product A. What would be the minimum price this firm could charge and still continue to supply A to the market in the long run?

Accepted Answer

A) $4 
B) $5 
C) $6 
D) $8 
A) $4 
B) $5 
C) $6 
D) $8

Question 10

"Competitive price-taker markets" and "purely competitive markets" are

Accepted Answer

A) similar, but competition is stronger in the latter. 
B) similar, but products are differentiated in the former. 
C) merely alternative names for the same concept. 
D) terms used to designate markets in which the firms confront a downward sloping demand curve. 
A) similar, but competition is stronger in the latter. 
B) similar, but products are differentiated in the former. 
C) merely alternative names for the same concept. 
D) terms used to designate markets in which the firms confront a downward sloping demand curve.

Question 11

Figure 9-18
  
-Refer to Figure 9-18. Given the current market conditions, in the long run,

Accepted Answer

A) new firms will enter the industry and market price will fall. 
B) firms will exit the industry and market price will rise. 
C) firms will neither enter nor exit because the market is in long-run equilibrium. 
D) firms will maintain their current level of economic profit. 
A) new firms will enter the industry and market price will fall. 
B) firms will exit the industry and market price will rise. 
C) firms will neither enter nor exit because the market is in long-run equilibrium. 
D) firms will maintain their current level of economic profit.

Question 12

In price-taker markets, individual firms have no control over price. Therefore, the firm's marginal revenue curve is

Accepted Answer

A) a downward-sloping curve. 
B) indeterminate. 
C) constant at the market price of the product. 
D) precisely the same as the firm's total revenue curve. 
A) a downward-sloping curve. 
B) indeterminate. 
C) constant at the market price of the product. 
D) precisely the same as the firm's total revenue curve.

Question 13

Figure 9-13
  
-Refer to Figure 9-13. When price rises from P₂ to P₃, the firm finds that

Accepted Answer

A) marginal cost exceeds marginal revenue at a production level of Q₂. 
B) if it produces at output level Q₃ it will earn a positive profit. 
C) expanding output to Q₄ would leave the firm with losses. 
D) it could increase profits by lowering output from Q₃ to Q₂. 
A) marginal cost exceeds marginal revenue at a production level of Q₂. 
B) if it produces at output level Q₃ it will earn a positive profit. 
C) expanding output to Q₄ would leave the firm with losses. 
D) it could increase profits by lowering output from Q₃ to Q₂.

Question 14

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Accepted Answer

A) vertical. 
B) more inelastic. 
C) more elastic. 
D) of unitary elasticity. 
A) vertical. 
B) more inelastic. 
C) more elastic. 
D) of unitary elasticity.

Question 15

Figure 9-5
  
-If the market price in Figure 9-5 fell to $2.50, what should the firm do?

Accepted Answer

A) raise its price 
B) shut down and wait for conditions to improve 
C) continue operating in the short run if it expects conditions to improve 
D) go out of business immediately 
A) raise its price 
B) shut down and wait for conditions to improve 
C) continue operating in the short run if it expects conditions to improve 
D) go out of business immediately

Question 16

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 17

Figure 9-9
  
-The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-9. If the current market price of the firm's product is $50, what output should this firm produce per day?

Accepted Answer

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

Question 18

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 price but reduce equilibrium quantity in the long run. 
D) equilibrium quantity, but equilibrium price will be unchanged 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 price but reduce equilibrium quantity in the long run. 
D) equilibrium quantity, but equilibrium price will be unchanged in the long run.

Question 19

Suppose antitheft auto alarms are produced in a price-taker market that is initially in long-run equilibrium. It is estimated that only 23 percent of all autos have alarms. Due to rising auto theft, Congress mandates alarms in every vehicle. Assume complete compliance. If the industry is an increasing cost industry, price will

Accepted Answer

A) increase in both the short run and long run. 
B) decrease in both the short run and long run. 
C) increase in the short run but not in the long run. 
D) decrease in the short run but not in the long run. 
A) increase in both the short run and long run. 
B) decrease in both the short run and long run. 
C) increase in the short run but not in the long run. 
D) decrease in the short run but not in the long run.

Question 20

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 andc. 
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 andc.

Exam 9: A: Price Takers and the Competitive Process

Refer to Scenario 9-1. At Q = 999, the firm's total cost amounts to

A price-taker firm is currently producing 50 units of output at an average total cost of $3 per unit. If the market price is $7, then the firm's total economic profit is

The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit?

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

For a firm in a price-taker market, the firm's demand curve is

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

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

Figure 9-1 -Figure 9-1 shows the marginal and average total cost curves for a firm producing product A. What would be the minimum price this firm could charge and still continue to supply A to the market in the long run?

"Competitive price-taker markets" and "purely competitive markets" are

Figure 9-18 -Refer to Figure 9-18. Given the current market conditions, in the long run,

In price-taker markets, individual firms have no control over price. Therefore, the firm's marginal revenue curve is

Figure 9-13 -Refer to Figure 9-13. When price rises from P₂ to P₃, the firm finds that

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Figure 9-5 -If the market price in Figure 9-5 fell to $2.50, what should the firm do?

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

Figure 9-9 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-9. If the current market price of the firm's product is $50, what output should this firm produce per day?

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

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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