Question 1

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 2

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 3

Farmer Fanny sells her crops in a competitive price-taker market. If she produces 500 bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,505, her

Accepted Answer

A) revenue will increase by $10 if she harvests the 501st bushel 
B) revenue will fall by $5 if she harvests the 501st bushel 
C) average fixed cost will rise if she harvests the 501st bushel 
D) profit will fall by $10 if she harvests the 501st bushel 
E) profit will remain unchanged if she harvests the 501st bushel 
A) revenue will increase by $10 if she harvests the 501st bushel 
B) revenue will fall by $5 if she harvests the 501st bushel 
C) average fixed cost will rise if she harvests the 501st bushel 
D) profit will fall by $10 if she harvests the 501st bushel 
E) profit will remain unchanged if she harvests the 501st bushel

Question 4

Figure 9-7
  
-If the market price in Figure 9-7 increases to $4, what should the firm do?

Accepted Answer

A) produce 5,000 per week 
B) produce 7,500 per week 
C) produce 10,000 per week 
D) increase its price to $5 
A) produce 5,000 per week 
B) produce 7,500 per week 
C) produce 10,000 per week 
D) increase its price to $5

Question 5

Competition as a dynamic process implies that individual firms in a market

Accepted Answer

A) seek to utilize a variety of techniques, such as product, style, and convenience of location, to win the dollar vote of consumers, but they never use price to compete. 
B) use price competition as well as other forms of competition to gain the dollar votes of consumers. 
C) produce a homogeneous product. 
D) cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer. 
A) seek to utilize a variety of techniques, such as product, style, and convenience of location, to win the dollar vote of consumers, but they never use price to compete. 
B) use price competition as well as other forms of competition to gain the dollar votes of consumers. 
C) produce a homogeneous product. 
D) cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.

Question 6

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) and that the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would

Accepted Answer

A) immediately shut down and get out of the industry. 
B) continue to produce a quantity such that marginal revenue equals marginal cost. 
C) shut down temporarily, in hopes of restarting in the near future. 
D) cut price and expand output in hopes of achieving economies of scale 
A) immediately shut down and get out of the industry. 
B) continue to produce a quantity such that marginal revenue equals marginal cost. 
C) shut down temporarily, in hopes of restarting in the near future. 
D) cut price and expand output in hopes of achieving economies of scale

Question 7

Figure 9-18
  
-The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Accepted Answer

A) This firm shown is earning zero economic profit. 
B) The industry is in long-run equilibrium. 
C) Firms will neither enter nor exit the market. 
D) All of the above are true. 
A) This firm shown is earning zero economic profit. 
B) The industry is in long-run equilibrium. 
C) Firms will neither enter nor exit the market. 
D) All of the above are true.

Question 8

Which of the following is a primary difference between price searchers and price takers?

Accepted Answer

A) Price searchers maximize profits, but price takers do not. 
B) Price searchers have to cut their price to sell additional output, but price takers do not. 
C) The market demand for goods produced by price searchers is downward sloping, while the market demand for goods produced by price takers is horizontal. 
D) Profit-maximizing price searchers will expand output to the quantity where marginal revenue equals marginal cost, but price takers will not. 
A) Price searchers maximize profits, but price takers do not. 
B) Price searchers have to cut their price to sell additional output, but price takers do not. 
C) The market demand for goods produced by price searchers is downward sloping, while the market demand for goods produced by price takers is horizontal. 
D) Profit-maximizing price searchers will expand output to the quantity where marginal revenue equals marginal cost, but price takers will not.

Question 9

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 10

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 11

In the short run, a profit-maximizing price taker will expand output as long as the market price exceeds

Accepted Answer

A) average variable cost. 
B) marginal cost. 
C) average total cost. 
D) average fixed cost. 
A) average variable cost. 
B) marginal cost. 
C) average total cost. 
D) average fixed cost.

Question 12

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should

Accepted Answer

A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price 
A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price

Question 13

The short-run supply curve in a price-taking industry is the

Accepted Answer

A) horizontal summation of the individual firms' MC curves above ATC. 
B) horizontal summation of the individual firms' MC curves above AVC. 
C) horizontal summation of the individual firms' AVC curves above MC. 
D) vertical summation of ATC curves above AVC. 
A) horizontal summation of the individual firms' MC curves above ATC. 
B) horizontal summation of the individual firms' MC curves above AVC. 
C) horizontal summation of the individual firms' AVC curves above MC. 
D) vertical summation of ATC curves above AVC.

Question 14

In competitive price-taker markets, if one firm raises its price,

Accepted Answer

A) others will follow 
B) that firm will increase its revenues 
C) that firm will lose revenues because other firms will not follow 
D) all consumers will be adversely affected 
E) the market demand curve will shift 
A) others will follow 
B) that firm will increase its revenues 
C) that firm will lose revenues because other firms will not follow 
D) all consumers will be adversely affected 
E) the market demand curve will shift

Question 15

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

Accepted Answer

A) Thelma must reduce output 
B) the price Thelma can charge falls 
C) the price Thelma can charge rises 
D) the price Thelma can charge is unaffected 
E) Thelma's profits must fall 
A) Thelma must reduce output 
B) the price Thelma can charge falls 
C) the price Thelma can charge rises 
D) the price Thelma can charge is unaffected 
E) Thelma's profits must fall

Question 16

Figure 9-7
  
-When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately

Accepted Answer

A) zero. 
B) $40. 
C) $6,000. 
D) $40,000. 
A) zero. 
B) $40. 
C) $6,000. 
D) $40,000.

Question 17

When market conditions in a price-taker market are such that firms cannot cover their production costs,

Accepted Answer

A) the firms will suffer long-run economic losses. 
B) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
C) some firms will go out of business, causing prices to rise until the remaining firms can cover their production costs. 
D) all firms will go out of business, since consumers will not pay prices that enable firms to cover their production costs. 
A) the firms will suffer long-run economic losses. 
B) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
C) some firms will go out of business, causing prices to rise until the remaining firms can cover their production costs. 
D) all firms will go out of business, since consumers will not pay prices that enable firms to cover their production costs.

Exam 9: A: Price Takers and the Competitive Process

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

A firm that is a price taker can

Farmer Fanny sells her crops in a competitive price-taker market. If she produces 500 bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,505, her

Figure 9-7 -If the market price in Figure 9-7 increases to $4, what should the firm do?

Competition as a dynamic process implies that individual firms in a market

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) and that the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would

Figure 9-18 -The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Which of the following is a primary difference between price searchers and price takers?

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

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

In the short run, a profit-maximizing price taker will expand output as long as the market price exceeds

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should

The short-run supply curve in a price-taking industry is the

In competitive price-taker markets, if one firm raises its price,

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

Figure 9-7 -When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately

When market conditions in a price-taker market are such that firms cannot cover their production costs,

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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