Question 1

Figure 9-11
  
-Which of the following represents the firm's total cost of producing the profit-maximizing output in Figure 9-11?

Accepted Answer

A) OCFK 
B) OBGK 
C) OAEL 
D) OCHI 
A) OCFK 
B) OBGK 
C) OAEL 
D) OCHI

Question 2

Figure 9-8
  
-The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, 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 3

Why will the long-run market supply curve for most products slope upward to the right?

Accepted Answer

A) The firms producing the product will be unable to expand the size of their plant and equipment in the long run. 
B) Economies of scale are present in most industries. 
C) Most products are produced under conditions of constant cost. 
D) Resource prices will rise and push costs upward as the output of the industry expands. 
A) The firms producing the product will be unable to expand the size of their plant and equipment in the long run. 
B) Economies of scale are present in most industries. 
C) Most products are produced under conditions of constant cost. 
D) Resource prices will rise and push costs upward as the output of the industry expands.

Question 4

Figure 9-15

-At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

Accepted Answer

A) $40 and 80 
B) $8 and 70 
C) $4 and 40 
D) $40 and 70 
E) $8 and zero output 
A) $40 and 80 
B) $8 and 70 
C) $4 and 40 
D) $40 and 70 
E) $8 and zero output

Question 5

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 6

Table 9-1
  
-Refer to Table 9-1. If the market price of tomatoes rose to $570 per ton, how many tons per month would the Tuckers produce if they were maximizing profit?

Accepted Answer

A) 6 
B) 7 
C) 8 
D) 9 
A) 6 
B) 7 
C) 8 
D) 9

Question 7

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 8

A competitive price-taker firm's marginal cost curve is regarded as its supply curve because

Accepted Answer

A) the position of the marginal cost curve determines the price for which the firm should sell its product. 
B) among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C) the marginal cost curve determines the quantity of output the firm is willing to supply at alternative prices. 
D) the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized. 
A) the position of the marginal cost curve determines the price for which the firm should sell its product. 
B) among the various cost curves, the marginal cost curve is the only one that slopes upward. 
C) the marginal cost curve determines the quantity of output the firm is willing to supply at alternative prices. 
D) the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

Question 9

Suppose the development of new drought-resistant hybrid seed corn leads to a 50-percent increase in the average yield per acre without increasing the cost to the farmers who use the new technology. If the conditions in the corn production industry are approximated by the price-taker model, which of the following is most likely to occur?

Accepted Answer

A) The price of corn will increase. 
B) The price of soybeans (a substitute for corn) will increase. 
C) The profits of corn farmers who quickly adopt the new technology will increase. 
D) The profits of corn farmers who do not adopt the new technology will increase. 
A) The price of corn will increase. 
B) The price of soybeans (a substitute for corn) will increase. 
C) The profits of corn farmers who quickly adopt the new technology will increase. 
D) The profits of corn farmers who do not adopt the new technology will increase.

Question 10

Which of the following is true?

Accepted Answer

A) When firms in a price-taker market are earning zero economic profit, they will shut down. 
B) When firms in a price-taker market are earning positive economic profits, new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C) When firms in a price-taker market are earning economic losses, some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D) Both b and c are true. 
A) When firms in a price-taker market are earning zero economic profit, they will shut down. 
B) When firms in a price-taker market are earning positive economic profits, new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C) When firms in a price-taker market are earning economic losses, some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D) Both b and c are true.

Question 11

If a profit-maximizing firm shuts down in the short run, it must be true that before the shutdown, at all positive output levels,

Accepted Answer

A) average total cost was less than average variable cost 
B) fixed cost was greater than total revenue 
C) variable cost was greater than total revenue 
D) profit was zero 
E) total cost plus total revenue was less than profit 
A) average total cost was less than average variable cost 
B) fixed cost was greater than total revenue 
C) variable cost was greater than total revenue 
D) profit was zero 
E) total cost plus total revenue was less than profit

Question 12

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 13

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

Accepted Answer

A) could increase your profit by expanding output. 
B) could increase your profit by decreasing output. 
C) are maximizing your profit at your current output level. 
D) will be able to earn positive economic profits in the long run. 
A) could increase your profit by expanding output. 
B) could increase your profit by decreasing output. 
C) are maximizing your profit at your current output level. 
D) will be able to earn positive economic profits in the long run.

Question 14

Figure 9-14
  
-Consider Figure 9-14. At which quantity will this firm maximize profit?

Accepted Answer

A) point a 
B) point b 
C) point c 
D) point d 
E) point e 
A) point a 
B) point b 
C) point c 
D) point d 
E) point e

Question 15

In a competitive price-taker market,

Accepted Answer

A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price. 
A) many other sellers are offering a product that is essentially identical. 
B) consumers have more influence over the market price than producers do. 
C) government intervention prevents firms from influencing price. 
D) producers agree not to change the price.

Question 16

A perfectly elastic, long-run market supply curve is most likely to be achieved in

Accepted Answer

A) a price-taker industry. 
B) a constant cost industry. 
C) an increasing cost industry. 
D) a price searcher industry. 
A) a price-taker industry. 
B) a constant cost industry. 
C) an increasing cost industry. 
D) a price searcher industry.

Question 17

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 18

Figure 9-18
  
-Refer to Figure 9-18. At the profit-maximizing level of output, the firm will earn an economic (Hint: Areas in the exhibit are referenced by the four letters on the corners of the respective area.)

Accepted Answer

A) profit of AHEC. 
B) profit of BIFC. 
C) loss of AHEC. 
D) loss of BIFC. 
A) profit of AHEC. 
B) profit of BIFC. 
C) loss of AHEC. 
D) loss of BIFC.

Question 19

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

Accepted Answer

A) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
B) all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs. 
C) some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return. 
D) resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit. 
A) the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
B) all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs. 
C) some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return. 
D) resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit.

Question 20

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

Exam 9: A: Price Takers and the Competitive Process

Figure 9-11 -Which of the following represents the firm's total cost of producing the profit-maximizing output in Figure 9-11?

Figure 9-8 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

Why will the long-run market supply curve for most products slope upward to the right?

Figure 9-15 -At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

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?

Table 9-1 -Refer to Table 9-1. If the market price of tomatoes rose to $570 per ton, how many tons per month would the Tuckers produce if they were maximizing profit?

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

A competitive price-taker firm's marginal cost curve is regarded as its supply curve because

Which of the following is true?

If a profit-maximizing firm shuts down in the short run, it must be true that before the shutdown, at all positive output levels,

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

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

Figure 9-14 -Consider Figure 9-14. At which quantity will this firm maximize profit?

In a competitive price-taker market,

A perfectly elastic, long-run market supply curve is most likely to be achieved in

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?

Figure 9-18 -Refer to Figure 9-18. At the profit-maximizing level of output, the firm will earn an economic (Hint: Areas in the exhibit are referenced by the four letters on the corners of the respective area.)

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

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

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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