Question 1

Figure 9-12
  
-Figure 9-12 illustrates a

Accepted Answer

A) competitive price-taker firm that is earning economic profit. 
B) competitive price-taker firm that is only able to break even when it is maximizing economic profit. 
C) firm that should shut down immediately. 
D) competitive price-taker firm that is making economic losses. 
A) competitive price-taker firm that is earning economic profit. 
B) competitive price-taker firm that is only able to break even when it is maximizing economic profit. 
C) firm that should shut down immediately. 
D) competitive price-taker firm that is making economic losses.

Question 2

Figure 9-9
  
-If the market price in Figure 9-9 increases to $60, what should the firm do?

Accepted Answer

A) produce 10 per day 
B) produce 15 per day 
C) produce 20 per day 
D) increase its price to $70 
A) produce 10 per day 
B) produce 15 per day 
C) produce 20 per day 
D) increase its price to $70

Question 3

Figure 9-11
  
-Which of the following indicates the firm's profit (or loss) at the profit-maximizing output in Figure 9-11?

Accepted Answer

A) profit BCFG 
B) profit OCDM 
C) zero economic profit 
D) loss AEFC 
A) profit BCFG 
B) profit OCDM 
C) zero economic profit 
D) loss AEFC

Question 4

In a competitive price-taker market, the actions of any single buyer or seller will

Accepted Answer

A) have a negligible impact on the market price. 
B) have little effect on overall production but will ultimately change final product price. 
C) cause a noticeable change in overall production and a change in final product price. 
D) adversely affect the profitability of more than one firm in the market. 
A) have a negligible impact on the market price. 
B) have little effect on overall production but will ultimately change final product price. 
C) cause a noticeable change in overall production and a change in final product price. 
D) adversely affect the profitability of more than one firm in the market.

Question 5

Figure 9-5
  
-If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

Accepted Answer

A) output, 3; maximum profit, $3 loss 
B) output, 5; maximum profit, zero 
C) output, 5; maximum profit, slightly less than $5 
D) output, 6; maximum profit, slightly less than $6 
A) output, 3; maximum profit, $3 loss 
B) output, 5; maximum profit, zero 
C) output, 5; maximum profit, slightly less than $5 
D) output, 6; maximum profit, slightly less than $6

Question 6

A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit?

Accepted Answer

A) Shut down. 
B) Increase output. 
C) Stay at current output. 
D) Decrease output. 
E) Decrease price. 
A) Shut down. 
B) Increase output. 
C) Stay at current output. 
D) Decrease output. 
E) Decrease price.

Question 7

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

Accepted Answer

A) output, 5 million; total revenue, $30 million 
B) output, 5 million; total revenue, $40 million 
C) output, 6 million; total revenue, $10 million (approx.) 
D) output, 6 million; total revenue, $48 million 
A) output, 5 million; total revenue, $30 million 
B) output, 5 million; total revenue, $40 million 
C) output, 6 million; total revenue, $10 million (approx.) 
D) output, 6 million; total revenue, $48 million

Question 8

Which portion of the marginal cost curve is used to create a firm's short-run supply curve?

Accepted Answer

A) the entire marginal cost curve 
B) the marginal cost curve above its intersection with the average variable cost curve because below this price, firms will shut down in the short run 
C) the marginal cost curve above its intersection with the marginal revenue (demand) curve 
D) the marginal cost curve above its intersection with the average total cost curve because below this price, firms will shut down in the short run 
A) the entire marginal cost curve 
B) the marginal cost curve above its intersection with the average variable cost curve because below this price, firms will shut down in the short run 
C) the marginal cost curve above its intersection with the marginal revenue (demand) curve 
D) the marginal cost curve above its intersection with the average total cost curve because below this price, firms will shut down in the short run

Question 9

To maximize profits, a firm should always produce the level of output where

Accepted Answer

A) marginal cost equals average total cost. 
B) average total cost equals price. 
C) marginal cost equals marginal revenue. 
D) marginal revenue equals price. 
A) marginal cost equals average total cost. 
B) average total cost equals price. 
C) marginal cost equals marginal revenue. 
D) marginal revenue equals price.

Question 10

When we say that a firm is a price taker, we are indicating that the

Accepted Answer

A) firm takes the price established in the market then tries to increase that price through advertising. 
B) firm can change output levels without having any significant effect on price. 
C) demand curve faced by the firm is perfectly inelastic. 
D) firm will have to take a lower price if it wants to increase the number of units that it sells. 
A) firm takes the price established in the market then tries to increase that price through advertising. 
B) firm can change output levels without having any significant effect on price. 
C) demand curve faced by the firm is perfectly inelastic. 
D) firm will have to take a lower price if it wants to increase the number of units that it sells.

Question 11

Figure 9-19
  
-Refer to Figure 9-19. To maximize profit, the firm should produce an output level of

Accepted Answer

A) zero; the firm should shut down immediately. 
B) Q₂. 
C) Q₃. 
D) Q₄. 
A) zero; the firm should shut down immediately. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Question 12

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?

Accepted Answer

A) Increase output. 
B) Decrease output. 
C) Shut down operations. 
D) Stay at the current output; the firm is earning a profit of $1,400. 
E) Stay at the current output; the firm is losing $1,400. 
A) Increase output. 
B) Decrease output. 
C) Shut down operations. 
D) Stay at the current output; the firm is earning a profit of $1,400. 
E) Stay at the current output; the firm is losing $1,400.

Question 13

Competition as a dynamic process implies that the individual firms in an industry

Accepted Answer

A) face a perfectly elastic demand curve. 
B) utilize a variety of techniques, such as product, style, and price, to win 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) face a perfectly elastic demand curve. 
B) utilize a variety of techniques, such as product, style, and price, to win 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 14

Figure 9-5
  
-The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?

Accepted Answer

A) output, 3; maximum profit, $3 loss 
B) output, 5; maximum profit, zero 
C) output, 5; maximum profit, $5 
D) output, 6; maximum profit, $6 
A) output, 3; maximum profit, $3 loss 
B) output, 5; maximum profit, zero 
C) output, 5; maximum profit, $5 
D) output, 6; maximum profit, $6

Question 15

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Accepted Answer

A) short run, $.25; long run, more than $.25 
B) short run, less than $.25; long run, $.25 
C) short run, less than $.25; long run, more than $.25 
D) short run, $.25; long run, less than $.25 
A) short run, $.25; long run, more than $.25 
B) short run, less than $.25; long run, $.25 
C) short run, less than $.25; long run, more than $.25 
D) short run, $.25; long run, less than $.25

Question 16

Refer to Scenario 9-1. To maximize its profit, the firm should

Accepted Answer

A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output, but continue to produce. 
D) shut down. 
A) increase its output. 
B) continue to produce 1,000 units. 
C) decrease its output, but continue to produce. 
D) shut down.

Question 17

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

Accepted Answer

A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue. 
A) a one-unit increase in output will increase the firm's profit. 
B) a one-unit decrease in output will increase the firm's profit. 
C) total revenue exceeds total cost. 
D) total cost exceeds total revenue.

Question 18

If a firm is making zero economic profit, it

Accepted Answer

A) will be forced to shutdown and leave the market. 
B) will also generally be making zero accounting profit. 
C) is doing as well as typical firms in other markets. 
D) will not survive in the long run. 
A) will be forced to shutdown and leave the market. 
B) will also generally be making zero accounting profit. 
C) is doing as well as typical firms in other markets. 
D) will not survive in the long run.

Question 19

The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

Accepted Answer

A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost. 
A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost.

Question 20

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

Accepted Answer

A) reflect a waste of society's scarce resources and reflect inefficient production. 
B) signal owners of factors of production to move their resources out of that industry. 
C) imply that accounting costs are greater than economic costs in this industry. 
D) signal owners of factors of production to move resources into this industry. 
A) reflect a waste of society's scarce resources and reflect inefficient production. 
B) signal owners of factors of production to move their resources out of that industry. 
C) imply that accounting costs are greater than economic costs in this industry. 
D) signal owners of factors of production to move resources into this industry.

Exam 9: A: Price Takers and the Competitive Process

Figure 9-12 -Figure 9-12 illustrates a

Figure 9-9 -If the market price in Figure 9-9 increases to $60, what should the firm do?

Figure 9-11 -Which of the following indicates the firm's profit (or loss) at the profit-maximizing output in Figure 9-11?

In a competitive price-taker market, the actions of any single buyer or seller will

Figure 9-5 -If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit?

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

Which portion of the marginal cost curve is used to create a firm's short-run supply curve?

To maximize profits, a firm should always produce the level of output where

When we say that a firm is a price taker, we are indicating that the

Figure 9-19 -Refer to Figure 9-19. To maximize profit, the firm should produce an output level of

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?

Competition as a dynamic process implies that the individual firms in an industry

Figure 9-5 -The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Refer to Scenario 9-1. To maximize its profit, the firm should

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

If a firm is making zero economic profit, it

The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

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

Filters