Question 1

The deadweight loss associated with output less than the competitive level can be determined by

Accepted Answer

A) subtracting the competitive level producer surplus from the producer surplus associated with less output. 
B) subtracting the consumer surplus from the producer surplus associated with less output. 
C) summing the consumer and producer surplus associated with less output. 
D) summing the change in the total consumer and producer surplus from moving from the competitive level of output to less output. 
A) subtracting the competitive level producer surplus from the producer surplus associated with less output. 
B) subtracting the consumer surplus from the producer surplus associated with less output. 
C) summing the consumer and producer surplus associated with less output. 
D) summing the change in the total consumer and producer surplus from moving from the competitive level of output to less output.

Question 2

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

Accepted Answer

A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost. 
A) It will shut down in the short run and wait until the price increases sufficiently. 
B) It will exit the industry in the long run. 
C) It will operate at a loss in the short run. 
D) It will minimize its loss by decreasing output so that price exceeds marginal cost.

Question 3

The short run is

Accepted Answer

A) usually 3 - 6 months. 
B) dependent on the characteristics of the industry. 
C) when a firm has to decide whether or not to exit. 
D) identical to the long run for most firms. 
A) usually 3 - 6 months. 
B) dependent on the characteristics of the industry. 
C) when a firm has to decide whether or not to exit. 
D) identical to the long run for most firms.

Question 4

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Derive the market supply curve.

Accepted Answer

For each MC = 2q and AVC = q.

Question 5

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

Accepted Answer

A) 50. 
B) 25. 
C) 12.50. 
D) 10. 
A) 50. 
B) 25. 
C) 12.50. 
D) 10.

Question 6

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how much will consumers spend, in total, on potatoes?

Accepted Answer

A) $0 
B) $500 
C) $10,000 
D) $50,000 
A) $0 
B) $500 
C) $10,000 
D) $50,000

Question 7

Assume government policy increases the demand for corn.

Accepted Answer

A) The consumer surplus of corn buyers will increase. 
B) The producer surplus of corn growers will decrease. 
C) The producer surplus of corn growers will increase. 
D) The producer surplus of corn growers will not change. 
A) The consumer surplus of corn buyers will increase. 
B) The producer surplus of corn growers will decrease. 
C) The producer surplus of corn growers will increase. 
D) The producer surplus of corn growers will not change.

Question 8

Producer surplus

Accepted Answer

A) is the minimum amount a firm must receive to engage in trade. 
B) is a measure of what a firm gains from trade. 
C) represents the opportunity cost of the firm. 
D) determines whether or not a firm will produce in the long run. 
A) is the minimum amount a firm must receive to engage in trade. 
B) is a measure of what a firm gains from trade. 
C) represents the opportunity cost of the firm. 
D) determines whether or not a firm will produce in the long run.

Question 9

If market price is greater than the minimum of AVC but below the minimum of AC, then

Accepted Answer

A) the firm will shut down. 
B) revenue covers variable costs and some of the fixed costs and profit is positive. 
C) revenue covers variable costs and some of the fixed costs, although profit is negative. 
D) economic profit is zero. 
A) the firm will shut down. 
B) revenue covers variable costs and some of the fixed costs and profit is positive. 
C) revenue covers variable costs and some of the fixed costs, although profit is negative. 
D) economic profit is zero.

Question 10

The model of perfect competition is valuable for

Accepted Answer

A) prediction. 
B) comparison to other markets. 
C) Either A or B. 
D) None of the above. 
A) prediction. 
B) comparison to other markets. 
C) Either A or B. 
D) None of the above.

Question 11

The short run is

Accepted Answer

A) a period of time in which at least one input cannot be varied. 
B) when firms are stuck with sunk costs, unlike the long run. 
C) treated the same way as the long run. 
D) a period of time when no inputs can be varied. 
A) a period of time in which at least one input cannot be varied. 
B) when firms are stuck with sunk costs, unlike the long run. 
C) treated the same way as the long run. 
D) a period of time when no inputs can be varied.

Question 12

A profit maximizing firm selects output such that

Accepted Answer

A) average profit is maximized. 
B) total profit is maximized. 
C) marginal profit is maximized. 
D) Both A and B. 
A) average profit is maximized. 
B) total profit is maximized. 
C) marginal profit is maximized. 
D) Both A and B.

Question 13

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

Accepted Answer

A) the firm will shut down. 
B) the firm will operate because its loss is less than if it shut down. 
C) revenue is lower than variable costs. 
D) profit is positive and so the firm will operate. 
A) the firm will shut down. 
B) the firm will operate because its loss is less than if it shut down. 
C) revenue is lower than variable costs. 
D) profit is positive and so the firm will operate.

Question 14

Total surplus

Accepted Answer

A) is maximized under perfect competition. 
B) represents the gains from trade to market participants. 
C) treats consumer and producer surplus equally. 
D) All of the above. 
A) is maximized under perfect competition. 
B) represents the gains from trade to market participants. 
C) treats consumer and producer surplus equally. 
D) All of the above.

Question 15

If firms in a competitive market are NOT identical, then the long-run market supply curve will be

Accepted Answer

A) horizontal. 
B) upward sloping. 
C) downward sloping. 
D) undetermined. 
A) horizontal. 
B) upward sloping. 
C) downward sloping. 
D) undetermined.

Question 16

If in a market the last unit of output was sold at a price higher than marginal cost

Accepted Answer

A) producer is better off producing more. 
B) consumers are better off if less of the product is sold. 
C) social welfare is not maximized. 
D) the unit increased total profit. 
A) producer is better off producing more. 
B) consumers are better off if less of the product is sold. 
C) social welfare is not maximized. 
D) the unit increased total profit.

Question 17

In a short run competitive equilibrium

Accepted Answer

A) the market demand curve is horizontal. 
B) the market demand curve is downward sloping. 
C) the market demand curve is perfectly inelastic. 
D) All of the above are possible. 
A) the market demand curve is horizontal. 
B) the market demand curve is downward sloping. 
C) the market demand curve is perfectly inelastic. 
D) All of the above are possible.

Question 18

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

Accepted Answer

A) They value consumer surplus more than producer surplus. 
B) They value producer surplus more than consumer surplus. 
C) They seek to avoid future regulation. 
D) They seek to minimize total surplus. 
A) They value consumer surplus more than producer surplus. 
B) They value producer surplus more than consumer surplus. 
C) They seek to avoid future regulation. 
D) They seek to minimize total surplus.

Question 19

In a perfectly competitive market

Accepted Answer

A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above. 
A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above.

Question 20

A competitive firm's supply curve is identical to its marginal cost curve.

Accepted Answer

A) True 
 B)False

The deadweight loss associated with output less than the competitive level can be determined by

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

The short run is

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Derive the market supply curve.

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how much will consumers spend, in total, on potatoes?

Assume government policy increases the demand for corn.

Producer surplus

If market price is greater than the minimum of AVC but below the minimum of AC, then

The model of perfect competition is valuable for

The short run is

A profit maximizing firm selects output such that

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

Total surplus

If firms in a competitive market are NOT identical, then the long-run market supply curve will be

If in a market the last unit of output was sold at a price higher than marginal cost

In a short run competitive equilibrium

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

In a perfectly competitive market

A competitive firm's supply curve is identical to its marginal cost curve.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 8: Competitive Firms and Markets

The deadweight loss associated with output less than the competitive level can be determined by

If a competitive firm cannot earn profit at any level of output during a given short-run period, then which of the following is LEAST likely to occur?

The short run is

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Derive the market supply curve.

Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how much will consumers spend, in total, on potatoes?

Assume government policy increases the demand for corn.

Producer surplus

If market price is greater than the minimum of AVC but below the minimum of AC, then

The model of perfect competition is valuable for

The short run is

A profit maximizing firm selects output such that

If market price is greater than or equal to the minimum of AVC but below the minimum of AC, then

Total surplus

If firms in a competitive market are NOT identical, then the long-run market supply curve will be

If in a market the last unit of output was sold at a price higher than marginal cost

In a short run competitive equilibrium

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be produced in a perfectly competitive market?

In a perfectly competitive market

A competitive firm's supply curve is identical to its marginal cost curve.

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters