Question 1

If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be TRUE?

Accepted Answer

A) p < AVC for all levels of output. 
B) p < AVC only for the level of output at which p = MC. 
C) p < AVC only if the firm has no fixed costs. 
D) The firm will earn zero profit. 
A) p < AVC for all levels of output. 
B) p < AVC only for the level of output at which p = MC. 
C) p < AVC only if the firm has no fixed costs. 
D) The firm will earn zero profit.

Question 2

A "stair-like" market supply curve is the result of

Accepted Answer

A) higher cost firms charging a higher price for their products. 
B) firms having different costs. 
C) firms shutting down in the long run. 
D) average variable costs that are higher than average fixed costs. 
A) higher cost firms charging a higher price for their products. 
B) firms having different costs. 
C) firms shutting down in the long run. 
D) average variable costs that are higher than average fixed costs.

Question 3

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

Accepted Answer

A) $5,000. 
B) $15,000. 
C) $20,000. 
D) not able to be calculated from the information given. 
A) $5,000. 
B) $15,000. 
C) $20,000. 
D) not able to be calculated from the information given.

Question 4

A horizontal demand curve for a firm implies that

Accepted Answer

A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products. 
A) the firm is a monopoly. 
B) the market the firm is operating in is not competitive. 
C) the firm is selling in a competitive market. 
D) the products of that firm are very different from other firms' products.

Question 5

If a firm is a price taker, then its marginal revenue will always equal

Accepted Answer

A) price. 
B) total cost. 
C) zero. 
D) one. 
A) price. 
B) total cost. 
C) zero. 
D) one.

Question 6

With identical firms, constant input prices, and all the other characteristics of a competitive market

Accepted Answer

A) the long run equilibrium price is the minimum of the average cost curve. 
B) a shift in demand will change the equilibrium price and quantity. 
C) the long run and short run equilibria are identical. 
D) Both A and B. 
A) the long run equilibrium price is the minimum of the average cost curve. 
B) a shift in demand will change the equilibrium price and quantity. 
C) the long run and short run equilibria are identical. 
D) Both A and B.

Question 7

With identical firms, constant input prices, and all the other characteristics of a competitive market

Accepted Answer

A) a shift in demand has no effect on the long-run average cost and so there is no change in equilibrium price and quantity. 
B) a shift in demand will change the equilibrium price and quantity. 
C) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium quantity but not price. 
D) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium price but not quantity. 
A) a shift in demand has no effect on the long-run average cost and so there is no change in equilibrium price and quantity. 
B) a shift in demand will change the equilibrium price and quantity. 
C) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium quantity but not price. 
D) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium price but not quantity.

Question 8

In the short run

Accepted Answer

A) firms will shut down if operating at a loss. 
B) profit maximizing firms have identical short run supply curves. 
C) firms may choose to operate at a loss. 
D) most firms have short run supply curves that are the same as their long run supply curves. 
A) firms will shut down if operating at a loss. 
B) profit maximizing firms have identical short run supply curves. 
C) firms may choose to operate at a loss. 
D) most firms have short run supply curves that are the same as their long run supply curves.

Question 9

Long-run market supply curves are downward sloping if

Accepted Answer

A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above. 
A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above.

Question 10

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

Accepted Answer

The firm's supply is q = 0.5p; market su

Question 11

If firms in a competitive market are NOT identical, then an increase in cost will

Accepted Answer

A) shift marginal cost to the right. 
B) push the most inefficient firms out of the market. 
C) push the most efficient firms out of the market. 
D) Need more information. 
A) shift marginal cost to the right. 
B) push the most inefficient firms out of the market. 
C) push the most efficient firms out of the market. 
D) Need more information.

Question 12

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

Accepted Answer

A) producer surplus to increase. 
B) consumer surplus to drop. 
C) consumer surplus to remain unchanged, since they pay the price and only get the rebate later. 
D) producers to stop making "green" automobiles. 
A) producer surplus to increase. 
B) consumer surplus to drop. 
C) consumer surplus to remain unchanged, since they pay the price and only get the rebate later. 
D) producers to stop making "green" automobiles.

Question 13

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Accepted Answer

A) the supply curve is flatter than if there were only 35 identical firms. 
B) the supply curve is more elastic than if there were only 25 identical firms. 
C) the supply curve is more inelastic than if the firms were identical. 
D) All of the above. 
A) the supply curve is flatter than if there were only 35 identical firms. 
B) the supply curve is more elastic than if there were only 25 identical firms. 
C) the supply curve is more inelastic than if the firms were identical. 
D) All of the above.

Question 14

Long-run market supply curves are upward sloping if

Accepted Answer

A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above. 
A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above.

Question 15

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is

Accepted Answer

A) N times the supply of an individual firm. 
B) N - 1 times the supply of an individual firm. 
C) N plus the supply of an individual firm. 
D) It cannot be determined from the information provided. 
A) N times the supply of an individual firm. 
B) N - 1 times the supply of an individual firm. 
C) N plus the supply of an individual firm. 
D) It cannot be determined from the information provided.

Question 16

The long-run supply curve in a competitive market is upward-sloping.

Accepted Answer

A) True 
 B)False

Question 17

Firms that exhibit price-taking behavior

Accepted Answer

A) wait for other firms to set price, take it as given, and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior in their own hands. 
D) are independently capable of setting price. 
A) wait for other firms to set price, take it as given, and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior in their own hands. 
D) are independently capable of setting price.

Question 18

The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model?

Accepted Answer

A) Many markets are close to being perfectly competitive. 
B) It is an important model to use as a benchmark to compare other markets structures to. 
C) Perfectly competitive markets maximize societal welfare. 
D) All of the above. 
A) Many markets are close to being perfectly competitive. 
B) It is an important model to use as a benchmark to compare other markets structures to. 
C) Perfectly competitive markets maximize societal welfare. 
D) All of the above.

Question 19

Market consumer surplus

Accepted Answer

A) is the area under the demand curve and above market price, up to the quantity actually bought. 
B) is equal to total market revenue minus cost. 
C) does not depend on the quantity sold. 
D) is the area under the market price and above the marginal cost curve. 
A) is the area under the demand curve and above market price, up to the quantity actually bought. 
B) is equal to total market revenue minus cost. 
C) does not depend on the quantity sold. 
D) is the area under the market price and above the marginal cost curve.

Question 20

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

Accepted Answer

A) fall to $820. 
B) fall by $84. 
C) fall by $58. 
D) fall to $369. 
A) fall to $820. 
B) fall by $84. 
C) fall by $58. 
D) fall to $369.

If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be TRUE?

A "stair-like" market supply curve is the result of

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

A horizontal demand curve for a firm implies that

If a firm is a price taker, then its marginal revenue will always equal

With identical firms, constant input prices, and all the other characteristics of a competitive market

With identical firms, constant input prices, and all the other characteristics of a competitive market

In the short run

Long-run market supply curves are downward sloping if

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

If firms in a competitive market are NOT identical, then an increase in cost will

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Long-run market supply curves are upward sloping if

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is

The long-run supply curve in a competitive market is upward-sloping.

Firms that exhibit price-taking behavior

The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model?

Market consumer surplus

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

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

If a competitive firm finds that it maximizes short-run profits by shutting down, which of the following must be TRUE?

A "stair-like" market supply curve is the result of

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

A horizontal demand curve for a firm implies that

If a firm is a price taker, then its marginal revenue will always equal

With identical firms, constant input prices, and all the other characteristics of a competitive market

With identical firms, constant input prices, and all the other characteristics of a competitive market

In the short run

Long-run market supply curves are downward sloping if

Suppose there are 1000 identical wheat farmers. For each, TC = 10 + q2. Market demand is Q = 600,000 - 100p. Derive the short-run equilibrium Q, q, and p. Does the typical firm earn a short-run profit?

If firms in a competitive market are NOT identical, then an increase in cost will

Currently, when a consumer purchases a "green" automobile, the U.S. government gives the consumer a rebate. When the rebate program expires, we would expect

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Long-run market supply curves are upward sloping if

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price is

The long-run supply curve in a competitive market is upward-sloping.

Firms that exhibit price-taking behavior

The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model?

Market consumer surplus

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone). The current price is $0.35 per minute. If the price were to increase by ten cents per minute, consumer surplus would

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