Question 1

The long-run supply curve for a increasing-cost industry is downward sloping.

Accepted Answer

A) True 
 B)False

Question 2

As more firms leave an industry,the market price will increase.

Accepted Answer

A) True 
 B)False

Question 3

In a perfectly competitive market,an individual firm cannot charge any price it wants.

Accepted Answer

A) True 
 B)False

Question 4

The owner of Tie-Dyed T-shirts,a perfectly competitive firm,has hired you to give him some economic advice.He has told you that the market price for his shirts is $20 and that he is currently producing 200 shirts.At this output his MC is $20,his short-run AVC is $15 and his short-run ATC is $25.What would you recommend to him?

Accepted Answer

A)  to continue producing in the short run, as his loss from production is less than his fixed costs, but to exit the industry in the long run if there are no changes in economic conditions 
B)  to shut down in the short run, as he is incurring a loss, and to leave the industry in the long run if there are no changes in economic conditions 
C)  to continue to produce in the short run, even though he is earning a loss, and to expand in the future with the hope of increasing market share and total revenue 
D)  You tell him you cannot make any recommendations until you know what his fixed costs are. 
A)  to continue producing in the short run, as his loss from production is less than his fixed costs, but to exit the industry in the long run if there are no changes in economic conditions 
B)  to shut down in the short run, as he is incurring a loss, and to leave the industry in the long run if there are no changes in economic conditions 
C)  to continue to produce in the short run, even though he is earning a loss, and to expand in the future with the hope of increasing market share and total revenue 
D)  You tell him you cannot make any recommendations until you know what his fixed costs are.

Question 5

A cost that has already been paid but can be recovered is a sunk cost.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 9.1: 21st Century Pen, Inc. produces 2,000 pens per day, and hires 20 workers at a cost of $200 per day per worker. The price of each pen is $5 each. 21st Century Pen, Inc. pays a daily rental rate of $60 on its factory and a daily insurance rate of $20. 21st Century Pen, Inc. has a ten year lease on the factory, an insurance contract for a year, and the company has no other expenses.
-Refer to Scenario 9.1.21st Century Pen,Inc.will earn positive economic profit as long as price is

Accepted Answer

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

Question 7

Monopolistic industries are characterized by a homogeneous product.

Accepted Answer

A) True 
 B)False

The long-run supply curve for a increasing-cost industry is downward sloping.

As more firms leave an industry,the market price will increase.

In a perfectly competitive market,an individual firm cannot charge any price it wants.

A cost that has already been paid but can be recovered is a sunk cost.

Monopolistic industries are characterized by a homogeneous product.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 9: Perfect Competition

The long-run supply curve for a increasing-cost industry is downward sloping.

As more firms leave an industry,the market price will increase.

In a perfectly competitive market,an individual firm cannot charge any price it wants.

A cost that has already been paid but can be recovered is a sunk cost.

Monopolistic industries are characterized by a homogeneous product.

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters