Question 1

-The above figure shows the cost curves for a competitive firm.If the market price is $15 per unit,the firm will earn profits of

Accepted Answer

A)  $0. 
B)  $4. 
C)  $40. 
D)  $160. 
A)  $0. 
B)  $4. 
C)  $40. 
D)  $160. D

Question 2

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

Accepted Answer

The residual demand curve is equal to the market demand curve minus the supply of all the other firms.The supply of the other 19 firms is 38p.The residual demand is 200 - 40p.

Question 3

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. A

Question 4

A firm should always shut down if its revenue is

Accepted Answer

A)  declining. 
B)  less than its average fixed costs. 
C)  less than its total costs. 
D)  less than its avoidable costs. 
A)  declining. 
B)  less than its average fixed costs. 
C)  less than its total costs. 
D)  less than its avoidable costs.

Question 5

Suppose TC = 10 + (0.1 ∗ q2).If p = 10,the firm's profit-maximizing level of output is

Accepted Answer

A)  40. 
B)  50. 
C)  60. 
D)  0, since the firm will shut down. 
A)  40. 
B)  50. 
C)  60. 
D)  0, since the firm will shut down.

Question 6

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

Accepted Answer

A)  p = MC 
B)  p = AC 
C)  profit = 0 
D)  All of the above. 
A)  p = MC 
B)  p = AC 
C)  profit = 0 
D)  All of the above.

Question 7

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 8

In a competitive market where the elasticity of the market demand curve is -1.5,the number of firms is 20,and an individual firm faces a residual demand curve with an elasticity of -68.What is the elasticity of the supply curve?

Accepted Answer

A)  0.5 
B)  1.2 
C)  2 
D)  Cannot be determined. 
A)  0.5 
B)  1.2 
C)  2 
D)  Cannot be determined.

Question 9

If a firm doesn't make an economic profit,it will shut down.

Accepted Answer

A) True 
 B)False

Question 10

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 11

In a competitive market,one would expect to see

Accepted Answer

A)  no advertising. 
B)  false advertising. 
C)  advertising only in the Sunday papers. 
D)  minimal advertising. 
A)  no advertising. 
B)  false advertising. 
C)  advertising only in the Sunday papers. 
D)  minimal advertising.

Question 12

Many used car owners and used car dealers describe their different cars for sale in the local newspapers and list their asking price.Many people shopping for a used car consider the different choices listed in the paper.The market for used cars could be described as

Accepted Answer

A)  relatively competitive. 
B)  perfectly competitive. 
C)  non-competitive. 
D)  having high transaction costs. 
A)  relatively competitive. 
B)  perfectly competitive. 
C)  non-competitive. 
D)  having high transaction costs.

Question 13

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 14

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 many firms will this industry sustain in the long run?

Accepted Answer

A)  0 
B)  100 
C)  50,000 
D)  There is not enough information to answer. 
A)  0 
B)  100 
C)  50,000 
D)  There is not enough information to answer.

Question 15

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Accepted Answer

A)  taxi services are very different. 
B)  firms cannot freely enter and exit the market. 
C)  transaction costs are high. 
D)  the government generates revenue from the licenses. 
A)  taxi services are very different. 
B)  firms cannot freely enter and exit the market. 
C)  transaction costs are high. 
D)  the government generates revenue from the licenses.

Question 16

Which of the following markets would reach long-run equilibrium fastest?

Accepted Answer

A)  online retail 
B)  auto dealers 
C)  oil extraction 
D)  World Series tickets 
A)  online retail 
B)  auto dealers 
C)  oil extraction 
D)  World Series tickets

Question 17

If a competitive firm has to pay a lump sum tax,it will produce less.

Accepted Answer

A) True 
 B)False

Question 18

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

Accepted Answer

A)  $0. 
B)  $15. 
C)  $10. 
D)  $11. 
A)  $0. 
B)  $15. 
C)  $10. 
D)  $11.

Question 19

What is the elasticity of residual supply faced by the USA in the cashew juice market,where the market supply elasticity is 1,the elasticity of demand of the other countries is -2,and the U.S.imports 10% of the world's cashew juice production?

Accepted Answer

A)  14 
B)  20 
C)  28 
D)  34 
A)  14 
B)  20 
C)  28 
D)  34

Question 20

Economists define a market to be competitive when the firms

Accepted Answer

A)  spend large amounts of money on advertising to lure customers away from the competition. 
B)  watch each other's behavior closely. 
C)  are price takers. 
D)  All of the above. 
A)  spend large amounts of money on advertising to lure customers away from the competition. 
B)  watch each other's behavior closely. 
C)  are price takers. 
D)  All of the above.

-The above figure shows the cost curves for a competitive firm.If the market price is $15 per unit,the firm will earn profits of

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

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

A firm should always shut down if its revenue is

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profit-maximizing level of output is

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

A horizontal demand curve for a firm implies that

In a competitive market where the elasticity of the market demand curve is -1.5,the number of firms is 20,and an individual firm faces a residual demand curve with an elasticity of -68.What is the elasticity of the supply curve?

If a firm doesn't make an economic profit,it will shut down.

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

In a competitive market,one would expect to see

Many used car owners and used car dealers describe their different cars for sale in the local newspapers and list their asking price.Many people shopping for a used car consider the different choices listed in the paper.The market for used cars could be described as

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

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 many firms will this industry sustain in the long run?

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Which of the following markets would reach long-run equilibrium fastest?

If a competitive firm has to pay a lump sum tax,it will produce less.

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

What is the elasticity of residual supply faced by the USA in the cashew juice market,where the market supply elasticity is 1,the elasticity of demand of the other countries is -2,and the U.S.imports 10% of the world's cashew juice production?

Economists define a market to be competitive when the firms

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 8: Competitive Firms and Markets

-The above figure shows the cost curves for a competitive firm.If the market price is $15 per unit,the firm will earn profits of

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

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

A firm should always shut down if its revenue is

Suppose TC = 10 + (0.1 ∗ q2).If p = 10,the firm's profit-maximizing level of output is

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

A horizontal demand curve for a firm implies that

In a competitive market where the elasticity of the market demand curve is -1.5,the number of firms is 20,and an individual firm faces a residual demand curve with an elasticity of -68.What is the elasticity of the supply curve?

If a firm doesn't make an economic profit,it will shut down.

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

In a competitive market,one would expect to see

Many used car owners and used car dealers describe their different cars for sale in the local newspapers and list their asking price.Many people shopping for a used car consider the different choices listed in the paper.The market for used cars could be described as

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

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 many firms will this industry sustain in the long run?

A special license is required to operate a taxi in many cities.The number of licenses is restricted.More drivers want licenses than are issued.This describes a non-perfectly competitive market because

Which of the following markets would reach long-run equilibrium fastest?

If a competitive firm has to pay a lump sum tax,it will produce less.

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

What is the elasticity of residual supply faced by the USA in the cashew juice market,where the market supply elasticity is 1,the elasticity of demand of the other countries is -2,and the U.S.imports 10% of the world's cashew juice production?

Economists define a market to be competitive when the firms

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profit-maximizing level of output is