Question 1

If a competitive firm's marginal profit is positive at an output of 1000 units,

Accepted Answer

A)  at 1000 units, MR = MC. 
B)  it should produce more than 1000 units. 
C)  it should produce less than 1000 units. 
D)  at 1000 units, MR < MC. 
A)  at 1000 units, MR = MC. 
B)  it should produce more than 1000 units. 
C)  it should produce less than 1000 units. 
D)  at 1000 units, MR < MC.

Question 2

If the market price in a competitive market is below the minimum of average variable cost,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 3

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

Accepted Answer

The long-run market

Question 4

Suppose an industry has no fixed costs.Draw two graphs side by side for the industry.In the left graph draw a U-shaped average cost curve and the corresponding marginal cost curve.In the right graph,draw a downward sloping market demand curve.Also in the right graph,draw a short-run supply curve that would generate positive profit,and the long-run supply curve that would result in.

Accepted Answer

@#IMG-DLM& See the a

Question 5

If a firm is currently in short-run equilibrium earning a profit,what impact will a lump-sum tax have on its production decision?

Accepted Answer

A)  The firm will decrease output to earn a higher profit. 
B)  The firm will increase output but earn a lower profit. 
C)  The firm will not change output but earn a lower profit. 
D)  The firm will not change output and earn a higher profit. 
A)  The firm will decrease output to earn a higher profit. 
B)  The firm will increase output but earn a lower profit. 
C)  The firm will not change output but earn a lower profit. 
D)  The firm will not change output and earn a higher profit.

Question 6

If all conditions for a perfectly competitive market are met,

Accepted Answer

A)  firms face sunk cost when entering the market. 
B)  firms' demand curves are horizontal. 
C)  the market demand curve is horizontal. 
D)  the firms' demand curves are downward-sloping. 
A)  firms face sunk cost when entering the market. 
B)  firms' demand curves are horizontal. 
C)  the market demand curve is horizontal. 
D)  the firms' demand curves are downward-sloping.

Question 7

If a firm makes zero economic profit,then the firm

Accepted Answer

A)  has total revenues greater than its economic costs. 
B)  must shut down. 
C)  can be earning positive business profit. 
D)  must have no fixed costs. 
A)  has total revenues greater than its economic costs. 
B)  must shut down. 
C)  can be earning positive business profit. 
D)  must have no fixed costs.

Question 8

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 9

If the shutdown rule,p < AVC,is the same in the short run and the long run,explain why the shutdown prices may be different.

Accepted Answer

In the short run there are fix

Question 10

Explain why shutting down and going out-of-business are different concepts.

Accepted Answer

Shutting down means that the firm seizes

Question 11

In a competitive market where the elasticity of the market demand curve is -2,the elasticity of the supply curve is 1,and an individual firm faces a residual demand curve with an elasticity of -98.What is the number of firms in this market?

Accepted Answer

A)  10 
B)  20 
C)  33 
D)  Cannot be determined. 
A)  10 
B)  20 
C)  33 
D)  Cannot be determined.

Question 12

Even if two products have different characteristics,such as color,the products are only considered heterogeneous if consumers

Accepted Answer

A)  consider the two products as perfect complements. 
B)  consider the two products as perfect substitutes. 
C)  consider the two products as imperfect substitutes. 
D)  consider the two products as imperfect complements. 
A)  consider the two products as perfect complements. 
B)  consider the two products as perfect substitutes. 
C)  consider the two products as imperfect substitutes. 
D)  consider the two products as imperfect complements.

Question 13

Suppose a firm has the following total cost function: TC = 100 + 4q2.What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run?

Accepted Answer

AC = 100/q + 4q.This is minimized when d

Question 14

In a graph of a firm's short-run total costs and total revenue,the total cost and the total revenue curves,respectively,will intersect the vertical axis

Accepted Answer

A)  above the origin, above the origin. 
B)  above the origin, at the origin. 
C)  at the origin, at the origin. 
D)  below the origin, below the origin. 
A)  above the origin, above the origin. 
B)  above the origin, at the origin. 
C)  at the origin, at the origin. 
D)  below the origin, below the origin.

Question 15

If a firm cannot earn profits in the short run,it will shut down.

Accepted Answer

A) True 
 B)False

Question 16

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

Accepted Answer

In a competitive market,if an individual

Question 17

A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

Accepted Answer

A) True 
 B)False

Question 18

The perfectly competitive model makes a lot of fairly unrealistic assumptions.Why do economics textbooks 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

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

Accepted Answer

A)  curve A. 
B)  curve B. 
C)  curve C. 
D)  either curve A or B, but definitely not C. 
A)  curve A. 
B)  curve B. 
C)  curve C. 
D)  either curve A or B, but definitely not C.

Question 20

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.If the long-run supply curve is horizontal,then

Accepted Answer

A)  some firms will enjoy long-run profits because they operate at minimum average cost. 
B)  the long-run price will be $0.20 per pound. 
C)  each consumer will purchase $100 worth of potatoes. 
D)  the long-run price will be set just above $0.20 per pound. 
A)  some firms will enjoy long-run profits because they operate at minimum average cost. 
B)  the long-run price will be $0.20 per pound. 
C)  each consumer will purchase $100 worth of potatoes. 
D)  the long-run price will be set just above $0.20 per pound.

If a competitive firm's marginal profit is positive at an output of 1000 units,

If the market price in a competitive market is below the minimum of average variable cost,the firm will shut down.

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

If a firm is currently in short-run equilibrium earning a profit,what impact will a lump-sum tax have on its production decision?

If all conditions for a perfectly competitive market are met,

If a firm makes zero economic profit,then the firm

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

If the shutdown rule,p < AVC,is the same in the short run and the long run,explain why the shutdown prices may be different.

Explain why shutting down and going out-of-business are different concepts.

In a competitive market where the elasticity of the market demand curve is -2,the elasticity of the supply curve is 1,and an individual firm faces a residual demand curve with an elasticity of -98.What is the number of firms in this market?

Even if two products have different characteristics,such as color,the products are only considered heterogeneous if consumers

Suppose a firm has the following total cost function: TC = 100 + 4q².What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run?

In a graph of a firm's short-run total costs and total revenue,the total cost and the total revenue curves,respectively,will intersect the vertical axis

If a firm cannot earn profits in the short run,it will shut down.

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

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

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

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.If the long-run supply curve is horizontal,then

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

If a competitive firm's marginal profit is positive at an output of 1000 units,

If the market price in a competitive market is below the minimum of average variable cost,the firm will shut down.

-The above figure shows the long-run cost curves for a typical firm in a competitive market.If the number of firms is unrestricted and input costs are constant,derive the long-run market supply curve.

If a firm is currently in short-run equilibrium earning a profit,what impact will a lump-sum tax have on its production decision?

If all conditions for a perfectly competitive market are met,

If a firm makes zero economic profit,then the firm

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

If the shutdown rule,p < AVC,is the same in the short run and the long run,explain why the shutdown prices may be different.

Explain why shutting down and going out-of-business are different concepts.

In a competitive market where the elasticity of the market demand curve is -2,the elasticity of the supply curve is 1,and an individual firm faces a residual demand curve with an elasticity of -98.What is the number of firms in this market?

Even if two products have different characteristics,such as color,the products are only considered heterogeneous if consumers

Suppose a firm has the following total cost function: TC = 100 + 4q2.What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run?

In a graph of a firm's short-run total costs and total revenue,the total cost and the total revenue curves,respectively,will intersect the vertical axis

If a firm cannot earn profits in the short run,it will shut down.

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

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

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

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.If the long-run supply curve is horizontal,then

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 a firm has the following total cost function: TC = 100 + 4q².What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run?