Question 1

Even though fixed costs do not affect the output decision,an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a firm has the following total cost function TC = 100 + 2q2.If price equals $20,what is the firm's output decision? What are its short-run profits?

Accepted Answer

MC = 4q.To maximize profit,set 20 = 4q,o

Question 3

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

Accepted Answer

A)  the resulting profits are positive. 
B)  marginal cost exceeds marginal revenue for greater levels of output. 
C)  the average cost curve lies above the demand curve. 
D)  All of the above are required. 
A)  the resulting profits are positive. 
B)  marginal cost exceeds marginal revenue for greater levels of output. 
C)  the average cost curve lies above the demand curve. 
D)  All of the above are required.

Question 4

When the production of a good involves several inputs,an increase in the cost of one input will usually cause total costs to

Accepted Answer

A)  rise more than in proportion. 
B)  rise less than in proportion. 
C)  remain unchanged. 
D)  rise by the exact amount of the input price increase. 
A)  rise more than in proportion. 
B)  rise less than in proportion. 
C)  remain unchanged. 
D)  rise by the exact amount of the input price increase.

Question 5

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 6

Which of the following are NOT characteristics of a competitive market?

Accepted Answer

A)  There is freedom of entry and exit. 
B)  There are zero transaction costs. 
C)  There are only one or two sellers. 
D)  Buyers and sellers have complete information. 
A)  There is freedom of entry and exit. 
B)  There are zero transaction costs. 
C)  There are only one or two sellers. 
D)  Buyers and sellers have complete information.

Question 7

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 8

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

Accepted Answer

A)  has no variable costs. 
B)  has no fixed costs. 
C)  will shut down. 
D)  can produce water at no cost. 
A)  has no variable costs. 
B)  has no fixed costs. 
C)  will shut down. 
D)  can produce water at no cost.

Question 9

Under what circumstances will the residual supply curve for a country be upward sloping?

Accepted Answer

A)  when it does not import any of the good from the rest of the world 
B)  when it imports a small portion of the rest of the world's supply of the good 
C)  when it imports a large portion of the rest of the world's supply of the good 
D)  Either A or B 
A)  when it does not import any of the good from the rest of the world 
B)  when it imports a small portion of the rest of the world's supply of the good 
C)  when it imports a large portion of the rest of the world's supply of the good 
D)  Either A or B

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is ________ and the economic profit is ________.

Accepted Answer

A)  $20,000; $5,000 
B)  $20,000; -$5,000 
C)  $25,000; -$5,000 
D)  $45,000; -$5,000 
A)  $20,000; $5,000 
B)  $20,000; -$5,000 
C)  $25,000; -$5,000 
D)  $45,000; -$5,000

Question 12

If a firm makes zero economic profit,then the firm

Accepted Answer

A)  has no incentive to stay in the industry. 
B)  is better off exiting the industry. 
C)  is indifferent between staying and exiting the industry. 
D)  will shut down. 
A)  has no incentive to stay in the industry. 
B)  is better off exiting the industry. 
C)  is indifferent between staying and exiting the industry. 
D)  will shut down.

Question 13

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 14

The residual supply curve is the ________ the market ________ that is ________ by other demanders at any given price.

Accepted Answer

A)  supply; consumes; also consumed. 
B)  quantity; supplies; consumed. 
C)  quantity; supplies; not consumed. 
D)  quantity; demands; consumed. 
A)  supply; consumes; also consumed. 
B)  quantity; supplies; consumed. 
C)  quantity; supplies; not consumed. 
D)  quantity; demands; consumed.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Downward sloping long-run supply curves occur in markets

Accepted Answer

A)  with learning-by-doing. 
B)  with increasing returns to scale. 
C)  with constant returns to scale. 
D)  Either A or B 
A)  with learning-by-doing. 
B)  with increasing returns to scale. 
C)  with constant returns to scale. 
D)  Either A or B

Question 17

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 18

-The above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

Accepted Answer

A)  $0. 
B)  $5. 
C)  $10. 
D)  $11. 
A)  $0. 
B)  $5. 
C)  $10. 
D)  $11.

Question 19

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.T

Question 20

Suppose a competitive firm's total revenue is $1,000,000 where MR = MC,its explicit variable costs are $900,000,its fixed costs are $90,000 of which $60,000 are sunk in the short run.If its implicit opportunity costs are $50,000,the firm should

Accepted Answer

A)  produce because its economic profit is positive. 
B)  produce because its economic profit is zero. 
C)  produce even though its economic profit is negative. 
D)  shut down. 
A)  produce because its economic profit is positive. 
B)  produce because its economic profit is zero. 
C)  produce even though its economic profit is negative. 
D)  shut down.

Even though fixed costs do not affect the output decision,an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

Suppose a firm has the following total cost function TC = 100 + 2q².If price equals $20,what is the firm's output decision? What are its short-run profits?

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

When the production of a good involves several inputs,an increase in the cost of one input will usually cause total costs to

The model of perfect competition is valuable for

Which of the following are NOT characteristics of a competitive market?

Long-run market supply curves are downward sloping if

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

Under what circumstances will the residual supply curve for a country be upward sloping?

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

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is and the economic profit is .

If a firm makes zero economic profit,then the firm

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?

The residual supply curve is the the market that is by other demanders at any given price.

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

Downward sloping long-run supply curves occur in markets

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 above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

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

Suppose a competitive firm's total revenue is $1,000,000 where MR = MC,its explicit variable costs are $900,000,its fixed costs are $90,000 of which $60,000 are sunk in the short run.If its implicit opportunity costs are $50,000,the firm should

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

Even though fixed costs do not affect the output decision,an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.

Suppose a firm has the following total cost function TC = 100 + 2q2.If price equals $20,what is the firm's output decision? What are its short-run profits?

If marginal revenue equals marginal cost,the firm is maximizing profits as long as

When the production of a good involves several inputs,an increase in the cost of one input will usually cause total costs to

The model of perfect competition is valuable for

Which of the following are NOT characteristics of a competitive market?

Long-run market supply curves are downward sloping if

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

Under what circumstances will the residual supply curve for a country be upward sloping?

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

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is ________ and the economic profit is ________.

If a firm makes zero economic profit,then the firm

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?

The residual supply curve is the ________ the market ________ that is ________ by other demanders at any given price.

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

Downward sloping long-run supply curves occur in markets

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 above figure shows the cost curves for a competitive firm.If the firm is to operate in the short run,price must exceed

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

Suppose a competitive firm's total revenue is $1,000,000 where MR = MC,its explicit variable costs are $900,000,its fixed costs are $90,000 of which $60,000 are sunk in the short run.If its implicit opportunity costs are $50,000,the firm should

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 + 2q².If price equals $20,what is the firm's output decision? What are its short-run profits?

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is and the economic profit is .

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?

The residual supply curve is the the market that is by other demanders at any given price.

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