Question 1

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. B

Question 2

If the long-run supply curve in a perfectly competitive industry is upward sloping,this is because

Accepted Answer

A)  firms are different. 
B)  firms are identical. 
C)  input prices rise as the industry expands. 
D)  Either A or C. 
A)  firms are different. 
B)  firms are identical. 
C)  input prices rise as the industry expands. 
D)  Either A or C. D

Question 3

If a competitive firm is in short-run equilibrium,then

Accepted Answer

A)  economic profits equal zero. 
B)  economic profits will be positive. 
C)  economic profits will be negative. 
D)  All of the above are possible in the short-run. 
A)  economic profits equal zero. 
B)  economic profits will be positive. 
C)  economic profits will be negative. 
D)  All of the above are possible in the short-run. D

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is ________ and owner's 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 6

Suppose there are two perfectly competitive industries with similar numbers of firms but where one industry consists of N identical firms while the second consists of N firms with differing costs.Compared to the short-run supply curve of the industry with identical firms,the short-run supply curve of the differing cost industry will tend to be

Accepted Answer

A)  steeper at higher prices. 
B)  flatter at higher prices. 
C)  steeper at lower prices. 
D)  flatter at lower prices. 
A)  steeper at higher prices. 
B)  flatter at higher prices. 
C)  steeper at lower prices. 
D)  flatter at lower prices.

Question 7

If a competitive firm maximizes short-run profits by producing some quantity of output,which of the following must be true at that level of output?

Accepted Answer

A)  p = MC 
B)  MR = MC 
C)  p ≥ AVC 
D)  All of the above 
A)  p = MC 
B)  MR = MC 
C)  p ≥ AVC 
D)  All of the above

Question 8

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q2,how many identical firms will there be when this industry is in long-run equilibrium?

Accepted Answer

The long-run market supply curve is hori

Question 9

If a firm operates in a perfectly competitive market,then

Accepted Answer

A)  all firms will advertise. 
B)  no firms will advertise. 
C)  the market leader will advertise. 
D)  new firms will advertise. 
A)  all firms will advertise. 
B)  no firms will advertise. 
C)  the market leader will advertise. 
D)  new firms will advertise.

Question 10

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.

Question 11

When the production of a good involves several inputs and inputs are used in fixed proportions,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 12

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 13

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

Accepted Answer

A) True 
 B)False

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 pounds of potatoes will be consumed in total?

Accepted Answer

A)  0 
B)  500 
C)  10,000 
D)  50,000 
A)  0 
B)  500 
C)  10,000 
D)  50,000

Question 15

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

Accepted Answer

A)  total cost. 
B)  average variable cost. 
C)  total fixed cost. 
D)  the number of buyers. 
A)  total cost. 
B)  average variable cost. 
C)  total fixed cost. 
D)  the number of buyers.

Question 16

In a perfectly competitive market,

Accepted Answer

A)  firms can freely enter and exit. 
B)  firms sell a differentiated product. 
C)  transaction costs are high. 
D)  All of the above. 
A)  firms can freely enter and exit. 
B)  firms sell a differentiated product. 
C)  transaction costs are high. 
D)  All of the above.

Question 17

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 18

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 19

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 20

-The above figure shows the cost curves for a typical firm in a competitive market.Note that if p = 10,then MC = p at both q = 5 and q = 60.Can they both yield maximum profit? Explain.

Accepted Answer

No,at q = 5,p = MC,but this is not profi

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

If the long-run supply curve in a perfectly competitive industry is upward sloping,this is because

If a competitive firm is in short-run equilibrium,then

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

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is and owner's economic profit is .

If a competitive firm maximizes short-run profits by producing some quantity of output,which of the following must be true at that level of output?

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?

If a firm operates in a perfectly competitive market,then

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

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

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

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 pounds of potatoes will be consumed in total?

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

In a perfectly competitive market,

A firm should always shut down if its revenue is

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.

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

-The above figure shows the cost curves for a typical firm in a competitive market.Note that if p = 10,then MC = p at both q = 5 and q = 60.Can they both yield maximum profit? Explain.

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

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

If the long-run supply curve in a perfectly competitive industry is upward sloping,this is because

If a competitive firm is in short-run equilibrium,then

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

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is ________ and owner's economic profit is ________.

If a competitive firm maximizes short-run profits by producing some quantity of output,which of the following must be true at that level of output?

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q2,how many identical firms will there be when this industry is in long-run equilibrium?

If a firm operates in a perfectly competitive market,then

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

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

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

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 pounds of potatoes will be consumed in total?

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

In a perfectly competitive market,

A firm should always shut down if its revenue is

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.

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

-The above figure shows the cost curves for a typical firm in a competitive market.Note that if p = 10,then MC = p at both q = 5 and q = 60.Can they both yield maximum profit? Explain.

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

A small business owner earns $60,000 in revenue annually.The explicit annual costs equal $40,000.The owner could work for someone else and earn $25,000 annually.The owner's accounting profit is and owner's economic profit is .

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?