Question 1

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 2

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

Accepted Answer

A)  profits equal zero. 
B)  it will not operate at a loss. 
C)  an increase in its fixed cost will have no effect on profit. 
D)  an increase in its fixed cost will have no effect on output. 
A)  profits equal zero. 
B)  it will not operate at a loss. 
C)  an increase in its fixed cost will have no effect on profit. 
D)  an increase in its fixed cost will have no effect on output.

Question 3

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 4

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 5

-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 6

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

Question 9

If a firm operates in a perfectly competitive market,then it will most likely

Accepted Answer

A)  advertise its product on television. 
B)  take the price of its product as determined by the market. 
C)  have a difficult time obtaining information about the market price. 
D)  have an easy time keeping other firms out of the market. 
A)  advertise its product on television. 
B)  take the price of its product as determined by the market. 
C)  have a difficult time obtaining information about the market price. 
D)  have an easy time keeping other firms out of the market.

Question 10

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 11

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

Accepted Answer

A)  decrease output. 
B)  increase output. 
C)  shut down. 
D)  operate at a loss. 
A)  decrease output. 
B)  increase output. 
C)  shut down. 
D)  operate at a loss.

Question 12

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 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

Suppose all firms in a competitive market are currently in both short-run and long-run equilibrium.What impact will a lump sum tax have on each firm in the short run? in the long run?

Accepted Answer

In the short run,the lump sum tax repres

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?

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

If a firm makes zero economic profit,then the firm

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?

-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

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

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 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

If a firm operates in a perfectly competitive market,then it will most likely

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

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

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?

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

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

A horizontal demand curve for a firm implies that

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

Suppose all firms in a competitive market are currently in both short-run and long-run equilibrium.What impact will a lump sum tax have on each firm in the short run? in the long run?

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 cannot earn profit at any level of output during a given short-run period,then which of the following is LEAST likely to occur?

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

If a firm makes zero economic profit,then the firm

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?

-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

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

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 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

If a firm operates in a perfectly competitive market,then it will most likely

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

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

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?

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

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

A horizontal demand curve for a firm implies that

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

Suppose all firms in a competitive market are currently in both short-run and long-run equilibrium.What impact will a lump sum tax have on each firm in the short run? in the long run?

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?

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?