Question 1

Fewer potential sellers make a firm-level demand curve ______ in the ______.

Accepted Answer

A)  flatter; short run 
B)  flatter; long run 
C)  steeper; short run 
D)  steeper; long run 
A)  flatter; short run 
B)  flatter; long run 
C)  steeper; short run 
D)  steeper; long run

Question 2

Economic profit differs from accounting profits because of its inclusion of:

Accepted Answer

A)  explicit costs. 
B)  incidental costs. 
C)  potential costs. 
D)  implicit costs. 
A)  explicit costs. 
B)  incidental costs. 
C)  potential costs. 
D)  implicit costs.

Question 3

A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE?

Accepted Answer

A)  Firms will enter the industry. 
B)  This firm will exit the industry in the long run. 
C)  The recoverable costs are less than the difference between revenues and variable costs. 
D)  The recoverable costs are less than operating profit. 
A)  Firms will enter the industry. 
B)  This firm will exit the industry in the long run. 
C)  The recoverable costs are less than the difference between revenues and variable costs. 
D)  The recoverable costs are less than operating profit.

Question 4

Figure: Profits   How much profit is the firm making at the profit-maximizing quantity?

Accepted Answer

A)  a profit of $300 
B)  a profit of $70 
C)  The firm is not making a profit-it is making a loss of $300. 
D)  The firm is not making a profit-it is making a loss of $70. 
A)  a profit of $300 
B)  a profit of $70 
C)  The firm is not making a profit-it is making a loss of $300. 
D)  The firm is not making a profit-it is making a loss of $70.

Question 5

A firm earning zero economic profits:

Accepted Answer

A)  will shut down immediately. 
B)  may continue to operate in the short run but will always shut down in the long run if zero economic profits continue. 
C)  is earning just "normal profits." 
D)  will not be earning enough to cover all payments to capital and labor. 
A)  will shut down immediately. 
B)  may continue to operate in the short run but will always shut down in the long run if zero economic profits continue. 
C)  is earning just "normal profits." 
D)  will not be earning enough to cover all payments to capital and labor.

Question 6

Whenever marginal cost is greater than the average total cost:

Accepted Answer

A)  marginal cost is falling. 
B)  average cost is falling. 
C)  average cost is constant. 
D)  average cost is rising. 
A)  marginal cost is falling. 
B)  average cost is falling. 
C)  average cost is constant. 
D)  average cost is rising.

Question 7

To maximize profit, a firm in a competitive market increases output until:

Accepted Answer

A)  P = TC. 
B)  P = AR. 
C)  P = MC. 
D)  P = AC. 
A)  P = TC. 
B)  P = AR. 
C)  P = MC. 
D)  P = AC.

Question 8

Give two reasons why an industry might be an increasing cost industry and use examples to demonstrate your reasons.

Accepted Answer

Some resources used in production may be

Question 9

Use the following to answer questions:
Figure: Two-Firm Industry  
-(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

Accepted Answer

A)  32 units. 
B)  45 units. 
C)  15 units. 
D)  25 units. 
A)  32 units. 
B)  45 units. 
C)  15 units. 
D)  25 units.

Question 10

Economic profit is equal to total revenue minus explicit costs.

Accepted Answer

A) True 
 B)False

Question 11

Graphically illustrate the maximum profit of a firm in a competitive market, and on the same graph depict how the profit-maximizing quantity would change as the price changes.

Accepted Answer

@#IMG-DLM& At P₁, profit-maximizing firm would prod

Question 12

Firms are profitable when price is:

Accepted Answer

A)  greater than average cost. 
B)  equal to average cost. 
C)  less than average cost. 
D)  zero. 
A)  greater than average cost. 
B)  equal to average cost. 
C)  less than average cost. 
D)  zero.

Question 13

Use the following to answer questions:
Figure: Industry Firms  
-(Figure: Industry Firms) Refer to the figures. This industry is a(n):

Accepted Answer

A)  increasing cost industry. 
B)  decreasing cost industry. 
C)  constant cost industry. 
D)  quadratic cost industry. 
A)  increasing cost industry. 
B)  decreasing cost industry. 
C)  constant cost industry. 
D)  quadratic cost industry.

Question 14

Firms will enter an industry when the:

Accepted Answer

A)  price rises above the minimum of the marginal cost curve. 
B)  price rises above the minimum of the average total cost curve. 
C)  marginal cost rises above the minimum of the average total cost curve. 
D)  average cost rises above the minimum of the marginal cost curve. 
A)  price rises above the minimum of the marginal cost curve. 
B)  price rises above the minimum of the average total cost curve. 
C)  marginal cost rises above the minimum of the average total cost curve. 
D)  average cost rises above the minimum of the marginal cost curve.

Question 15

Use the following to answer questions:
Figure: Costs  
-(Figure: Costs) Use the figure. At a price of $20, which statement is FALSE?

Accepted Answer

A)  AC = $15 
B)  Profit = (20 - 15)15 
C)  Average profit = $5 
D)  MC < AC 
A)  AC = $15 
B)  Profit = (20 - 15)15 
C)  Average profit = $5 
D)  MC < AC

Question 16

Which of the following statements is TRUE?

Accepted Answer

A)  Accounting profit is usually smaller than economic profit. 
B)  Unlike implicit costs, explicit costs require monetary outlays. 
C)  Knowledge about explicit costs is more useful for making business decisions than knowledge about implicit costs. 
D)  Implicit costs equal explicit costs for for-profit firms. 
A)  Accounting profit is usually smaller than economic profit. 
B)  Unlike implicit costs, explicit costs require monetary outlays. 
C)  Knowledge about explicit costs is more useful for making business decisions than knowledge about implicit costs. 
D)  Implicit costs equal explicit costs for for-profit firms.

Question 17

Stating that TR = TC is equivalent to stating that:

Accepted Answer

A)  MR = MC. 
B)  P = AC. 
C)  P = Average fixed cost. 
D)  MR = P. 
A)  MR = MC. 
B)  P = AC. 
C)  P = Average fixed cost. 
D)  MR = P.

Exam 11: Costs and Profit Maximization Under Competition

Fewer potential sellers make a firm-level demand curve ______ in the ______.

Economic profit differs from accounting profits because of its inclusion of:

A firm pays a monthly lease of $10,000 and generates $8,000 of revenue a month. Which of the following is TRUE?

Figure: Profits How much profit is the firm making at the profit-maximizing quantity?

A firm earning zero economic profits:

Whenever marginal cost is greater than the average total cost:

To maximize profit, a firm in a competitive market increases output until:

Give two reasons why an industry might be an increasing cost industry and use examples to demonstrate your reasons.

Use the following to answer questions: Figure: Two-Firm Industry -(Figure: Two-Firm Industry) Refer to the figures. At a market price of $25, the total quantity supplied in the industry is:

Economic profit is equal to total revenue minus explicit costs.

Graphically illustrate the maximum profit of a firm in a competitive market, and on the same graph depict how the profit-maximizing quantity would change as the price changes.

Firms are profitable when price is:

Use the following to answer questions: Figure: Industry Firms -(Figure: Industry Firms) Refer to the figures. This industry is a(n):

Firms will enter an industry when the:

Use the following to answer questions: Figure: Costs -(Figure: Costs) Use the figure. At a price of $20, which statement is FALSE?

Which of the following statements is TRUE?

Stating that TR = TC is equivalent to stating that:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Fewer potential sellers make a firm-level demand curve in the .