Question 1

According to the Department of Agriculture, net farm income in 2017 will rise from $61.5 billion in 2016 to $63.4 billion in 2017, a modest 3.1 percent increase but also the first increase since 2013. Much of the increase came from the sales of grain inventory, along with increased revenue from milk and livestock. The net income for 2017 is still only about half of its peak level, and according to agricultural economist David Widmar, income closer to $72 billion would be a sign of an improving farm economy.
Source: Alan Bjerga and Jeff Wilson, "First U.S. Farm-Income Gain in Four Years Signals Hope of Bottom," bloomberg.com, August 30, 2017.
-Refer to the Article Summary.Assume that after the slight increase in U.S.farm income in 2017,farmers are expected to break even in 2018.This means that at the quantity being produced in 2018

Accepted Answer

A)  MC =AVC. 
B)  MR =MC. 
C)  MR =ATC. 
D)  AVC =ATC.

Question 2

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

Accepted Answer

A)  shut down temporarily and wait for market conditions to change. 
B)  exit the industry. 
C)  raise its price to cover average total cost. 
D)  continue to operate if it can raise the demand for its product through advertising and quality improvements.

Question 3

Figure 9-10
 
-Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Accepted Answer

A)  $1,200. 
B)  $2,500. 
C)  $4,800. 
D)  $6,000.

Question 4

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A)  Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B)  Each firm produces up to the point where all scale economies are exhausted. 
C)  Production occurs at the lowest average total cost. 
D)  Firms use an input combination that minimizes cost and maximizes output.

Question 5

In August 2008,Ethan Nicholas developed the iShoot app for the Apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market,

Accepted Answer

A)  earning an economic profit in the long run is extremely easy. 
B)  earning an economic profit in the long run is extremely difficult. 
C)  it is impossible to earn an economic profit in either the short run or the long run. 
D)  economic profits are only earned in the long run.

Question 6

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Accepted Answer

The answer of Why would a company continue to operate...

Question 7

Use a graph to show the demand,AVC,ATC,MC,and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.

Accepted Answer

The answer of Use a graph to show the demand,AVC,ATC,MC,and...

Question 8

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.
 $\begin{array}{|c|c|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Total } \
\text { Revenue } \
(T R)
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost } \
(T C)
\end{array} & \text { Profit } & \begin{array}{c}
\text { Marginal } \
\text { Revenue } \
(M R)
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }(M C)
\end{array} \
\hline 0 & 0 & 3 & & & \
\hline 1 & 5 & 5 & & & \
\hline 2 & 10 & 6 & & & \
\hline 3 & 15 & 8 & & & \
\hline 4 & 20 & 11 & & & \
\hline 5 & 25 & 15 & & & \
\hline 6 & 30 & 21 & & & \
\hline 7 & 35 & 30 & & & \
\hline 8 & 40 & 42 & & & \
\hline 9 & 45 & 60 & & & \
\hline 10 & 50 & 85 & & & \
\hline
\end{array}$

Accepted Answer

The answer of Fill in the columns in the following...

Question 9

Figure 9-8
 
-Refer to Figure 9-8.Suppose the firm produces 4,000 units.What does the shaded area labeled B represent?

Accepted Answer

A)  the firm's economic loss 
B)  total variable cost 
C)  average variable cost 
D)  total fixed cost

Question 10

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A)  There are a very large number of firms that are small compared to the market. 
B)  All firms sell identical products. 
C)  There are no restrictions to entry by new firms. 
D)  There are restrictions on exit of firms.

Question 11

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A)  upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B)  upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C)  perfectly elastic at the market price. 
D)  horizontal at the minimum average total cost.

Question 12

Firms in perfect competition are price takers because

Accepted Answer

A)  one firm determines the price that all other firms in the industry will charge. 
B)  consumers have enough market power to set prices. 
C)  firms accept the price determined by the government. 
D)  each firm is too small relative to the market to be able to influence the price.

Question 13

The long-run supply curve for a perfectly competitive,constant-cost industry

Accepted Answer

A)  is upward-sloping. 
B)  is horizontal. 
C)  is downward-sloping. 
D)  is found by adding up the marginal cost curves for all firms in the industry.

Question 14

To maximize profit,a perfectly competitive firm

Accepted Answer

A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 15

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's profit?

Accepted Answer

A)  P - ATC 
B)  (P × Q) - TC 
C)  (P × Q) - (P × AT
C)  
D)  P - TC

Question 16

Using two graphs,illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market.On the first graph,use a supply and demand graph to illustrate the positive technological change.On the second graph,use demand,ATC,MC,and MR curves to illustrate the elimination of economic profit resulting from the positive technological change.Explain what is taking place in each graph.

Accepted Answer

The answer of Using two graphs,illustrate how a positive technological...

Question 17

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

Accepted Answer

A)  The difference between total revenue and total cost is the greatest. 
B)  Total revenue equals total cost. 
C)  Average revenue equals average total cost. 
D)  Marginal profit equals marginal cost.

Question 18

Figure 9-4
  Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 9-4.If the market price is $30 and the firm is producing output,what is the amount of the firm's profit or loss?

Accepted Answer

A)  loss of $1,080 
B)  profit of $1,440 
C)  loss of $2,520 
D)  profit of $1,300

Question 19

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

Accepted Answer

A)  will usually rise. 
B)  will usually fall. 
C)  will usually remain stable. 
D)  will eventually fall to zero.

Question 20

For a perfectly competitive firm,average revenue is equal to

Accepted Answer

A)  marginal cost. 
B)  the market price. 
C)  total revenue. 
D)  average fixed cost.

Exam 9: Firms in Perfectly Competitive Markets