Question 1

A decreasing-cost industry has a downward-sloping:

Accepted Answer

A)  long-run average cost curve. 
B)  long-run marginal cost curve. 
C)  short-run average cost curve. 
D)  short-run marginal cost curve. 
E)  long-run industry supply curve. 
A)  long-run average cost curve. 
B)  long-run marginal cost curve. 
C)  short-run average cost curve. 
D)  short-run marginal cost curve. 
E)  long-run industry supply curve.

Question 2

The long-run supply curve in a constant-cost industry is linear and:

Accepted Answer

A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
E)  could have any constant slope. 
A)  upward-sloping. 
B)  downward-sloping. 
C)  horizontal. 
D)  vertical. 
E)  could have any constant slope.

Question 3

Owners and managers:

Accepted Answer

A)  must be the same people. 
B)  may be different people with different goals, and in the long run firms that do best are those in which the managers are allowed to pursue their own independent goals. 
C)  may be different people with different goals, but in the long run firms that do best are those in which the managers pursue the goals of the owners. 
D)  may be different people with different but exactly complementary goals. 
E)  may be different people with the same goals. 
A)  must be the same people. 
B)  may be different people with different goals, and in the long run firms that do best are those in which the managers are allowed to pursue their own independent goals. 
C)  may be different people with different goals, but in the long run firms that do best are those in which the managers pursue the goals of the owners. 
D)  may be different people with different but exactly complementary goals. 
E)  may be different people with the same goals.

Question 4

Figure 8.7.3
-Refer to Figure 8.7.3 above. As the firm makes its long-run adjustment, which must be true?

Accepted Answer

A)  It takes advantage of increasing returns to scale. 
B)  It suffers from decreasing returns to scale. 
C)  It takes advantage of increasing marginal product. 
D)  It takes advantage of economies of scale. 
E)  It takes advantage of diseconomies of scale. 
A)  It takes advantage of increasing returns to scale. 
B)  It suffers from decreasing returns to scale. 
C)  It takes advantage of increasing marginal product. 
D)  It takes advantage of economies of scale. 
E)  It takes advantage of diseconomies of scale.

Question 5

The long-run cost function for Jeremy's Jetski Rentals is:   The long-run marginal cost function is   If Jeremy can sell as many jetski rentals as he desires at $50, calculate his optimal output in the long run.

Accepted Answer

Jeremy's optimal output occurs where pri

Question 6

Consider the following statements when answering this question: I. In the long run, if a firm wants to remain in a competitive industry, then it needs to own resources that are in limited supply.
II) In this competitive market our firm's long-run survival depends only on the efficiency of our production process.

Accepted Answer

A)  I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  I and II are false. 
A)  I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  I and II are false.

Question 7

Which of following is an example of a homogeneous product?

Accepted Answer

A)  Gasoline 
B)  Copper 
C)  Personal computers 
D)  Winter parkas 
E)  both A and B 
A)  Gasoline 
B)  Copper 
C)  Personal computers 
D)  Winter parkas 
E)  both A and B

Question 8

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?

Accepted Answer

A)  They must intersect, with TC cutting TR from below. 
B)  They must intersect, with TC cutting TR from above. 
C)  They must be tangent to each other. 
D)  They cannot be tangent to each other. 
E)  They must have the same slope. 
A)  They must intersect, with TC cutting TR from below. 
B)  They must intersect, with TC cutting TR from above. 
C)  They must be tangent to each other. 
D)  They cannot be tangent to each other. 
E)  They must have the same slope.

Question 9

In the long run, a firm's producer surplus is equal to the:

Accepted Answer

A)  economic rent it enjoys from its scarce inputs. 
B)  revenue it earns in the long run. 
C)  positive economic profit it earns in the long run. 
D)  difference between total revenue and total variable costs. 
E)  difference between total revenue and total fixed costs. 
A)  economic rent it enjoys from its scarce inputs. 
B)  revenue it earns in the long run. 
C)  positive economic profit it earns in the long run. 
D)  difference between total revenue and total variable costs. 
E)  difference between total revenue and total fixed costs.

Question 10

If the market price for a competitive firm's output doubles, then:

Accepted Answer

A)  the profit maximizing output will double. 
B)  the marginal revenue doubles. 
C)  at the new profit maximizing output, price has increased more than marginal cost. 
D)  at the new profit maximizing output, price has risen more than marginal revenue. 
E)  competitive firms will earn an economic profit in the long-run. 
A)  the profit maximizing output will double. 
B)  the marginal revenue doubles. 
C)  at the new profit maximizing output, price has increased more than marginal cost. 
D)  at the new profit maximizing output, price has risen more than marginal revenue. 
E)  competitive firms will earn an economic profit in the long-run.

Question 11

The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as:

Accepted Answer

A)  revenue exceeds producer surplus. 
B)  producer surplus is positive. 
C)  producer surplus exceeds fixed cost. 
D)  producer surplus exceeds variable cost. 
E)  profit and producer surplus are equal. 
A)  revenue exceeds producer surplus. 
B)  producer surplus is positive. 
C)  producer surplus exceeds fixed cost. 
D)  producer surplus exceeds variable cost. 
E)  profit and producer surplus are equal.

Question 12

Figure 8.8.2
-Refer to Figure 8.8.2 above. Starting with the increase in demand, the cost and supply curves will shift, indicating that this is:

Accepted Answer

A)  A constant-cost industry. 
B)  An increasing-cost industry. 
C)  A decreasing-cost industry. 
D)  A monopolistic industry. 
A)  A constant-cost industry. 
B)  An increasing-cost industry. 
C)  A decreasing-cost industry. 
D)  A monopolistic industry.

Question 13

The authors note that the goal of maximizing the market value of the firm may be more appropriate than maximizing short-run profits because:

Accepted Answer

A)  the market value of the firm is based on long-run profits. 
B)  managers will not focus on increasing short-run profits at the expense of long-run profits. 
C)  this would more closely align the interests of owners and managers. 
D)  all of the above 
A)  the market value of the firm is based on long-run profits. 
B)  managers will not focus on increasing short-run profits at the expense of long-run profits. 
C)  this would more closely align the interests of owners and managers. 
D)  all of the above

Question 14

The marginal cost curves of six firms in an industry appear in the table below. If these firms behave competitively, determine the market supply curve. Calculate the elasticity of market supply at $5.

Accepted Answer

To determine each firm's individual supp

Question 15

Consider the following statements when answering this question: I. In the long-run equilibrium of a perfectly competitive market, a firm's producer surplus equals the sum of the economic rents earned on its inputs to production.
II) In the long-run equilibrium of a perfectly competitive market, the amount of economic profit earned can differ across firms, but not the amount of producer surplus.

Accepted Answer

A)  I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  I and II are false. 
A)  I and II are true. 
B)  I is true, and II is false. 
C)  I is false, and II is true. 
D)  I and II are false.

Question 16

If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

Accepted Answer

A)  they are more likely to become takeover targets of profit-maximizing firms. 
B)  they are less likely to be replaced by stockholders. 
C)  they are less likely to be replaced by the board of directors. 
D)  they are more likely to have higher profit than if they had pursued that policy explicitly. 
E)  their companies are more likely to survive in the long run. 
A)  they are more likely to become takeover targets of profit-maximizing firms. 
B)  they are less likely to be replaced by stockholders. 
C)  they are less likely to be replaced by the board of directors. 
D)  they are more likely to have higher profit than if they had pursued that policy explicitly. 
E)  their companies are more likely to survive in the long run.

Question 17

Figure 8.6.1
-Refer to Figure 8.6.1 above. The minimum variable cost of the firms in this competitive market is:

Accepted Answer

A)  the same for all the firms in the market. 
B)  lower for firms 1 and 2. 
C)  lower for firm 3. 
D)  an unknown level, based on the figure. 
A)  the same for all the firms in the market. 
B)  lower for firms 1 and 2. 
C)  lower for firm 3. 
D)  an unknown level, based on the figure.

Question 18

Producer surplus in a perfectly competitive industry is:

Accepted Answer

A)  the difference between profit at the profit-maximizing output and profit at the profit-minimizing output. 
B)  the difference between revenue and total cost. 
C)  the difference between revenue and variable cost. 
D)  the difference between revenue and fixed cost. 
E)  the same thing as revenue. 
A)  the difference between profit at the profit-maximizing output and profit at the profit-minimizing output. 
B)  the difference between revenue and total cost. 
C)  the difference between revenue and variable cost. 
D)  the difference between revenue and fixed cost. 
E)  the same thing as revenue.

Question 19

The market demand for a type of carpet known as KP-7 has been estimated as:
P = 40 - 0.25Q,
where P is price ($/yard) and Q is rate of sales (hundreds of yards per month). The market supply is expressed as:
P = 5.0 + 0.05Q.
A typical firm in this market has a total cost function given as:
C = 100 - 20.0q + 2.0q2.
a. Determine the equilibrium market output rate and price.
b. Determine the output rate for a typical firm.
c. Determine the rate of profit (or loss) earned by the typical firm.

Accepted Answer

a.Equate supply to demand to get Q.
40 -

Question 20

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

Accepted Answer

A)  price-taking assumption. 
B)  homogeneous product assumption. 
C)  free entry assumption. 
D)  A and B are correct. 
E)  A and C are correct. 
A)  price-taking assumption. 
B)  homogeneous product assumption. 
C)  free entry assumption. 
D)  A and B are correct. 
E)  A and C are correct.

A decreasing-cost industry has a downward-sloping:

The long-run supply curve in a constant-cost industry is linear and:

Owners and managers:

Figure 8.7.3 -Refer to Figure 8.7.3 above. As the firm makes its long-run adjustment, which must be true?

The long-run cost function for Jeremy's Jetski Rentals is: The long-run marginal cost function is If Jeremy can sell as many jetski rentals as he desires at $50, calculate his optimal output in the long run.

Which of following is an example of a homogeneous product?

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?

In the long run, a firm's producer surplus is equal to the:

If the market price for a competitive firm's output doubles, then:

The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as:

Figure 8.8.2 -Refer to Figure 8.8.2 above. Starting with the increase in demand, the cost and supply curves will shift, indicating that this is:

The authors note that the goal of maximizing the market value of the firm may be more appropriate than maximizing short-run profits because:

The marginal cost curves of six firms in an industry appear in the table below. If these firms behave competitively, determine the market supply curve. Calculate the elasticity of market supply at $5.

If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

Figure 8.6.1 -Refer to Figure 8.6.1 above. The minimum variable cost of the firms in this competitive market is:

Producer surplus in a perfectly competitive industry is:

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters

Exam 8: Profit Maximization and Competitive Supply

A decreasing-cost industry has a downward-sloping:

The long-run supply curve in a constant-cost industry is linear and:

Owners and managers:

Figure 8.7.3 -Refer to Figure 8.7.3 above. As the firm makes its long-run adjustment, which must be true?

The long-run cost function for Jeremy's Jetski Rentals is: The long-run marginal cost function is If Jeremy can sell as many jetski rentals as he desires at $50, calculate his optimal output in the long run.

Which of following is an example of a homogeneous product?

At the profit-maximizing level of output, what is relationship between the total revenue (TR) and total cost (TC) curves?

In the long run, a firm's producer surplus is equal to the:

If the market price for a competitive firm's output doubles, then:

The shutdown decision can be restated in terms of producer surplus by saying that a firm should produce in the short run as long as:

Figure 8.8.2 -Refer to Figure 8.8.2 above. Starting with the increase in demand, the cost and supply curves will shift, indicating that this is:

The authors note that the goal of maximizing the market value of the firm may be more appropriate than maximizing short-run profits because:

The marginal cost curves of six firms in an industry appear in the table below. If these firms behave competitively, determine the market supply curve. Calculate the elasticity of market supply at $5.

If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,

Figure 8.6.1 -Refer to Figure 8.6.1 above. The minimum variable cost of the firms in this competitive market is:

Producer surplus in a perfectly competitive industry is:

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

Preliminaries

The Basics of Supply and Demand

Consumer Behavior

Individual and Market Demand

Uncertainty and Consumer Behavior

Production

The Cost of Production

The Analysis of Competitive Markets

Market Power: Monopoly and Monopsony

Pricing With Market Power

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Markets for Factor Inputs

Investment, Time, and Capital Markets

General Equilibrium and Economic Efficiency

Markets With Asymmetric Information

Externalities and Public Goods

Behavioral Economics

Filters