Question 1

An association of businesses that are jointly owned and operated by members for mutual benefit is a:

Accepted Answer

A) condominium. 
B) corporation. 
C) cooperative. 
D) joint tenancy. 
A) condominium. 
B) corporation. 
C) cooperative. 
D) joint tenancy.

Question 2

Which of following is a key assumption of a perfectly competitive market?

Accepted Answer

A) Firms can influence market price. 
B) Commodities have few sellers. 
C) It is difficult for new sellers to enter the market. 
D) Each seller has a very small share of the market. 
E) none of the above 
A) Firms can influence market price. 
B) Commodities have few sellers. 
C) It is difficult for new sellers to enter the market. 
D) Each seller has a very small share of the market. 
E) none of the above

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

Revenue is equal to

Accepted Answer

A) price times quantity. 
B) price times quantity minus total cost. 
C) price times quantity minus average cost. 
D) price times quantity minus marginal cost. 
E) expenditure on production of output. 
A) price times quantity. 
B) price times quantity minus total cost. 
C) price times quantity minus average cost. 
D) price times quantity minus marginal cost. 
E) expenditure on production of output.

Question 5

In a supply-and-demand graph,producer surplus can be pictured as the

Accepted Answer

A) vertical intercept of the supply curve. 
B) area between the demand curve and the supply curve to the left of equilibrium output. 
C) area under the supply curve to the left of equilibrium output. 
D) area under the demand curve to the left of equilibrium output. 
E) area between the equilibrium price line and the supply curve to the left of equilibrium output. 
A) vertical intercept of the supply curve. 
B) area between the demand curve and the supply curve to the left of equilibrium output. 
C) area under the supply curve to the left of equilibrium output. 
D) area under the demand curve to the left of equilibrium output. 
E) area between the equilibrium price line and the supply curve to the left of equilibrium output.

Question 6

Generally,long-run elasticities of supply are

Accepted Answer

A) greater than short-run elasticities,because existing inventories can be exploited during shortages. 
B) greater than short-run elasticities,because consumers have time to find substitutes for the good. 
C) greater than short-run elasticities,because firms can make alterations to plant size and input combinations to be more flexible in production. 
D) smaller than short-run elasticities,because the firm has made long-term commitments it cannot easily modify. 
E) the same as short-run elasticities,because technology is not assumed to change in the long-run adjustment process. 
A) greater than short-run elasticities,because existing inventories can be exploited during shortages. 
B) greater than short-run elasticities,because consumers have time to find substitutes for the good. 
C) greater than short-run elasticities,because firms can make alterations to plant size and input combinations to be more flexible in production. 
D) smaller than short-run elasticities,because the firm has made long-term commitments it cannot easily modify. 
E) the same as short-run elasticities,because technology is not assumed to change in the long-run adjustment process.

Question 7

In the robotics industry there are 100 firms.Each firm shares the same long-run cost function.It is: C(q)= 100   .The relevant marginal cost function is MC(q)=   .
Each of the 100 firms produce 64 units.The market demand for robotics is:
QD = 15,000 - 688P.Calculate the market price at this production level.Also,calculate the profits for a representative firm in the robotics industry.If one firm expanded production to 100 units while the remaining 99 firms kept output at 64 units,what would happen to the market price and profits? Would all firms benefit or lose if every firm expanded output to 100 units?

Accepted Answer

If each firm is producing 64 units,the a

Question 8

An increasing-cost industry is so named because of the positive slope of which curve?

Accepted Answer

A) Each firm's short-run average cost curve 
B) Each firm's short-run marginal cost curve 
C) Each firm's long-run average cost curve 
D) Each firm's long-run marginal cost curve 
E) The industry's long-run supply curve 
A) Each firm's short-run average cost curve 
B) Each firm's short-run marginal cost curve 
C) Each firm's long-run average cost curve 
D) Each firm's long-run marginal cost curve 
E) The industry's long-run supply curve

Question 9

An industry analyst observes that in response to a small increase in price,a competitive firm's output sometimes rises a little and sometimes a lot.The best explanation for this finding is that

Accepted Answer

A) the firm's marginal cost curve is random. 
B) the firm's marginal cost curve has a very small positive slope. 
C) the firm's marginal cost has a very large positive slope. 
D) the firm's marginal cost curve is horizontal for some ranges of output and rises in steps. 
E) the firm's marginal cost curve is downward sloping. 
A) the firm's marginal cost curve is random. 
B) the firm's marginal cost curve has a very small positive slope. 
C) the firm's marginal cost has a very large positive slope. 
D) the firm's marginal cost curve is horizontal for some ranges of output and rises in steps. 
E) the firm's marginal cost curve is downward sloping.

Question 10

If current output is less than the profit-maximizing output,then the next unit produced

Accepted Answer

A) will decrease profit. 
B) will increase cost more than it increases revenue. 
C) will increase revenue more than it increases cost. 
D) will increase revenue without increasing cost. 
E) may or may not increase profit. 
A) will decrease profit. 
B) will increase cost more than it increases revenue. 
C) will increase revenue more than it increases cost. 
D) will increase revenue without increasing cost. 
E) may or may not increase profit.

Question 11

The manufacturing of paper products causes damage to a local river when the manufacturing plant produces more than 1,000 units in a period.To discourage the plant from producing more than 1,000 units,the local community is considering placing a tax on the plant.The long-run cost curve for the paper producing firm is:   where q is the number of units of paper produced and t is the per unit tax on paper production.The relevant marginal cost curve is:   If the manufacturing plant can sell all of its output for $2,what is the firm's optimal output if the tax is set at zero? What is the minimum tax rate necessary to ensure that the firm produces no more than 1,000 units? How much are the firm's profits reduced by the presence of a tax?

Accepted Answer

In the absence of a tax,we know the plan

Question 12

An industry has 1000 competitive firms,each producing 50 tons of output.At the current market price of $10,half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2.The short-run elasticity of market supply is

Accepted Answer

A) 1/50 
B) 3/10 
C) 1/5 
D) 2/5 
E) none of the above 
A) 1/50 
B) 3/10 
C) 1/5 
D) 2/5 
E) none of the above

Question 13

If a competitive firm's marginal costs always increase with output,then at the profit maximizing output level,producer surplus is

Accepted Answer

A) zero because marginal costs equal marginal revenue. 
B) zero because price equals marginal costs. 
C) positive because price exceeds average variable costs. 
D) positive because price exceeds average total costs. 
E) positive because revenues are increasing faster than variable costs. 
A) zero because marginal costs equal marginal revenue. 
B) zero because price equals marginal costs. 
C) positive because price exceeds average variable costs. 
D) positive because price exceeds average total costs. 
E) positive because revenues are increasing faster than variable costs.

Question 14

A firm maximizes profit by operating at the level of output where

Accepted Answer

A) average revenue equals average cost. 
B) average revenue equals average variable cost. 
C) total costs are minimized. 
D) marginal revenue equals marginal cost. 
E) marginal revenue exceeds marginal cost by the greatest amount. 
A) average revenue equals average cost. 
B) average revenue equals average variable cost. 
C) total costs are minimized. 
D) marginal revenue equals marginal cost. 
E) marginal revenue exceeds marginal cost by the greatest amount.

Question 15

Laura's internet services has the following short-run cost curve:   where q is Laura's output level,K is the number of servers she leases and r is the lease rate of servers.Laura's short-run marginal cost function is:   Currently,Laura leases 8 servers,the lease rate of servers is $15,and Laura can sell all the output she produces for $500.Find Laura's short-run profit maximizing level of output.Calculate Laura's profits.If the lease rate of internet servers rise to $20,how does Laura's optimal output and profits change?

Accepted Answer

The profit maximizing output level is wh

Question 16

Consider the following diagram where a perfectly competitive firm faces a price of $40.   Figure 8.1
-Refer to Figure 8.1.At the profit-maximizing level of output,ATC is

Accepted Answer

A) $26. 
B) $30. 
C) $31. 
D) $40. 
E) $44. 
A) $26. 
B) $30. 
C) $31. 
D) $40. 
E) $44.

Question 17

Consider the following statements when answering this question I.If the cost of producing each unit of output falls $5,then the short-run market price falls $5.
II.If the cost of producing each unit of output falls $5,then the long-run market price falls $5.

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 18

The total revenue graph consistent with Table 8.1 is

Accepted Answer

A) linear and upward-sloping. 
B) linear and horizontal. 
C) linear and vertical. 
D) linear and downward-sloping. 
E) concave downwards. 
A) linear and upward-sloping. 
B) linear and horizontal. 
C) linear and vertical. 
D) linear and downward-sloping. 
E) concave downwards.

Question 19

Use the following statements to answer this question: I.Markets that have only a few sellers cannot be highly competitive.
II.Markets with many sellers are always perfectly competitive.

Accepted Answer

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

Question 20

In a constant-cost industry,an increase in demand will be followed by

Accepted Answer

A) no increase in supply. 
B) an increase in supply that will not change price from the higher level that occurs after the demand shift. 
C) an increase in supply that will bring price down to the level it was before the demand shift. 
D) an increase in supply that will bring price down below the level it was before the demand shift. 
E) a decrease in demand to keep price constant. 
A) no increase in supply. 
B) an increase in supply that will not change price from the higher level that occurs after the demand shift. 
C) an increase in supply that will bring price down to the level it was before the demand shift. 
D) an increase in supply that will bring price down below the level it was before the demand shift. 
E) a decrease in demand to keep price constant.

An association of businesses that are jointly owned and operated by members for mutual benefit is a:

Which of following is a key assumption of a perfectly competitive market?

Owners and managers

Revenue is equal to

In a supply-and-demand graph,producer surplus can be pictured as the

Generally,long-run elasticities of supply are

An increasing-cost industry is so named because of the positive slope of which curve?

An industry analyst observes that in response to a small increase in price,a competitive firm's output sometimes rises a little and sometimes a lot.The best explanation for this finding is that

If current output is less than the profit-maximizing output,then the next unit produced

An industry has 1000 competitive firms,each producing 50 tons of output.At the current market price of $10,half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2.The short-run elasticity of market supply is

If a competitive firm's marginal costs always increase with output,then at the profit maximizing output level,producer surplus is

A firm maximizes profit by operating at the level of output where

Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1 -Refer to Figure 8.1.At the profit-maximizing level of output,ATC is

Consider the following statements when answering this question I.If the cost of producing each unit of output falls $5,then the short-run market price falls $5. II.If the cost of producing each unit of output falls $5,then the long-run market price falls $5.

The total revenue graph consistent with Table 8.1 is

Use the following statements to answer this question: I.Markets that have only a few sellers cannot be highly competitive. II.Markets with many sellers are always perfectly competitive.

In a constant-cost industry,an increase in demand will be followed by

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 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters

Exam 8: Profit Maximization and Competitive Supply

An association of businesses that are jointly owned and operated by members for mutual benefit is a:

Which of following is a key assumption of a perfectly competitive market?

Owners and managers

Revenue is equal to

In a supply-and-demand graph,producer surplus can be pictured as the

Generally,long-run elasticities of supply are

An increasing-cost industry is so named because of the positive slope of which curve?

An industry analyst observes that in response to a small increase in price,a competitive firm's output sometimes rises a little and sometimes a lot.The best explanation for this finding is that

If current output is less than the profit-maximizing output,then the next unit produced

An industry has 1000 competitive firms,each producing 50 tons of output.At the current market price of $10,half of the firms have a short-run supply curve with a slope of 1; the other half each have a short-run supply curve with slope 2.The short-run elasticity of market supply is

If a competitive firm's marginal costs always increase with output,then at the profit maximizing output level,producer surplus is

A firm maximizes profit by operating at the level of output where

Consider the following diagram where a perfectly competitive firm faces a price of $40. Figure 8.1 -Refer to Figure 8.1.At the profit-maximizing level of output,ATC is

Consider the following statements when answering this question I.If the cost of producing each unit of output falls $5,then the short-run market price falls $5. II.If the cost of producing each unit of output falls $5,then the long-run market price falls $5.

The total revenue graph consistent with Table 8.1 is

Use the following statements to answer this question: I.Markets that have only a few sellers cannot be highly competitive. II.Markets with many sellers are always perfectly competitive.

In a constant-cost industry,an increase in demand will be followed by

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 1-83

Markets With Asymmetric Information

Externalities and Public Goods

Filters