Question 1

If supply is perfectly elastic,

Accepted Answer

A)  producer surplus is equal to zero. 
B)  an increase in demand decreases producer surplus. 
C)  an upward shift of supply decreases producer surplus. 
D)  a downward shift of supply decreases producer surplus. 
E)  no output is produced. 
A)  producer surplus is equal to zero. 
B)  an increase in demand decreases producer surplus. 
C)  an upward shift of supply decreases producer surplus. 
D)  a downward shift of supply decreases producer surplus. 
E)  no output is produced. A

Question 2

All types of firms suffer from managerial conflicts.

Accepted Answer

A) True 
 B)False  False

Question 3

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

Accepted Answer

In a competitive market, there are many firms such that individual firms have no ability to affect the price that prevails in the market. As a result, the firm becomes a price-taker, meaning it cannot charge a price far from the price that other firms are charging in the market without losing all its customers. A good example is the commodity market, such as wheat and corn, where the product is homogenous and there is a large number of sellers so that no one seller can control the market price.

Question 4

Refer to the table below. Find the fixed costs and the producer surplus when the firm produces the profit-maximizing quantity. What is the relationship between producer surplus and fixed costs?

Accepted Answer

The fixed costs are $80, which equals th

Question 5

Partnerships differ from sole proprietorships because partnerships

Accepted Answer

A)  generate fewer profits than do sole proprietorships. 
B)  are characterized by unlimited liability and sole proprietorships are not. 
C)  consist of two or more partners sharing the responsibilities of the firm and sole proprietorships do not. 
D)  require a written agreement and sole proprietorships do not. 
E)  require a state charter and sole proprietorships do not. 
A)  generate fewer profits than do sole proprietorships. 
B)  are characterized by unlimited liability and sole proprietorships are not. 
C)  consist of two or more partners sharing the responsibilities of the firm and sole proprietorships do not. 
D)  require a written agreement and sole proprietorships do not. 
E)  require a state charter and sole proprietorships do not.

Question 6

In the pumpkin-growing firm example in the text, land is a fixed factor because

Accepted Answer

A)  it is a physical factor of production. 
B)  the firm produces a single product. 
C)  it cannot be varied during the season. 
D)  it has no close substitutes. 
E)  the firm is a price-taker. 
A)  it is a physical factor of production. 
B)  the firm produces a single product. 
C)  it cannot be varied during the season. 
D)  it has no close substitutes. 
E)  the firm is a price-taker.

Question 7

Exhibit 6-6  
-Refer to Exhibit 6-6. Let market price be $10 and fixed costs be $13. Calculate the difference between revenue and total costs at the output the profit-maximizing firm will produce.

Accepted Answer

-$2
The loss-minimizing output

Question 8

By definition, profits are

Accepted Answer

A)  total output minus total inputs. 
B)  total revenue plus total costs. 
C)  total revenue minus total costs. 
D)  total inputs minus total output. 
E)  total costs minus total revenue. 
A)  total output minus total inputs. 
B)  total revenue plus total costs. 
C)  total revenue minus total costs. 
D)  total inputs minus total output. 
E)  total costs minus total revenue.

Question 9

An improvement in production technology shifts marginal cost

Accepted Answer

A)  downward and does not affect market supply. 
B)  and market supply downward. 
C)  and market supply upward. 
D)  downward and shifts market supply upward. 
E)  upward and shifts market supply downward. 
A)  downward and does not affect market supply. 
B)  and market supply downward. 
C)  and market supply upward. 
D)  downward and shifts market supply upward. 
E)  upward and shifts market supply downward.

Question 10

Suppose a price-taking firm has the following total cost schedule:

Accepted Answer

The answer of Suppose a price-taking firm has the following...

Question 11

Producer surplus is just an economist's technical name for profit.

Accepted Answer

A) True 
 B)False

Question 12

Separation of ownership from control is most commonly found in a

Accepted Answer

A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  nonprofit firm. 
E)  consortium. 
A)  sole proprietorship. 
B)  partnership. 
C)  corporation. 
D)  nonprofit firm. 
E)  consortium.

Question 13

The slope of the total cost curve is called

Accepted Answer

A)  diminishing returns. 
B)  marginal cost. 
C)  marginal product. 
D)  marginal benefit. 
E)  total product. 
A)  diminishing returns. 
B)  marginal cost. 
C)  marginal product. 
D)  marginal benefit. 
E)  total product.

Question 14

Explain what happens to market supply when a new firm enters a market, holding everything else equal.

Accepted Answer

The market supply is the horizontal summ

Question 15

Why does it not make sense to sum individual firms' supply prices at every quantity rather than summing individual firms' supply quantities at every price?

Accepted Answer

The individual supply curve tells how mu

Question 16

Firms are assumed to maximize

Accepted Answer

A)  inputs. 
B)  profits. 
C)  wages. 
D)  output price. 
E)  output quantity. 
A)  inputs. 
B)  profits. 
C)  wages. 
D)  output price. 
E)  output quantity.

Question 17

Draw a graph of total revenue and total cost for a competitive firm that is maximizing profit but just breaking even. Mark the profit-maximizing output level.

Accepted Answer

The answer of Draw a graph of total revenue and...

Question 18

If the market price of a good is $3, then a profit-maximizing competitive firm will produce

Accepted Answer

A)  after its marginal cost exceeds $3. 
B)  until its marginal cost reaches $3. 
C)  after its marginal revenue exceeds $3. 
D)  until its marginal revenue reaches $3. 
E)  nothing at all. 
A)  after its marginal cost exceeds $3. 
B)  until its marginal cost reaches $3. 
C)  after its marginal revenue exceeds $3. 
D)  until its marginal revenue reaches $3. 
E)  nothing at all.

Question 19

Total costs are the ____ variable and fixed costs.

Accepted Answer

A)  quotient of 
B)  difference between 
C)  product of 
D)  sum of 
E)  difference between total revenue and the total of 
A)  quotient of 
B)  difference between 
C)  product of 
D)  sum of 
E)  difference between total revenue and the total of

Question 20

When marginal cost is positive, total cost must be rising.

Accepted Answer

A) True 
 B)False

If supply is perfectly elastic,

All types of firms suffer from managerial conflicts.

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

Refer to the table below. Find the fixed costs and the producer surplus when the firm produces the profit-maximizing quantity. What is the relationship between producer surplus and fixed costs?

Partnerships differ from sole proprietorships because partnerships

In the pumpkin-growing firm example in the text, land is a fixed factor because

Exhibit 6-6 -Refer to Exhibit 6-6. Let market price be $10 and fixed costs be $13. Calculate the difference between revenue and total costs at the output the profit-maximizing firm will produce.

By definition, profits are

An improvement in production technology shifts marginal cost

Suppose a price-taking firm has the following total cost schedule:

Producer surplus is just an economist's technical name for profit.

Separation of ownership from control is most commonly found in a

The slope of the total cost curve is called

Explain what happens to market supply when a new firm enters a market, holding everything else equal.

Why does it not make sense to sum individual firms' supply prices at every quantity rather than summing individual firms' supply quantities at every price?

Firms are assumed to maximize

Draw a graph of total revenue and total cost for a competitive firm that is maximizing profit but just breaking even. Mark the profit-maximizing output level.

If the market price of a good is $3, then a profit-maximizing competitive firm will produce

Total costs are the ____ variable and fixed costs.

When marginal cost is positive, total cost must be rising.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters

Exam 6: The Supply Curve and the Behavior of Firms

If supply is perfectly elastic,

All types of firms suffer from managerial conflicts.

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

Refer to the table below. Find the fixed costs and the producer surplus when the firm produces the profit-maximizing quantity. What is the relationship between producer surplus and fixed costs?

Partnerships differ from sole proprietorships because partnerships

In the pumpkin-growing firm example in the text, land is a fixed factor because

Exhibit 6-6 -Refer to Exhibit 6-6. Let market price be $10 and fixed costs be $13. Calculate the difference between revenue and total costs at the output the profit-maximizing firm will produce.

By definition, profits are

An improvement in production technology shifts marginal cost

Suppose a price-taking firm has the following total cost schedule:

Producer surplus is just an economist's technical name for profit.

Separation of ownership from control is most commonly found in a

The slope of the total cost curve is called

Explain what happens to market supply when a new firm enters a market, holding everything else equal.

Why does it not make sense to sum individual firms' supply prices at every quantity rather than summing individual firms' supply quantities at every price?

Firms are assumed to maximize

Draw a graph of total revenue and total cost for a competitive firm that is maximizing profit but just breaking even. Mark the profit-maximizing output level.

If the market price of a good is $3, then a profit-maximizing competitive firm will produce

Total costs are the ____ variable and fixed costs.

When marginal cost is positive, total cost must be rising.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

The Demand Curve and the Behavior of Consumers

The Interaction of People in Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Reading, Understanding, and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Filters