Question 1

Long-run competitive equilibrium in an industry implies that

Accepted Answer

A)  all firms in the industry are earning positive economic profit. 
B)  all firms in the industry are producing output at the point where marginal profit equals marginal cost. 
C)  there is no positive economic profit to attract new entrants. 
D)  the accounting profit of all firms in a competitive industry is zero. 
E)  there is negative economic profit,so firms exit. 
A)  all firms in the industry are earning positive economic profit. 
B)  all firms in the industry are producing output at the point where marginal profit equals marginal cost. 
C)  there is no positive economic profit to attract new entrants. 
D)  the accounting profit of all firms in a competitive industry is zero. 
E)  there is negative economic profit,so firms exit.

Question 2

In a free-market economy,the decisions of buyers and sellers are

Accepted Answer

A)  random. 
B)  motivated by custom and tradition. 
C)  in need of coordination by government. 
D)  guided by prices. 
E)  wildly inconsistent. 
A)  random. 
B)  motivated by custom and tradition. 
C)  in need of coordination by government. 
D)  guided by prices. 
E)  wildly inconsistent.

Question 3

The portion of the short-run average cost curve that becomes part of the long-run average cost curve is the

Accepted Answer

A)  portion of the short-run average cost curve with the highest unit cost. 
B)  minimum short-run average cost curve. 
C)  the downward-sloping portion of the short-run average cost curve. 
D)  portion of the short-run cost curve,be it upward-sloping or downward-sloping,that gives the lowest production cost for that specific level of output. 
E)  upward-sloping portion of the short-run average cost curve. 
A)  portion of the short-run average cost curve with the highest unit cost. 
B)  minimum short-run average cost curve. 
C)  the downward-sloping portion of the short-run average cost curve. 
D)  portion of the short-run cost curve,be it upward-sloping or downward-sloping,that gives the lowest production cost for that specific level of output. 
E)  upward-sloping portion of the short-run average cost curve.

Question 4

-Use the data in the table above.If output is divisible,the marginal revenue for each additional unit of output is

Accepted Answer

A)  $1. 
B)  $5. 
C)  $25. 
D)  $25/Q. 
E)  unknown. 
A)  $1. 
B)  $5. 
C)  $25. 
D)  $25/Q. 
E)  unknown.

Question 5

Right Panel: The market: a shift of short-run supply in response to an increase in demand.  
-Refer to the diagrams above.If the market demand for wheat and the market supply of wheat are represented by D' and SRS,respectively,the market price is____ per bushel and the quantity produced by the market is__________ bushels of wheat per year.

Accepted Answer

A)  $1.20;12 million 
B)  $1.20;12 thousand 
C)  $1.12;12 thousand 
D)  $1.12;14 million 
E)  $1.20;10 million 
A)  $1.20;12 million 
B)  $1.20;12 thousand 
C)  $1.12;12 thousand 
D)  $1.12;14 million 
E)  $1.20;10 million

Question 6

Unlike economic profit,economic rent

Accepted Answer

A)  can be less than zero. 
B)  cannot be easily driven to zero. 
C)  do not involve the idea of opportunity costs. 
D)  only applies to land. 
E)  can be positive when accounting profit is zero. 
A)  can be less than zero. 
B)  cannot be easily driven to zero. 
C)  do not involve the idea of opportunity costs. 
D)  only applies to land. 
E)  can be positive when accounting profit is zero.

Question 7

If total revenue covers explicit costs but not opportunity costs,then

Accepted Answer

A)  both economic profit and accounting profit are positive. 
B)  economic profit is positive,but accounting profit is negative. 
C)  accounting profit is positive,but economic profit is negative. 
D)  neither accounting profit nor economic profit is positive. 
E)  accounting profit is negative,but economic profit may be positive or negative. 
A)  both economic profit and accounting profit are positive. 
B)  economic profit is positive,but accounting profit is negative. 
C)  accounting profit is positive,but economic profit is negative. 
D)  neither accounting profit nor economic profit is positive. 
E)  accounting profit is negative,but economic profit may be positive or negative.

Question 8

When producers do not have the flexibility to adjust their existing stock of capital with respect to output,the per-unit cost of production is the

Accepted Answer

A)  long-run average total cost. 
B)  long-run total cost. 
C)  short-run total cost. 
D)  short-run average total cost. 
E)  opportunity cost. 
A)  long-run average total cost. 
B)  long-run total cost. 
C)  short-run total cost. 
D)  short-run average total cost. 
E)  opportunity cost.

Question 9

Accounting profit minus economic profit equals

Accepted Answer

A)  zero. 
B)  explicit costs. 
C)  some negative number. 
D)  long-run costs. 
E)  implicit costs. 
A)  zero. 
B)  explicit costs. 
C)  some negative number. 
D)  long-run costs. 
E)  implicit costs.

Question 10

Accounting profit is

Accepted Answer

A)  the only measure of profitability. 
B)  equal to total revenue minus implicit costs. 
C)  the difference between total revenue and explicit costs. 
D)  equal to total revenue minus explicit and implicit costs. 
E)  less than economic profit. 
A)  the only measure of profitability. 
B)  equal to total revenue minus implicit costs. 
C)  the difference between total revenue and explicit costs. 
D)  equal to total revenue minus explicit and implicit costs. 
E)  less than economic profit.

Question 11

-Use the data in the table above.If output is divisible,the market price for each unit of output is

Accepted Answer

A)  $1. 
B)  $5. 
C)  $25. 
D)  $25/Q. 
E)  unknown. 
A)  $1. 
B)  $5. 
C)  $25. 
D)  $25/Q. 
E)  unknown.

Question 12

For a price-taking firm in a competitive market,the firm's only way to increase profitability is to

Accepted Answer

A)  change price. 
B)  advertise more. 
C)  reduce production costs. 
D)  exit the industry. 
E)  increase revenue. 
A)  change price. 
B)  advertise more. 
C)  reduce production costs. 
D)  exit the industry. 
E)  increase revenue.

Question 13

-Use the data in the table above.The highest level of output that exactly covers all costs is

Accepted Answer

A)  30 units. 
B)  25 units. 
C)  20 units. 
D)  15 units. 
E)  10 units. 
A)  30 units. 
B)  25 units. 
C)  20 units. 
D)  15 units. 
E)  10 units.

Question 14

Economic rent

Accepted Answer

A)  is always positive. 
B)  is driven towards zero. 
C)  can never be zero. 
D)  can never be negative. 
E)  can be positive,zero,or negative. 
A)  is always positive. 
B)  is driven towards zero. 
C)  can never be zero. 
D)  can never be negative. 
E)  can be positive,zero,or negative.

Question 15

The signal for new firms to join an industry is

Accepted Answer

A)  economic profits. 
B)  normal profits. 
C)  accounting profits. 
D)  economic losses. 
E)  when economic profits exceed accounting profits. 
A)  economic profits. 
B)  normal profits. 
C)  accounting profits. 
D)  economic losses. 
E)  when economic profits exceed accounting profits.

Question 16

For entry into a particular perfectly competitive industry to occur,which of the following must be TRUE?

Accepted Answer

A)  Economic profit > Accounting profit > 0. 
B)  Accounting profit > Economic profit > 0. 
C)  Accounting profit > 0 > Economic profit. 
D)  Accounting profit > Economic profit = 0. 
E)  Accounting profit = Economic profit = 0. 
A)  Economic profit > Accounting profit > 0. 
B)  Accounting profit > Economic profit > 0. 
C)  Accounting profit > 0 > Economic profit. 
D)  Accounting profit > Economic profit = 0. 
E)  Accounting profit = Economic profit = 0.

Question 17

If a price-taking firm that belongs to an industry in long-run equilibrium discovers a significant cost-saving technology,then

Accepted Answer

A)  all firms will enjoy positive economic profit for a short period of time. 
B)  the rest of the industry will quickly adopt the new technology. 
C)  the firm will enjoy positive economic profit forever. 
D)  the firm will lower the price to drive the rest of the industry out of business. 
E)  the firm will not implement the new technology,fearing a price war with the rest of the industry. 
A)  all firms will enjoy positive economic profit for a short period of time. 
B)  the rest of the industry will quickly adopt the new technology. 
C)  the firm will enjoy positive economic profit forever. 
D)  the firm will lower the price to drive the rest of the industry out of business. 
E)  the firm will not implement the new technology,fearing a price war with the rest of the industry.

Question 18

If all firms in a perfectly competitive industry earn a normal profit,then

Accepted Answer

A)  new firms will enter the industry. 
B)  old firms will exit the industry. 
C)  the number of firms in the industry is stable. 
D)  the market supply curve will shift to the left. 
E)  the market supply curve will shift to the right. 
A)  new firms will enter the industry. 
B)  old firms will exit the industry. 
C)  the number of firms in the industry is stable. 
D)  the market supply curve will shift to the left. 
E)  the market supply curve will shift to the right.

Question 19

-Refer to the graph above.If the firm initially planned to produce 300 units and now desires to expand its output to 600 units,in the short run it will use the plant size represented by

Accepted Answer

A)  SATC1. 
B)  SATC2. 
C)  SATC3. 
D)  SATC4. 
E)  SATC1 and SATC2. 
A)  SATC1. 
B)  SATC2. 
C)  SATC3. 
D)  SATC4. 
E)  SATC1 and SATC2.

Question 20

When total revenue is less than the sum of explicit and implicit costs,

Accepted Answer

A)  accounting profit is negative. 
B)  normal profit is zero. 
C)  the firm is experiencing an economic loss. 
D)  economic profit is negative but normal profit is positive. 
E)  accounting profit is positive. 
A)  accounting profit is negative. 
B)  normal profit is zero. 
C)  the firm is experiencing an economic loss. 
D)  economic profit is negative but normal profit is positive. 
E)  accounting profit is positive.

Long-run competitive equilibrium in an industry implies that

In a free-market economy,the decisions of buyers and sellers are

The portion of the short-run average cost curve that becomes part of the long-run average cost curve is the

-Use the data in the table above.If output is divisible,the marginal revenue for each additional unit of output is

Unlike economic profit,economic rent

If total revenue covers explicit costs but not opportunity costs,then

When producers do not have the flexibility to adjust their existing stock of capital with respect to output,the per-unit cost of production is the

Accounting profit minus economic profit equals

Accounting profit is

-Use the data in the table above.If output is divisible,the market price for each unit of output is

For a price-taking firm in a competitive market,the firm's only way to increase profitability is to

-Use the data in the table above.The highest level of output that exactly covers all costs is

Economic rent

The signal for new firms to join an industry is

For entry into a particular perfectly competitive industry to occur,which of the following must be TRUE?

If a price-taking firm that belongs to an industry in long-run equilibrium discovers a significant cost-saving technology,then

If all firms in a perfectly competitive industry earn a normal profit,then

-Refer to the graph above.If the firm initially planned to produce 300 units and now desires to expand its output to 600 units,in the short run it will use the plant size represented by

When total revenue is less than the sum of explicit and implicit costs,

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

The Quest for Profit and the Invisible Hand

Monopoly and Other Forms of Imperfect Competition

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters

Exam 6: Efficiency and Exchange

Long-run competitive equilibrium in an industry implies that

In a free-market economy,the decisions of buyers and sellers are

The portion of the short-run average cost curve that becomes part of the long-run average cost curve is the

-Use the data in the table above.If output is divisible,the marginal revenue for each additional unit of output is

Unlike economic profit,economic rent

If total revenue covers explicit costs but not opportunity costs,then

When producers do not have the flexibility to adjust their existing stock of capital with respect to output,the per-unit cost of production is the

Accounting profit minus economic profit equals

Accounting profit is

-Use the data in the table above.If output is divisible,the market price for each unit of output is

For a price-taking firm in a competitive market,the firm's only way to increase profitability is to

-Use the data in the table above.The highest level of output that exactly covers all costs is

Economic rent

The signal for new firms to join an industry is

For entry into a particular perfectly competitive industry to occur,which of the following must be TRUE?

If a price-taking firm that belongs to an industry in long-run equilibrium discovers a significant cost-saving technology,then

If all firms in a perfectly competitive industry earn a normal profit,then

-Refer to the graph above.If the firm initially planned to produce 300 units and now desires to expand its output to 600 units,in the short run it will use the plant size represented by

When total revenue is less than the sum of explicit and implicit costs,

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

The Quest for Profit and the Invisible Hand

Monopoly and Other Forms of Imperfect Competition

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters