Question 1

A good economist will ignore ________ and focus on ________ when it comes to making the right decisions.

Accepted Answer

A)  marginal value; sunk costs 
B)  sunk costs; marginal value 
C)  costs; revenues 
D)  marginal cost; marginal revenue 
E)  opportunity costs; sunk costs 
A)  marginal value; sunk costs 
B)  sunk costs; marginal value 
C)  costs; revenues 
D)  marginal cost; marginal revenue 
E)  opportunity costs; sunk costs B

Question 2

The marginal cost curve is the short-run supply curve

Accepted Answer

A)  at all points. 
B)  as long as the firm is not operating. 
C)  as long as the firm is operating. 
D)  only between minimum average total cost (AT
C) and minimum average variable cost (AV
C) . 
E)  only above minimum average total cost (AT
C) . 
A)  at all points. 
B)  as long as the firm is not operating. 
C)  as long as the firm is operating. 
D)  only between minimum average total cost (AT
C) and minimum average variable cost (AV
C) . 
E)  only above minimum average total cost (AT
C) . C

Question 3

Refer to the accompanying figure to answer the following questions.  
-If the price is $8,the firm is making

Accepted Answer

A)  a loss and will exit the market. 
B)  a profit and will exit the market. 
C)  a loss and more firms will enter the market. 
D)  a profit and more firms will enter the market in the long run. 
E)  zero profit and the market is at long-run equilibrium. 
A)  a loss and will exit the market. 
B)  a profit and will exit the market. 
C)  a loss and more firms will enter the market. 
D)  a profit and more firms will enter the market in the long run. 
E)  zero profit and the market is at long-run equilibrium. D

Question 4

Use the following scenario to answer the following questions:
Chuck Diesel Burger is a food truck in Houston,Texas.Imagine that Chuck Diesel Burger's minimum average total cost (ATC)is $3.75 and that its minimum average variable cost (AVC)is $2.50.Assume there are no barriers to enter into or exit from the food-truck market.
-Refer to the accompanying table.A firm participating in a competitive market with these costs would be making a profit if the price is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $4. 
D)  $2. 
E)  either $6 or $8. 
A)  $6. 
B)  $8. 
C)  $4. 
D)  $2. 
E)  either $6 or $8.

Question 5

The market for watches is perfectly competitive and is currently in equilibrium.What will happen if watches become more popular among college students?

Accepted Answer

A)  In the short run,firms will experience economic profits,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
B)  In the short run,firms will experience economic profits,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
C)  In the short run,firms will incur economic losses,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
D)  In the short run,firms will incur economic losses,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
E)  In both the short run and the long run,firms will experience zero economic profits. 
A)  In the short run,firms will experience economic profits,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
B)  In the short run,firms will experience economic profits,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
C)  In the short run,firms will incur economic losses,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
D)  In the short run,firms will incur economic losses,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
E)  In both the short run and the long run,firms will experience zero economic profits.

Question 6

If the market price of a product is between the minimum average variable cost (AVC)and minimum average total cost (ATC)of a firm,that firm will

Accepted Answer

A)  always shut down. 
B)  always continue to produce. 
C)  produce in the short run but shut down in the long run. 
D)  produce in the long run but shut down in the short run. 
E)  make positive economic profits. 
A)  always shut down. 
B)  always continue to produce. 
C)  produce in the short run but shut down in the long run. 
D)  produce in the long run but shut down in the short run. 
E)  make positive economic profits.

Question 7

Use the following scenario to answer the following questions:
Lenora and Uma own a dog-grooming business in upstate New York,called Pawkeepsie Groomers.There are many buyers and many sellers in the dog-grooming service market.Pawkeepsie Groomers experiences normal cost curves,with the marginal cost (MC)curve crossing average variable cost (AVC)at $14 and average total cost (ATC)at $22.
-Pawkeepsie Groomers will always shut down if the market price is

Accepted Answer

A)  $14. 
B)  between $14 and $22. 
C)  below $14. 
D)  $22. 
E)  above $14. 
A)  $14. 
B)  between $14 and $22. 
C)  below $14. 
D)  $22. 
E)  above $14.

Question 8

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the following questions.  
-Profits are maximized when producing _______ unit(s).

Accepted Answer

A)  0 (zero) 
B)  1 
C)  2 
D)  3 
E)  4 
A)  0 (zero) 
B)  1 
C)  2 
D)  3 
E)  4

Question 9

Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

Accepted Answer

A)  many buyers 
B)  many sellers 
C)  similar goods 
D)  differentiated goods 
E)  easy entry into and exit from the market 
A)  many buyers 
B)  many sellers 
C)  similar goods 
D)  differentiated goods 
E)  easy entry into and exit from the market

Question 10

Use the following scenario to answer the following questions:
Chuck Diesel Burger is a food truck in Houston,Texas.Imagine that Chuck Diesel Burger's minimum average total cost (ATC)is $3.75 and that its minimum average variable cost (AVC)is $2.50.Assume there are no barriers to enter into or exit from the food-truck market.
-Chuck Diesel Burger will shut down if the price is equal to

Accepted Answer

A)  $4.00. 
B)  $3.75. 
C)  $3.00. 
D)  $2.50. 
E)  $2.00. 
A)  $4.00. 
B)  $3.75. 
C)  $3.00. 
D)  $2.50. 
E)  $2.00.

Question 11

The perfectly competitive firm cannot influence the market price because

Accepted Answer

A)  the firm has market power. 
B)  the firm is a price maker. 
C)  the firm's production levels are too small to affect the market. 
D)  the firm faces less competition. 
E)  the firm has high costs. 
A)  the firm has market power. 
B)  the firm is a price maker. 
C)  the firm's production levels are too small to affect the market. 
D)  the firm faces less competition. 
E)  the firm has high costs.

Question 12

The market for candles is perfectly competitive and is currently in equilibrium.What will happen if candles are later linked to more houses catching on fire?

Accepted Answer

A)  In the short run,firms will experience economic profits,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
B)  In the short run,firms will experience economic profits,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
C)  In the short run,firms will incur economic losses,but in the long run,firms will leave the market,bringing economic profits back up to zero. 
D)  In the short run,firms will incur economic losses,but in the long run,firms will enter the market,bringing economic profits back up to zero. 
E)  In both the short run and the long run,firms will experience zero economic profits. 
A)  In the short run,firms will experience economic profits,but in the long run,firms will leave the market,bringing economic profits back down to zero. 
B)  In the short run,firms will experience economic profits,but in the long run,firms will enter the market,bringing economic profits back down to zero. 
C)  In the short run,firms will incur economic losses,but in the long run,firms will leave the market,bringing economic profits back up to zero. 
D)  In the short run,firms will incur economic losses,but in the long run,firms will enter the market,bringing economic profits back up to zero. 
E)  In both the short run and the long run,firms will experience zero economic profits.

Question 13

Give two reasons why the long-run market supply curve may slope upward.

Accepted Answer

(1)Some resources that are needed to pro

Question 14

The perfectly competitive firm's short-run shutdown price equals

Accepted Answer

A)  total variable costs. 
B)  the fixed costs. 
C)  marginal revenue. 
D)  the minimum of average total cost. 
E)  the minimum of average variable cost. 
A)  total variable costs. 
B)  the fixed costs. 
C)  marginal revenue. 
D)  the minimum of average total cost. 
E)  the minimum of average variable cost.

Question 15

In the short run,a competitive firm may choose to operate at a loss

Accepted Answer

A)  to ensure that other firms make a loss as well. 
B)  only if those losses are economic losses. 
C)  to gain market power in the future. 
D)  only if those losses are accounting losses. 
E)  to recover a portion of its fixed costs. 
A)  to ensure that other firms make a loss as well. 
B)  only if those losses are economic losses. 
C)  to gain market power in the future. 
D)  only if those losses are accounting losses. 
E)  to recover a portion of its fixed costs.

Question 16

When marginal revenue is greater than marginal cost,the firm should

Accepted Answer

A)  increase the level of output until price is equal to average variable cost. 
B)  stop producing. 
C)  stay at the same level of output. 
D)  reduce the level of output. 
E)  increase the level of output. 
A)  increase the level of output until price is equal to average variable cost. 
B)  stop producing. 
C)  stay at the same level of output. 
D)  reduce the level of output. 
E)  increase the level of output.

Question 17

Draw the market demand (MD),market supply (MS),and long-run (LR)market supply curve associated with the firm in the accompanying graph.

Accepted Answer

The answer of Draw the market demand (MD),market supply (MS),and...

Question 18

The city of Tustin,California,has spent $10 million on a project to build a new community college.It will cost the city $40 million to finish the project.When making the decision to continue the project,the city's chief economist tells the city council to ignore the $10 million because

Accepted Answer

A)  the $10 million is a sunk cost. 
B)  the $10 million doesn't factor into the total cost of the project. 
C)  $10 million is only one-fifth of the entire project cost. 
D)  the $10 million is a variable cost. 
E)  the $10 million can be recovered if the project is stopped. 
A)  the $10 million is a sunk cost. 
B)  the $10 million doesn't factor into the total cost of the project. 
C)  $10 million is only one-fifth of the entire project cost. 
D)  the $10 million is a variable cost. 
E)  the $10 million can be recovered if the project is stopped.

Question 19

Firms will be indifferent about shutting down or producing if the price they charge is

Accepted Answer

A)  less than their minimum average total cost (AT
C) . 
B)  less than their minimum average variable cost (AV
C) . 
C)  greater than their minimum average variable cost (AV
C) . 
D)  greater than their minimum average total cost (AT
C) . 
E)  equal to their minimum average variable cost (AV
C) . 
A)  less than their minimum average total cost (AT
C) . 
B)  less than their minimum average variable cost (AV
C) . 
C)  greater than their minimum average variable cost (AV
C) . 
D)  greater than their minimum average total cost (AT
C) . 
E)  equal to their minimum average variable cost (AV
C) .

Question 20

If firms in a competitive market are making zero economic profits,the long-run market supply curve

Accepted Answer

A)  is above the point where the short-run market supply curve and the demand curve intersect. 
B)  is below the point where the short-run market supply curve and the demand curve intersect. 
C)  and the short-run market supply curve and the demand curve all intersect at the same point. 
D)  shifts upward. 
E)  shifts downward. 
A)  is above the point where the short-run market supply curve and the demand curve intersect. 
B)  is below the point where the short-run market supply curve and the demand curve intersect. 
C)  and the short-run market supply curve and the demand curve all intersect at the same point. 
D)  shifts upward. 
E)  shifts downward.

Exam 9: Firms in a Competitive Market

A good economist will ignore ________ and focus on ________ when it comes to making the right decisions.

The marginal cost curve is the short-run supply curve

Refer to the accompanying figure to answer the following questions. -If the price is $8,the firm is making

The market for watches is perfectly competitive and is currently in equilibrium.What will happen if watches become more popular among college students?

If the market price of a product is between the minimum average variable cost (AVC)and minimum average total cost (ATC)of a firm,that firm will

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the following questions. -Profits are maximized when producing _______ unit(s).

Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

The perfectly competitive firm cannot influence the market price because

The market for candles is perfectly competitive and is currently in equilibrium.What will happen if candles are later linked to more houses catching on fire?

Give two reasons why the long-run market supply curve may slope upward.

The perfectly competitive firm's short-run shutdown price equals

In the short run,a competitive firm may choose to operate at a loss

When marginal revenue is greater than marginal cost,the firm should

Draw the market demand (MD),market supply (MS),and long-run (LR)market supply curve associated with the firm in the accompanying graph.

The city of Tustin,California,has spent $10 million on a project to build a new community college.It will cost the city $40 million to finish the project.When making the decision to continue the project,the city's chief economist tells the city council to ignore the $10 million because

Firms will be indifferent about shutting down or producing if the price they charge is

If firms in a competitive market are making zero economic profits,the long-run market supply curve

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Elasticity

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings,interest Rates,and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

Filters

A good economist will ignore and focus on when it comes to making the right decisions.