Question 1

Refer to the accompanying figure to answer the following questions.  
-A firm would produce in the long run only if the market price is

Accepted Answer

A)  at or above $20. 
B)  above $15. 
C)  between $15 and $20. 
D)  above $8. 
E)  between $8 and $15. 
A)  at or above $20. 
B)  above $15. 
C)  between $15 and $20. 
D)  above $8. 
E)  between $8 and $15.

Question 2

Suppose a perfectly competitive broccoli farm can produce 35 crates at an output level where marginal revenue equals marginal cost.The price per crate of broccoli is $25 and the average total cost is $30.What is the total profit or loss that this farm is earning?

Accepted Answer

A)  $175.00 
B)  -$175.00 
C)  $875.00 
D)  $5 
E)  -$5 
A)  $175.00 
B)  -$175.00 
C)  $875.00 
D)  $5 
E)  -$5

Question 3

When firms enter a market,the ________-run market supply curve shifts ________,causing individual firms' profits to ________.

Accepted Answer

A)  long; right; decrease 
B)  short; left; decrease 
C)  short; left; increase 
D)  short; right; decrease 
E)  short; right; increase 
A)  long; right; decrease 
B)  short; left; decrease 
C)  short; left; increase 
D)  short; right; decrease 
E)  short; right; increase

Question 4

Kimiko owns a cupcake shop in Newport Beach,California.The market for cupcakes is very competitive.At Kimiko's current production level,her marginal cost is $25 and her marginal revenue is $29.To maximize profits,Kimiko should

Accepted Answer

A)  decrease production. 
B)  keep production the same. 
C)  increase the price. 
D)  decrease the price. 
E)  increase production. 
A)  decrease production. 
B)  keep production the same. 
C)  increase the price. 
D)  decrease the price. 
E)  increase production.

Question 5

Which of the following conditions will result in the firm making zero economic profits?

Accepted Answer

A)  P $\gt$ATC 
B)  P $\lt$ ATC 
C)  P = ATC 
D)  P = AVC 
E)  ATC $\gt$ P $\gt$ AVC 
A)  P $\gt$ATC 
B)  P $\lt$ ATC 
C)  P = ATC 
D)  P = AVC 
E)  ATC $\gt$ P $\gt$ AVC

Question 6

Which of the following is NOT a characteristic of a perfectly competitive industry?

Accepted Answer

A)  The firms produce a homogenous product. 
B)  Sellers have better information about the product than consumers. 
C)  There is a large number of buyers and sellers. 
D)  The firms earn zero profit. 
E)  Firms can easily enter or exit the industry. 
A)  The firms produce a homogenous product. 
B)  Sellers have better information about the product than consumers. 
C)  There is a large number of buyers and sellers. 
D)  The firms earn zero profit. 
E)  Firms can easily enter or exit the industry.

Question 7

The University of California at Irvine (UCI)allows student organizations and private firms to sell items on campus to raise funds for various activities.Many of the organizations sell boba,a Taiwanese tea drink,because boba is popular with students.The market for boba on the UCI campus is very competitive.If legislation is passed to restrict the entry of private firms into the boba market at the UCI campus,the

Accepted Answer

A)  market would become less competitive. 
B)  market would become more competitive. 
C)  demand for boba would fall. 
D)  supply for boba would increase. 
E)  demand for boba would increase. 
A)  market would become less competitive. 
B)  market would become more competitive. 
C)  demand for boba would fall. 
D)  supply for boba would increase. 
E)  demand for boba would increase.

Question 8

In competitive markets

Accepted Answer

A)  the products sold are different depending on the firm selling the product. 
B)  buyers can expect to find consistently low prices and wide availability of the goods that they want. 
C)  producers can expect to be able to set prices at the level they choose. 
D)  it is hard for a seller to enter the market due to barriers to entry. 
E)  firms will leave the market if they are making economic profits. 
A)  the products sold are different depending on the firm selling the product. 
B)  buyers can expect to find consistently low prices and wide availability of the goods that they want. 
C)  producers can expect to be able to set prices at the level they choose. 
D)  it is hard for a seller to enter the market due to barriers to entry. 
E)  firms will leave the market if they are making economic profits.

Question 9

Which of the following conditions will result in the firm making an economic profit?

Accepted Answer

A)  P $\gt$ ATC 
B)  P$\lt$ ATC 
C)  P = ATC 
D)  P = AVC 
E)  ATC $\gt$P $\gt$AVC 
A)  P $\gt$ ATC 
B)  P$\lt$ ATC 
C)  P = ATC 
D)  P = AVC 
E)  ATC $\gt$P $\gt$AVC

Question 10

Refer to the following figure to answer the following questions.  
-Firm 1 and firm 2 are the sole producers in the industry.At price P2,the industry's total quantity supplied is

Accepted Answer

A)  Q1 + Q2 +Q3 + Q4. 
B)  Q1+ Q3. 
C)  Q2+ Q4. 
D)  Q1 - Q4. 
E)  Q4 - Q1. 
A)  Q1 + Q2 +Q3 + Q4. 
B)  Q1+ Q3. 
C)  Q2+ Q4. 
D)  Q1 - Q4. 
E)  Q4 - Q1.

Question 11

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.
-A firm would shut down in the short run if the price is

Accepted Answer

A)  anywhere below $5. 
B)  below $5 but above $4. 
C)  anywhere above $4. 
D)  below $4. 
E)  above $5. 
A)  anywhere below $5. 
B)  below $5 but above $4. 
C)  anywhere above $4. 
D)  below $4. 
E)  above $5.

Question 12

Refer to the accompanying set of graphs to answer the following questions.  
-Which graph would result in no firms entering or exiting the perfectly competitive market?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  E 
A)  A 
B)  B 
C)  C 
D)  D 
E)  E

Question 13

What should the firm do if there is no possible output where the price would at least be equal to average variable costs?

Accepted Answer

A)  The firm should lower the price. 
B)  The firm should raise the price. 
C)  The firm should shut down in the short run. 
D)  The firm should increase production. 
E)  The firm should decrease production. 
A)  The firm should lower the price. 
B)  The firm should raise the price. 
C)  The firm should shut down in the short run. 
D)  The firm should increase production. 
E)  The firm should decrease production.

Question 14

Assume that a firm's costs are split between variable costs and fixed costs.Once variable costs are covered

Accepted Answer

A)  any extra money is profit. 
B)  any extra money goes toward paying the fixed costs. 
C)  the firm will shut down. 
D)  the firm will make an economic profit. 
E)  the firm will break even. 
A)  any extra money is profit. 
B)  any extra money goes toward paying the fixed costs. 
C)  the firm will shut down. 
D)  the firm will make an economic profit. 
E)  the firm will break even.

Question 15

Refer to the accompanying table.A firm participating in a competitive market with these costs would always shut down 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 16

If Tamsin's Tank Tops is a perfectly competitive firm and is currently making positive economic profits of $1,000,

Accepted Answer

A)  firms will enter the market. 
B)  firms will exit the market. 
C)  individuals will demand more tank tops. 
D)  individuals will demand fewer tank tops. 
E)  the market supply curve will shift to the left. 
A)  firms will enter the market. 
B)  firms will exit the market. 
C)  individuals will demand more tank tops. 
D)  individuals will demand fewer tank tops. 
E)  the market supply curve will shift to the left.

Question 17

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' long-run supply curve would be the

Accepted Answer

A)  marginal revenue (MR)curve above $14. 
B)  marginal revenue (MR)curve above $22. 
C)  marginal cost (M
C) curve above $14. 
D)  marginal cost (M
C) curve above $22. 
E)  average variable cost (AV
C) curve above $14. 
A)  marginal revenue (MR)curve above $14. 
B)  marginal revenue (MR)curve above $22. 
C)  marginal cost (M
C) curve above $14. 
D)  marginal cost (M
C) curve above $22. 
E)  average variable cost (AV
C) curve above $14.

Question 18

Kathryn's Kites is a profit-maximizing firm in a competitive market.
a.Draw a graph of Kathryn's firm next to a graph for the market,assuming the market is in long-run equilibrium.
b.Now assume the demand for kites decreases.Redraw a graph of Kathryn's firm next to a graph for the market.
c.What do you expect to happen in the long run?

Accepted Answer

a. @#IMG-DLM& b. @#IMG-DLM& c.In the long run,firms will lea

Question 19

Asa's Online Poker Room is a profit-maximizing firm in a competitive market.
a.Draw a graph of Asa's firm next to a graph for the market,assuming the market is in long-run equilibrium.
b.Now assume the demand for online poker increases.Redraw a graph of Asa's firm next to a graph for the market.
c.What do you expect to happen in the long run?

Accepted Answer

a. @#IMG-DLM& b. @#IMG-DLM& c.In the long run,other firms wi

Question 20

Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

Accepted Answer

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

Exam 9: Firms in a Competitive Market

Refer to the accompanying figure to answer the following questions. -A firm would produce in the long run only if the market price is

Suppose a perfectly competitive broccoli farm can produce 35 crates at an output level where marginal revenue equals marginal cost.The price per crate of broccoli is $25 and the average total cost is $30.What is the total profit or loss that this farm is earning?

When firms enter a market,the ________-run market supply curve shifts ________,causing individual firms' profits to ________.

Kimiko owns a cupcake shop in Newport Beach,California.The market for cupcakes is very competitive.At Kimiko's current production level,her marginal cost is $25 and her marginal revenue is $29.To maximize profits,Kimiko should

Which of the following conditions will result in the firm making zero economic profits?

Which of the following is NOT a characteristic of a perfectly competitive industry?

In competitive markets

Which of the following conditions will result in the firm making an economic profit?

Refer to the following figure to answer the following questions. -Firm 1 and firm 2 are the sole producers in the industry.At price P2,the industry's total quantity supplied is

Refer to the accompanying set of graphs to answer the following questions. -Which graph would result in no firms entering or exiting the perfectly competitive market?

What should the firm do if there is no possible output where the price would at least be equal to average variable costs?

Assume that a firm's costs are split between variable costs and fixed costs.Once variable costs are covered

Refer to the accompanying table.A firm participating in a competitive market with these costs would always shut down if the price is

If Tamsin's Tank Tops is a perfectly competitive firm and is currently making positive economic profits of $1,000,

Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

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

When firms enter a market,the -run market supply curve shifts ,causing individual firms' profits to .

Refer to the following figure to answer the following questions. -Firm 1 and firm 2 are the sole producers in the industry.At price P₂,the industry's total quantity supplied is