Question 1

Holding all else constant,a decrease in the market demand for a product in a competitive market would cause

Accepted Answer

A)  the average total cost (AT
C) curve of the firms to decrease. 
B)  an increase in the price a firm could charge for the product. 
C)  the marginal cost (M
C) curve of the firms to decrease. 
D)  the marginal revenue (MR)curve of the firms to shift downward. 
E)  an increase in profits for a firm. 
A)  the average total cost (AT
C) curve of the firms to decrease. 
B)  an increase in the price a firm could charge for the product. 
C)  the marginal cost (M
C) curve of the firms to decrease. 
D)  the marginal revenue (MR)curve of the firms to shift downward. 
E)  an increase in profits for a firm.

Question 2

A perfectly competitive industry's short-run supply curve is

Accepted Answer

A)  horizontal. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  the upward-sloping portion of the largest firm's marginal cost curve. 
E)  the horizontal summation of the supply curve for individual firms. 
A)  horizontal. 
B)  perfectly elastic. 
C)  perfectly inelastic. 
D)  the upward-sloping portion of the largest firm's marginal cost curve. 
E)  the horizontal summation of the supply curve for individual firms.

Question 3

Firms will always stay in the market in the short run 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) but not greater than their minimum average variable cost (AV
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) but not greater than their minimum average variable cost (AV
C) . 
E)  equal to their minimum average variable cost (AV
C) .

Question 4

A firm's willingness to supply its product in the short run is represented on a graph by the

Accepted Answer

A)  market supply curve. 
B)  entire marginal cost (M
C) curve. 
C)  marginal revenue (MR)curve. 
D)  part of the marginal cost (M
C) curve above minimum average total cost (AT
C) . 
E)  part of the marginal cost (M
C) curve above minimum average variable cost (AV
C) . 
A)  market supply curve. 
B)  entire marginal cost (M
C) curve. 
C)  marginal revenue (MR)curve. 
D)  part of the marginal cost (M
C) curve above minimum average total cost (AT
C) . 
E)  part of the marginal cost (M
C) curve above minimum average variable cost (AV
C) .

Question 5

Use the following scenario to answer the following questions:
Babak owns a sports practice facility called Boston Batting Cages in Boston,Massachusetts.During the first year of operation,Boston Batting Cages incurred many costs.In that year,Babak spent $5,000 on labor,$2,000 on maintenance,and $1,000 on electricity.Babak took out a loan to open his business,in which he would have earned $1,500,and his previous job,which he could get back at any time,paid him $50,000.
-If Boston Batting Cages received $80,000 in revenues,what were the economics profits?

Accepted Answer

A)  $20,500 
B)  $72,000 
C)  $51,500 
D)  $80,000 
E)  $50,000 
A)  $20,500 
B)  $72,000 
C)  $51,500 
D)  $80,000 
E)  $50,000

Question 6

If firms in a competitive market are incurring economic losses,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.

Question 7

Marginal revenue is the change in total

Accepted Answer

A)  cost when the firm produces additional units. 
B)  revenue when the firm spends more money. 
C)  revenue divided by the change in total cost. 
D)  revenue when the firm produces additional units. 
E)  cost divided by the change in total revenue. 
A)  cost when the firm produces additional units. 
B)  revenue when the firm spends more money. 
C)  revenue divided by the change in total cost. 
D)  revenue when the firm produces additional units. 
E)  cost divided by the change in total revenue.

Question 8

Firms will always suffer a loss only if the price they charge is

Accepted Answer

A)  less than their minimum average total cost (AT
C) . 
B)  equal to 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 total cost (AT
C) . 
A)  less than their minimum average total cost (AT
C) . 
B)  equal to 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 total cost (AT
C) .

Question 9

Firms in every market structure

Accepted Answer

A)  make long-run economic profits. 
B)  are in competition with many other firms. 
C)  leave the market as soon as they experience loss of profits. 
D)  will attempt to maximize profits. 
E)  face a horizontal demand curve. 
A)  make long-run economic profits. 
B)  are in competition with many other firms. 
C)  leave the market as soon as they experience loss of profits. 
D)  will attempt to maximize profits. 
E)  face a horizontal demand curve.

Question 10

A firm will shut down in the short run

Accepted Answer

A)  when price is below average variable costs at all levels of output. 
B)  when price is below average fixed costs at all levels of output. 
C)  when price is below average total costs at all levels of output. 
D)  when price is below marginal costs at all levels of output. 
E)  whenever the firm is losing money. 
A)  when price is below average variable costs at all levels of output. 
B)  when price is below average fixed costs at all levels of output. 
C)  when price is below average total costs at all levels of output. 
D)  when price is below marginal costs at all levels of output. 
E)  whenever the firm is losing money.

Question 11

When revenue is insufficient to cover cost,the firm

Accepted Answer

A)  will always shut down. 
B)  will always stay open. 
C)  gains a profit. 
D)  breaks even. 
E)  suffers a loss. 
A)  will always shut down. 
B)  will always stay open. 
C)  gains a profit. 
D)  breaks even. 
E)  suffers a loss.

Question 12

A firm's willingness to supply its product in the long run is represented on a graph by the

Accepted Answer

A)  market supply curve. 
B)  entire marginal cost (M
C) curve. 
C)  marginal revenue (MR)curve. 
D)  part of the marginal cost (M
C) curve above minimum average total cost (AT
C) . 
E)  part of the marginal cost (M
C) curve above minimum average variable cost (AV
C) . 
A)  market supply curve. 
B)  entire marginal cost (M
C) curve. 
C)  marginal revenue (MR)curve. 
D)  part of the marginal cost (M
C) curve above minimum average total cost (AT
C) . 
E)  part of the marginal cost (M
C) curve above minimum average variable cost (AV
C) .

Question 13

Profit per unit is the difference between

Accepted Answer

A)  revenue per unit and average total cost. 
B)  total revenue and average total cost. 
C)  marginal revenue and marginal cost. 
D)  total revenue and total cost. 
E)  revenue per unit and marginal cost. 
A)  revenue per unit and average total cost. 
B)  total revenue and average total cost. 
C)  marginal revenue and marginal cost. 
D)  total revenue and total cost. 
E)  revenue per unit and marginal cost.

Question 14

Refer to the accompanying set of graphs to answer the following questions.  
-Which graph would result in firms entering a perfectly competitive market in the long run?

Accepted Answer

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

Question 15

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 make zero economic profits 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 16

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 be suffering a loss but still be producing 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 17

Which of the following lists three main characteristics of a competitive market?

Accepted Answer

A)  many buyers and sellers,similar products,easy entry into the market 
B)  many buyers and few sellers,similar products,easy entry into the market 
C)  many buyers and sellers,differentiated products,easy entry into the market 
D)  many buyers and sellers,similar products,barriers to entry into the market 
E)  many buyers and few sellers,unique products,barriers to entry into the market 
A)  many buyers and sellers,similar products,easy entry into the market 
B)  many buyers and few sellers,similar products,easy entry into the market 
C)  many buyers and sellers,differentiated products,easy entry into the market 
D)  many buyers and sellers,similar products,barriers to entry into the market 
E)  many buyers and few sellers,unique products,barriers to entry into the market

Question 18

Use the following scenario to answer the following questions:
Babak owns a sports practice facility called Boston Batting Cages in Boston,Massachusetts.During the first year of operation,Boston Batting Cages incurred many costs.In that year,Babak spent $5,000 on labor,$2,000 on maintenance,and $1,000 on electricity.Babak took out a loan to open his business,in which he would have earned $1,500,and his previous job,which he could get back at any time,paid him $50,000.
-Boston Batting Cages incurred ________ in explicit costs.

Accepted Answer

A)  $9,500 
B)  $7,000 
C)  $51,500 
D)  $8,000 
E)  $50,000 
A)  $9,500 
B)  $7,000 
C)  $51,500 
D)  $8,000 
E)  $50,000

Question 19

Refer to the accompanying graph to answer the following questions.  
-If the firm is maximizing profits,profit is represented by the area

Accepted Answer

A)  B *C. 
B)  A* C. 
C)  (A - 
B) * C. 
D)  A * B. 
E)  (A +B )* C. 
A)  B *C. 
B)  A* C. 
C)  (A - 
B) * C. 
D)  A * B. 
E)  (A +B )* C.

Question 20

Refer to the accompanying graph to answer the following questions.  
-If the firm is maximizing profits,total cost is represented by the area

Accepted Answer

A)  B * C. 
B)  A * C. 
C)  (A - 
B) * C. 
D)  A *B. 
E)  (A + 
B) *C. 
A)  B * C. 
B)  A * C. 
C)  (A - 
B) * C. 
D)  A *B. 
E)  (A + 
B) *C.

Exam 9: Firms in a Competitive Market

Holding all else constant,a decrease in the market demand for a product in a competitive market would cause

A perfectly competitive industry's short-run supply curve is

Firms will always stay in the market in the short run if the price they charge is

A firm's willingness to supply its product in the short run is represented on a graph by the

If firms in a competitive market are incurring economic losses,the long-run market supply curve

Marginal revenue is the change in total

Firms will always suffer a loss only if the price they charge is

Firms in every market structure

A firm will shut down in the short run

When revenue is insufficient to cover cost,the firm

A firm's willingness to supply its product in the long run is represented on a graph by the

Profit per unit is the difference between

Refer to the accompanying set of graphs to answer the following questions. -Which graph would result in firms entering a perfectly competitive market in the long run?

Which of the following lists three main characteristics of a competitive market?

Refer to the accompanying graph to answer the following questions. -If the firm is maximizing profits,profit is represented by the area

Refer to the accompanying graph to answer the following questions. -If the firm is maximizing profits,total cost is represented by the area

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

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