Question 1

Profit maximization occurs when

Accepted Answer

A)  a firm expands output until marginal revenue is exceeded by marginal cost. 
B)  a firm expands output until marginal revenue is equal to marginal cost. 
C)  the price in the market is equal to the firm's marginal revenue. 
D)  total costs equal total revenue. 
E)  a firm sets the price at a point above average total cost. 
A)  a firm expands output until marginal revenue is exceeded by marginal cost. 
B)  a firm expands output until marginal revenue is equal to marginal cost. 
C)  the price in the market is equal to the firm's marginal revenue. 
D)  total costs equal total revenue. 
E)  a firm sets the price at a point above average total cost.

Question 2

Holding all else constant,an increase in the price of hot dogs would cause the

Accepted Answer

A)  marginal revenue (MR)curve in the market for hot dog buns to increase. 
B)  marginal revenue (MR)curve in the market for hot dogs to decrease. 
C)  average total cost (AT
C) curve in the market for hot dog buns to increase. 
D)  profits in the market for hot dog buns to increase. 
E)  marginal revenue (MR)curve in the market for hot dog buns to decrease. 
A)  marginal revenue (MR)curve in the market for hot dog buns to increase. 
B)  marginal revenue (MR)curve in the market for hot dogs to decrease. 
C)  average total cost (AT
C) curve in the market for hot dog buns to increase. 
D)  profits in the market for hot dog buns to increase. 
E)  marginal revenue (MR)curve in the market for hot dog buns to decrease.

Question 3

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 suffer a loss but still produce 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 4

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 making positive profits 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 5

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

Accepted Answer

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

Question 6

One difference between implicit costs and explicit costs is that

Accepted Answer

A)  implicit costs are included in accounting profits,whereas explicit costs are not. 
B)  implicit costs are included in economic profits,whereas explicit costs are not. 
C)  explicit costs are included in accounting profits,whereas implicit costs are not. 
D)  explicit costs are included in economic profits,whereas implicit costs are not. 
E)  explicit costs involve opportunity costs,whereas implicit costs involve a monetary transaction. 
A)  implicit costs are included in accounting profits,whereas explicit costs are not. 
B)  implicit costs are included in economic profits,whereas explicit costs are not. 
C)  explicit costs are included in accounting profits,whereas implicit costs are not. 
D)  explicit costs are included in economic profits,whereas implicit costs are not. 
E)  explicit costs involve opportunity costs,whereas implicit costs involve a monetary transaction.

Question 7

Refer to the accompanying figure.Point ________ corresponds to the profit-maximizing quantity that a competitive firm would produce.

Accepted Answer

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

Question 8

A firm will shut down in the long-run if the

Accepted Answer

A)  price is above the minimum average total cost (AT
C) . 
B)  price is equal to the minimum average total cost (AT
C) . 
C)  price is anywhere above the minimum average variable cost (AV
C) . 
D)  price is anywhere below the minimum average total cost (AT
C) . 
E)  firm is making zero economic profits. 
A)  price is above the minimum average total cost (AT
C) . 
B)  price is equal to the minimum average total cost (AT
C) . 
C)  price is anywhere above the minimum average variable cost (AV
C) . 
D)  price is anywhere below the minimum average total cost (AT
C) . 
E)  firm is making zero economic profits.

Question 9

One reason why the long-run supply curve may slope upward in a competitive market is that

Accepted Answer

A)  firms can exit the industry easily. 
B)  firms can enter the industry easily. 
C)  there are many buyers and many sellers. 
D)  some resources necessary to produce the product may be available only in limited supplies. 
E)  some resources necessary to produce the product are not limited. 
A)  firms can exit the industry easily. 
B)  firms can enter the industry easily. 
C)  there are many buyers and many sellers. 
D)  some resources necessary to produce the product may be available only in limited supplies. 
E)  some resources necessary to produce the product are not limited.

Question 10

At what point does the profit-maximizing perfectly competitive firm produce?

Accepted Answer

A)  where total revenue minus marginal revenue is at a maximum 
B)  where marginal revenue minus marginal cost is at a minimum 
C)  where total revenue minus total cost is at a minimum 
D)  where marginal revenue minus marginal cost is at a maximum 
E)  where marginal revenue is equal to marginal cost 
A)  where total revenue minus marginal revenue is at a maximum 
B)  where marginal revenue minus marginal cost is at a minimum 
C)  where total revenue minus total cost is at a minimum 
D)  where marginal revenue minus marginal cost is at a maximum 
E)  where marginal revenue is equal to marginal cost

Question 11

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows

Accepted Answer

A)  sellers in the market to have influence over the market price. 
B)  buyers in the market to have influence over the market price. 
C)  sellers in the market to have influence over the market quantity. 
D)  buyers in the market to have influence over the market quantity. 
E)  the price and quantity in the market to be determined by market forces. 
A)  sellers in the market to have influence over the market price. 
B)  buyers in the market to have influence over the market price. 
C)  sellers in the market to have influence over the market quantity. 
D)  buyers in the market to have influence over the market quantity. 
E)  the price and quantity in the market to be determined by market forces.

Question 12

Signals

Accepted Answer

A)  have no importance in economics. 
B)  convey information about the profitability of various markets. 
C)  are only a characteristic of competitive markets. 
D)  lead to less competition in markets. 
E)  result in less information in a market. 
A)  have no importance in economics. 
B)  convey information about the profitability of various markets. 
C)  are only a characteristic of competitive markets. 
D)  lead to less competition in markets. 
E)  result in less information in a market.

Question 13

If a perfectly competitive firm is maximizing profits in the short run,what does this mean?

Accepted Answer

A)  The profit must be positive. 
B)  The profit equals zero. 
C)  The profit must be zero or positive. 
D)  The profit can be negative,zero,or positive. 
E)  The profit must be negative. 
A)  The profit must be positive. 
B)  The profit equals zero. 
C)  The profit must be zero or positive. 
D)  The profit can be negative,zero,or positive. 
E)  The profit must be negative.

Question 14

At the current level of output,the following data exists: Price = $20
Marginal cost = $6
Average variable cost = $10
Average total cost=$13
What must be true at this level of output?

Accepted Answer

A)  The firm should lower the price. 
B)  The firm should stay at the same level of output. 
C)  The firm should shut down. 
D)  The firm should increase output. 
E)  The firm should decrease output. 
A)  The firm should lower the price. 
B)  The firm should stay at the same level of output. 
C)  The firm should shut down. 
D)  The firm should increase output. 
E)  The firm should decrease output.

Question 15

If Dorothy's Doughnuts is a perfectly competitive firm and is currently incurring economic losses of $500,

Accepted Answer

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

Question 16

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 implicit 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 17

Each firm in a perfectly competitive industry

Accepted Answer

A)  is a price taker. 
B)  is a price maker. 
C)  faces low average total costs. 
D)  is relatively large. 
E)  is producing a differentiated product. 
A)  is a price taker. 
B)  is a price maker. 
C)  faces low average total costs. 
D)  is relatively large. 
E)  is producing a differentiated product.

Question 18

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

Question 19

At current production levels,the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15.The firm should

Accepted Answer

A)  cut back on production. 
B)  stop production all together. 
C)  produce more. 
D)  continue producing at current levels. 
E)  raise its prices. 
A)  cut back on production. 
B)  stop production all together. 
C)  produce more. 
D)  continue producing at current levels. 
E)  raise its prices.

Question 20

As a firm attempts to expand production,it must ________ the wage it pays to attract additional help.This leads to ________ costs,making the long-run supply curve slope ________.

Accepted Answer

A)  increase; higher; upward 
B)  increase; higher; downward 
C)  increase; lower; upward 
D)  decrease; lower; upward 
E)  decrease; higher; upward 
A)  increase; higher; upward 
B)  increase; higher; downward 
C)  increase; lower; upward 
D)  decrease; lower; upward 
E)  decrease; higher; upward

Exam 9: Firms in a Competitive Market

Profit maximization occurs when

Holding all else constant,an increase in the price of hot dogs would cause the

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

One difference between implicit costs and explicit costs is that

Refer to the accompanying figure.Point ________ corresponds to the profit-maximizing quantity that a competitive firm would produce.

A firm will shut down in the long-run if the

One reason why the long-run supply curve may slope upward in a competitive market is that

At what point does the profit-maximizing perfectly competitive firm produce?

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows

Signals

If a perfectly competitive firm is maximizing profits in the short run,what does this mean?

At the current level of output,the following data exists: Price = $20 Marginal cost = $6 Average variable cost = $10 Average total cost=$13 What must be true at this level of output?

If Dorothy's Doughnuts is a perfectly competitive firm and is currently incurring economic losses of $500,

Each firm in a perfectly competitive industry

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

At current production levels,the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15.The firm should

As a firm attempts to expand production,it must ________ the wage it pays to attract additional help.This leads to ________ costs,making the long-run supply curve slope ________.

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

As a firm attempts to expand production,it must the wage it pays to attract additional help.This leads to costs,making the long-run supply curve slope .