Question 1

When marginal cost is greater than marginal revenue, then a profit-maximizing firm must

Accepted Answer

A) increase output. 
B) hold output constant. 
C) decrease output. 
D) stop production. 
E) reduce the price it charges. 
A) increase output. 
B) hold output constant. 
C) decrease output. 
D) stop production. 
E) reduce the price it charges.

Question 2

A firm is one of the terms for a business organization.

Accepted Answer

A) True 
 B)False

Question 3

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

Accepted Answer

In a competitive market, there are many

Question 4

Draw a graph of total revenue and total cost for a competitive firm that is maximizing profit but just breaking even. Mark the profit-maximizing output level.

Accepted Answer

The answer of Draw a graph of total revenue and...

Question 5

Other things being equal, when the market price increases, the producer surplus

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) increases and then decreases. 
E) cannot be determined given the available information. 
A) increases. 
B) decreases. 
C) remains the same. 
D) increases and then decreases. 
E) cannot be determined given the available information.

Question 6

Which of the following formulas is not a valid characterization of producer surplus?

Accepted Answer

A) Total revenue - the sum of marginal costs 
B) Profit + fixed costs 
C) Profit - marginal costs 
D) Total revenue - (total costs- fixed costs) 
E) (P -MC1) + (P - MC2) + (P -MC3) + J + (P -MCQ), where Q = quantity produced and sold 
A) Total revenue - the sum of marginal costs 
B) Profit + fixed costs 
C) Profit - marginal costs 
D) Total revenue - (total costs- fixed costs) 
E) (P -MC1) + (P - MC2) + (P -MC3) + J + (P -MCQ), where Q = quantity produced and sold

Question 7

Exhibit 6-7  
-If supply is perfectly elastic,

Accepted Answer

A) producer surplus is equal to zero. 
B) an increase in demand decreases producer surplus. 
C) an upward shift of supply decreases producer surplus. 
D) a downward shift of supply decreases producer surplus. 
E) no output is produced. 
A) producer surplus is equal to zero. 
B) an increase in demand decreases producer surplus. 
C) an upward shift of supply decreases producer surplus. 
D) a downward shift of supply decreases producer surplus. 
E) no output is produced.

Question 8

Production in the short run requires

Accepted Answer

A) no factor of production. 
B) both fixed and variable factors of production. 
C) variable factors of production only. 
D) fixed factors of production only. 
E) the difference between fixed and variable factors of production. 
A) no factor of production. 
B) both fixed and variable factors of production. 
C) variable factors of production only. 
D) fixed factors of production only. 
E) the difference between fixed and variable factors of production.

Question 9

Which of the following statements concerning the slope of market supply is false?

Accepted Answer

A) Market supply usually gets steeper as output increases. 
B) The slope of a market supply curve depends on the slopes of individual marginal cost curves. 
C) The steeper marginal cost curves are for individual firms, the steeper market supply will be. 
D) The slope of market supply is somewhat dependent on the shape of the market demand curve. 
E) Individual marginal cost curves have positive slopes, and so does market supply. 
A) Market supply usually gets steeper as output increases. 
B) The slope of a market supply curve depends on the slopes of individual marginal cost curves. 
C) The steeper marginal cost curves are for individual firms, the steeper market supply will be. 
D) The slope of market supply is somewhat dependent on the shape of the market demand curve. 
E) Individual marginal cost curves have positive slopes, and so does market supply.

Question 10

Exhibit 6-6  
-Refer to Exhibit 6-6. Let market price be $15 and fixed costs be $5. Calculate the profit at the profit-maximizing output level.

Accepted Answer

$23
The profit-maximizing output level i

Question 11

If total revenue is less than total costs, then

Accepted Answer

A) economic profits are positive. 
B) economic profits are zero. 
C) economic profits are negative. 
D) a firm breaks even. 
E) profits can be positive or negative, depending on other factors. 
A) economic profits are positive. 
B) economic profits are zero. 
C) economic profits are negative. 
D) a firm breaks even. 
E) profits can be positive or negative, depending on other factors.

Question 12

In contrast with a firm in a competitive market, a monopoly is able to control

Accepted Answer

A) input costs. 
B) price. 
C) profits. 
D) demand. 
E) all aspects of its operation. 
A) input costs. 
B) price. 
C) profits. 
D) demand. 
E) all aspects of its operation.

Question 13

A graph showing how much total output results for any given amount of input is called a(n)

Accepted Answer

A) labor function. 
B) production function. 
C) marginal product curve. 
D) variable cost curve. 
E) earnings schedule. 
A) labor function. 
B) production function. 
C) marginal product curve. 
D) variable cost curve. 
E) earnings schedule.

Question 14

Exhibit 6-6  
-Refer to Exhibit 6-6. Let market price be $10 and fixed costs be $13. Calculate the difference between revenue and total costs at the output the profit-maximizing firm will produce.

Accepted Answer

-$2
The loss-minimizing output

Question 15

Other things being equal, an increase in marginal cost reduces producer surplus.

Accepted Answer

A) True 
 B)False

Question 16

What is the profit-maximization rule? Explain why profit is maximized when the rule is met.

Accepted Answer

Setting output so that price equals marg

Question 17

The table below shows the total costs of producing cherries on a small plot of land.

Accepted Answer

The answer of The table below shows the total costs...

Question 18

When price and quantity sold by a firm are multiplied, the result is called

Accepted Answer

A) marginal cost. 
B) total costs. 
C) marginal revenue. 
D) average revenue. 
E) total revenue. 
A) marginal cost. 
B) total costs. 
C) marginal revenue. 
D) average revenue. 
E) total revenue.

Question 19

The reason for an upward-sloping supply curve is increasing marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A) Price-taking behavior by competitive firms does not have an analogy in the theory of the consumer. 
B) The more competitive a market, the more prices are expected to vary between firms in the market. 
C) Buyers and sellers individually set prices. 
D) A competitive firm is a price-taker. 
E) A competitive firm is a price-maker. 
A) Price-taking behavior by competitive firms does not have an analogy in the theory of the consumer. 
B) The more competitive a market, the more prices are expected to vary between firms in the market. 
C) Buyers and sellers individually set prices. 
D) A competitive firm is a price-taker. 
E) A competitive firm is a price-maker.

Exam 6: The Supply Curve and the Behavior of Firms

When marginal cost is greater than marginal revenue, then a profit-maximizing firm must

A firm is one of the terms for a business organization.

What is the assumption of a competitive market and what are the implications of this assumption? Provide one example of this type of market.

Draw a graph of total revenue and total cost for a competitive firm that is maximizing profit but just breaking even. Mark the profit-maximizing output level.

Other things being equal, when the market price increases, the producer surplus

Which of the following formulas is not a valid characterization of producer surplus?

Exhibit 6-7 -If supply is perfectly elastic,

Production in the short run requires

Which of the following statements concerning the slope of market supply is false?

Exhibit 6-6 -Refer to Exhibit 6-6. Let market price be $15 and fixed costs be $5. Calculate the profit at the profit-maximizing output level.

If total revenue is less than total costs, then

In contrast with a firm in a competitive market, a monopoly is able to control

A graph showing how much total output results for any given amount of input is called a(n)

Exhibit 6-6 -Refer to Exhibit 6-6. Let market price be $10 and fixed costs be $13. Calculate the difference between revenue and total costs at the output the profit-maximizing firm will produce.

Other things being equal, an increase in marginal cost reduces producer surplus.

What is the profit-maximization rule? Explain why profit is maximized when the rule is met.

The table below shows the total costs of producing cherries on a small plot of land.

When price and quantity sold by a firm are multiplied, the result is called

The reason for an upward-sloping supply curve is increasing marginal cost.

Which of the following statements is true?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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