Question 1

In a competitive market, price is taken as given by

Accepted Answer

A) both buyers and sellers. 
B) neither buyers nor sellers. 
C) buyers only. 
D) sellers only. 
E) the government. 
A) both buyers and sellers. 
B) neither buyers nor sellers. 
C) buyers only. 
D) sellers only. 
E) the government.

Question 2

To maximize profits, a competitive firm increases its output as long as

Accepted Answer

A) total revenue is greater than total cost. 
B) total revenue is less than total cost. 
C) marginal revenue is less than marginal cost. 
D) marginal revenue is greater than marginal cost. 
E) marginal revenue is positive. 
A) total revenue is greater than total cost. 
B) total revenue is less than total cost. 
C) marginal revenue is less than marginal cost. 
D) marginal revenue is greater than marginal cost. 
E) marginal revenue is positive.

Question 3

Exhibit 6-4  
-Refer to Exhibit 6-4. Suppose the firm has fixed costs of $30. What is the total cost if output is 5 units?

Accepted Answer

A) $80 
B) $104 
C) $30 
D) $50 
E) $62 
A) $80 
B) $104 
C) $30 
D) $50 
E) $62

Question 4

A firm that considers price as a given and chooses quantity of output accordingly is called a

Accepted Answer

A) profit-maximizer. 
B) quantity-setter. 
C) market-taker. 
D) monopoly. 
E) price-taker. 
A) profit-maximizer. 
B) quantity-setter. 
C) market-taker. 
D) monopoly. 
E) price-taker.

Question 5

If the market wage increases, marginal cost shifts ____ and market supply ____.

Accepted Answer

A) upward; decreases 
B) downward; decreases 
C) upward; increases 
D) downward; increases 
E) upward and then downward; remains unchanged 
A) upward; decreases 
B) downward; decreases 
C) upward; increases 
D) downward; increases 
E) upward and then downward; remains unchanged

Question 6

Due to the indivisibility of output,

Accepted Answer

A) market supply must be rougher than the individual firm's supply curve. 
B) market supply can be smoother than the individual firm's supply curve. 
C) an individual firm's supply curves cannot be summed. 
D) it is impossible to obtain a valid market supply curve. 
E) market supply is always equal to any individual firm's supply. 
A) market supply must be rougher than the individual firm's supply curve. 
B) market supply can be smoother than the individual firm's supply curve. 
C) an individual firm's supply curves cannot be summed. 
D) it is impossible to obtain a valid market supply curve. 
E) market supply is always equal to any individual firm's supply.

Question 7

The reason for increasing marginal cost is the diminishing marginal product of labor.

Accepted Answer

A) True 
 B)False

Question 8

A corporation differs from other forms of businesses because it

Accepted Answer

A) is required to own a seat on a stock exchange. 
B) has a lower debt ratio. 
C) has no tax liability. 
D) is characterized by limited profits. 
E) is owned by people who enjoy limited liability. 
A) is required to own a seat on a stock exchange. 
B) has a lower debt ratio. 
C) has no tax liability. 
D) is characterized by limited profits. 
E) is owned by people who enjoy limited liability.

Question 9

Exhibit 6-1  
-Refer to Exhibit 6-1. Diminishing returns to labor is illustrated by

Accepted Answer

A) increasing output. 
B) decreasing output. 
C) output increasing at a decreasing rate. 
D) output increasing at an increasing rate. 
E) increasing input. 
A) increasing output. 
B) decreasing output. 
C) output increasing at a decreasing rate. 
D) output increasing at an increasing rate. 
E) increasing input.

Question 10

What is the relationship between the slope of the total cost curve and marginal cost? Explain.

Accepted Answer

The slope of the total cost curve and ma

Question 11

Exhibit 6-4  
-For a competitive firm, if any level of production results in losses, the loss-minimizing output level is when

Accepted Answer

A) marginal product equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price equals marginal revenue. 
D) total revenue equals total cost. 
E) average revenue equals average cost. 
A) marginal product equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) price equals marginal revenue. 
D) total revenue equals total cost. 
E) average revenue equals average cost.

Question 12

The slope of the supply curve reflects a(n)

Accepted Answer

A) increasing variable cost. 
B) decreasing variable cost. 
C) increasing total cost. 
D) increasing marginal cost. 
E) decreasing marginal cost. 
A) increasing variable cost. 
B) decreasing variable cost. 
C) increasing total cost. 
D) increasing marginal cost. 
E) decreasing marginal cost.

Question 13

Which of the following does not affect producer surplus in the short run?

Accepted Answer

A) Supply shifts to the left. 
B) A price ceiling below equilibrium is imposed by government. 
C) Wages paid to labor increase. 
D) Demand shifts to the right. 
E) Fixed costs for the typical firm increase. 
A) Supply shifts to the left. 
B) A price ceiling below equilibrium is imposed by government. 
C) Wages paid to labor increase. 
D) Demand shifts to the right. 
E) Fixed costs for the typical firm increase.

Question 14

In economics, firms are assumed to

Accepted Answer

A) maximize output prices. 
B) minimize output prices. 
C) maximize profits. 
D) maximize consumer surplus. 
E) maximize customer satisfaction. 
A) maximize output prices. 
B) minimize output prices. 
C) maximize profits. 
D) maximize consumer surplus. 
E) maximize customer satisfaction.

Question 15

Exhibit 6-1  
-When total product is rising, marginal product

Accepted Answer

A) must be negative. 
B) must be zero. 
C) must be positive. 
D) can be either negative or positive. 
E) must be rising as well. 
A) must be negative. 
B) must be zero. 
C) must be positive. 
D) can be either negative or positive. 
E) must be rising as well.

Question 16

In the pumpkin-growing firm example in the text, land is a fixed factor because

Accepted Answer

A) it is a physical factor of production. 
B) the firm produces a single product. 
C) it cannot be varied during the season. 
D) it has no close substitutes. 
E) the firm is a price-taker. 
A) it is a physical factor of production. 
B) the firm produces a single product. 
C) it cannot be varied during the season. 
D) it has no close substitutes. 
E) the firm is a price-taker.

Question 17

The difference between producer surplus and economic profit is

Accepted Answer

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

Question 18

Exhibit 6-8  
-Producer surplus is the difference between the marginal cost of an item and the price received for it.

Accepted Answer

A) True 
 B)False

Question 19

The three types of businesses in the United States are

Accepted Answer

A) enterprises, partnerships, and corporations. 
B) partnerships, multinationals, and corporations. 
C) partnerships, firms, and sole proprietorships. 
D) corporations, households, and sole proprietorships. 
E) corporations, sole proprietorships, and partnerships. 
A) enterprises, partnerships, and corporations. 
B) partnerships, multinationals, and corporations. 
C) partnerships, firms, and sole proprietorships. 
D) corporations, households, and sole proprietorships. 
E) corporations, sole proprietorships, and partnerships.

Question 20

Total revenue always increases if price increases.

Accepted Answer

A) True 
 B)False

Exam 6: The Supply Curve and the Behavior of Firms

In a competitive market, price is taken as given by

To maximize profits, a competitive firm increases its output as long as

Exhibit 6-4 -Refer to Exhibit 6-4. Suppose the firm has fixed costs of $30. What is the total cost if output is 5 units?

A firm that considers price as a given and chooses quantity of output accordingly is called a

If the market wage increases, marginal cost shifts ____ and market supply ____.

Due to the indivisibility of output,

The reason for increasing marginal cost is the diminishing marginal product of labor.

A corporation differs from other forms of businesses because it

Exhibit 6-1 -Refer to Exhibit 6-1. Diminishing returns to labor is illustrated by

What is the relationship between the slope of the total cost curve and marginal cost? Explain.

Exhibit 6-4 -For a competitive firm, if any level of production results in losses, the loss-minimizing output level is when

The slope of the supply curve reflects a(n)

Which of the following does not affect producer surplus in the short run?

In economics, firms are assumed to

Exhibit 6-1 -When total product is rising, marginal product

In the pumpkin-growing firm example in the text, land is a fixed factor because

The difference between producer surplus and economic profit is

Exhibit 6-8 -Producer surplus is the difference between the marginal cost of an item and the price received for it.

The three types of businesses in the United States are

Total revenue always increases if price increases.

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

Filters

If the market wage increases, marginal cost shifts and market supply .