Question 1

One In the News article "IBM Forced to Halt PCjr Output Next Month" indicates all of the following except:

Accepted Answer

A)  Competitive pressure forced IBM to discontinue a particular PC model 
B)  IBM pushed the price down to no avail 
C)  IBM attempted to price below average total cost 
D)  IBM launched the product with a $40 million dollar advertising campaign 
A)  Competitive pressure forced IBM to discontinue a particular PC model 
B)  IBM pushed the price down to no avail 
C)  IBM attempted to price below average total cost 
D)  IBM launched the product with a $40 million dollar advertising campaign

Question 2

The price consumers pay for a product in a perfectly competitive market is an inaccurate reflection of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 3

Refer to Figure 23.5 for a perfectly competitive firm. Given the current market price of $200, we expect to see

Accepted Answer

A)  Firms exit from the industry, driving up the market price. 
B)  Firms exit from the industry, driving down the market price. 
C)  No change in the number of firms in the industry and no change in the market price. 
D)  Firms enter the industry, driving down the market price. 
A)  Firms exit from the industry, driving up the market price. 
B)  Firms exit from the industry, driving down the market price. 
C)  No change in the number of firms in the industry and no change in the market price. 
D)  Firms enter the industry, driving down the market price.

Question 4

Perfectly competitive markets are responsive to the demand of consumers.

Accepted Answer

A) True 
 B)False

Question 5

High profits in a particular industry indicate that consumers want more of that industry's goods.

Accepted Answer

A) True 
 B)False

Question 6

To determine the market supply, the quantities

Accepted Answer

A)  Demanded at each price by each demander are added together. 
B)  Supplied at each price by each supplier are added together. 
C)  Demanded at each price by each demander and supplied at each price by each supplier are added together. 
D)  Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier. 
A)  Demanded at each price by each demander are added together. 
B)  Supplied at each price by each supplier are added together. 
C)  Demanded at each price by each demander and supplied at each price by each supplier are added together. 
D)  Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier.

Question 7

For a competitive market in the long run,

Accepted Answer

A)  Economic losses induce firms to shut down. 
B)  Economic profits induce firms to enter until profits are normal. 
C)  Accounting profit is zero. 
D)  Economic profit is positive. 
A)  Economic losses induce firms to shut down. 
B)  Economic profits induce firms to enter until profits are normal. 
C)  Accounting profit is zero. 
D)  Economic profit is positive.

Question 8

Refer to Figure 23.6 for a perfectly competitive firm. Given the current market price, we expect to see

Accepted Answer

A)  Firms exit from the industry, driving up the market price. 
B)  Firms exit from the industry, driving down the market price. 
C)  No change in the number of firms in the industry and no change in the market price. 
D)  Firms enter the industry, driving down the market price. 
A)  Firms exit from the industry, driving up the market price. 
B)  Firms exit from the industry, driving down the market price. 
C)  No change in the number of firms in the industry and no change in the market price. 
D)  Firms enter the industry, driving down the market price.

Question 9

In perfectly competitive markets, economic losses are the signal for firms to exit from the industry.

Accepted Answer

A) True 
 B)False

Question 10

Explain why economic profits in all perfectly competitive markets will tend toward zero in the long run.

Accepted Answer

In markets experiencing economic profits

Question 11

In a perfectly competitive market in the long run, which of the following is not correct?

Accepted Answer

A)  Firms are attempting to maximize profit. 
B)  Economic profits are zero. 
C)  There are no better uses for the firm's resources. 
D)  Firms are maximizing total revenue. 
A)  Firms are attempting to maximize profit. 
B)  Economic profits are zero. 
C)  There are no better uses for the firm's resources. 
D)  Firms are maximizing total revenue.

Question 12

When firms in a competitive market are experiencing zero economic profits, this is an indication that

Accepted Answer

A)  They should be producing a different product. 
B)  There is currently no better way to use society's scarce resources. 
C)  They will eventually go bankrupt. 
D)  Accounting losses are being experienced by these firms. 
A)  They should be producing a different product. 
B)  There is currently no better way to use society's scarce resources. 
C)  They will eventually go bankrupt. 
D)  Accounting losses are being experienced by these firms.

Question 13

Sellers in a perfectly competitive market are powerless to affect the market price of their product.

Accepted Answer

A) True 
 B)False

Question 14

In a competitive market, if the market price is equal to the minimum point of the firm's ATC curve, the firm may seek to earn economic profits by

Accepted Answer

A)  Producing at the rate of output where price equals demand. 
B)  Decreasing production costs through technological improvements. 
C)  Decreasing price. 
D)  Increasing price. 
A)  Producing at the rate of output where price equals demand. 
B)  Decreasing production costs through technological improvements. 
C)  Decreasing price. 
D)  Increasing price.

Question 15

Diagram a model of a perfectly competitive market and a separate model of a firm experiencing economic profits. Explain and illustrate on your models the changes that take place in the long run. Be sure to explain why any changes take place.

Accepted Answer

Additional firms, in pursuit of higher p

Question 16

Profit per unit is maximized when the firm produces the output where

Accepted Answer

A)  The ATC is minimized. 
B)  MC equals MR. 
C)  The MC is minimized. 
D)  Demand equals MC. 
A)  The ATC is minimized. 
B)  MC equals MR. 
C)  The MC is minimized. 
D)  Demand equals MC.

Question 17

Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 18

When resources are earning zero economic profits for a firm, the resources could earn more in their next best alternative use.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is characteristic of a perfectly competitive market?

Accepted Answer

A)  Long-run economic profit. 
B)  High barriers to entry. 
C)  Identical products. 
D)  A small number of firms. 
A)  Long-run economic profit. 
B)  High barriers to entry. 
C)  Identical products. 
D)  A small number of firms.

Question 20

Explain why technological progress will, at best, only temporarily allow a perfectly competitive firm to earn an economic profit.

Accepted Answer

Technological progress shifts a firm's M

Exam 9: Aggregate Demand

One In the News article "IBM Forced to Halt PCjr Output Next Month" indicates all of the following except:

The price consumers pay for a product in a perfectly competitive market is an inaccurate reflection of opportunity cost.

Refer to Figure 23.5 for a perfectly competitive firm. Given the current market price of $200, we expect to see

Perfectly competitive markets are responsive to the demand of consumers.

High profits in a particular industry indicate that consumers want more of that industry's goods.

To determine the market supply, the quantities

For a competitive market in the long run,

Refer to Figure 23.6 for a perfectly competitive firm. Given the current market price, we expect to see

In perfectly competitive markets, economic losses are the signal for firms to exit from the industry.

Explain why economic profits in all perfectly competitive markets will tend toward zero in the long run.

In a perfectly competitive market in the long run, which of the following is not correct?

When firms in a competitive market are experiencing zero economic profits, this is an indication that

Sellers in a perfectly competitive market are powerless to affect the market price of their product.

In a competitive market, if the market price is equal to the minimum point of the firm's ATC curve, the firm may seek to earn economic profits by

Diagram a model of a perfectly competitive market and a separate model of a firm experiencing economic profits. Explain and illustrate on your models the changes that take place in the long run. Be sure to explain why any changes take place.

Profit per unit is maximized when the firm produces the output where

Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point

When resources are earning zero economic profits for a firm, the resources could earn more in their next best alternative use.

Which of the following is characteristic of a perfectly competitive market?

Explain why technological progress will, at best, only temporarily allow a perfectly competitive firm to earn an economic profit.

Economics: the Core Issues

The Us Economy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

International Trade

International Finance

Global Poverty Glossary Index Reference Tables

International Economics

International Economics

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