Question 1

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

Accepted Answer

A)  Thelma must reduce output 
B)  the price Thelma can charge falls 
C)  the price Thelma can charge rises 
D)  the price Thelma can charge is unaffected 
E)  Thelma's profits must fall 
A)  Thelma must reduce output 
B)  the price Thelma can charge falls 
C)  the price Thelma can charge rises 
D)  the price Thelma can charge is unaffected 
E)  Thelma's profits must fall

Question 2

A firm that is a price taker can

Accepted Answer

A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product. 
A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product.

Question 3

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Accepted Answer

A)  MC curves above AVC. 
B)  AVC curves above marginal revenue. 
C)  MC curves above ATC. 
D)  MC curves between AVC and ATC. 
A)  MC curves above AVC. 
B)  AVC curves above marginal revenue. 
C)  MC curves above ATC. 
D)  MC curves between AVC and ATC.

Question 4

Competitive price-taker firms respond to changing market conditions by varying their

Accepted Answer

A)  price 
B)  output 
C)  market share 
D)  information 
E)  advertising campaigns 
A)  price 
B)  output 
C)  market share 
D)  information 
E)  advertising campaigns

Question 5

The motivating force behind an increase in supply in a long-run adjustment to equilibrium is

Accepted Answer

A)  lower prices. 
B)  economic profits that are present in the short run. 
C)  higher profit expectations among owners of firms in the industry, triggered by increased prices. 
D)  normal profits witnessed by individuals outside the industry that trigger entry. 
E)  the decreases in average cost that can be obtained through economies of scale. 
A)  lower prices. 
B)  economic profits that are present in the short run. 
C)  higher profit expectations among owners of firms in the industry, triggered by increased prices. 
D)  normal profits witnessed by individuals outside the industry that trigger entry. 
E)  the decreases in average cost that can be obtained through economies of scale.

Question 6

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

Accepted Answer

A)  reflect a waste of society's scarce resources and reflect inefficient production. 
B)  signal owners of factors of production to move their resources out of that industry. 
C)  imply that accounting costs are greater than economic costs in this industry. 
D)  signal owners of factors of production to move resources into this industry. 
A)  reflect a waste of society's scarce resources and reflect inefficient production. 
B)  signal owners of factors of production to move their resources out of that industry. 
C)  imply that accounting costs are greater than economic costs in this industry. 
D)  signal owners of factors of production to move resources into this industry.

Question 7

If a firm competing in a price-taker market seeks to maximize profit, the firm should

Accepted Answer

A)  increase output whenever marginal cost is less than average total cost. 
B)  increase output whenever marginal revenue is less than marginal cost. 
C)  choose the output where per-unit profit is greatest. 
D)  increase output whenever price exceeds marginal cost. 
A)  increase output whenever marginal cost is less than average total cost. 
B)  increase output whenever marginal revenue is less than marginal cost. 
C)  choose the output where per-unit profit is greatest. 
D)  increase output whenever price exceeds marginal cost.

Question 8

Use the figure to answer the following question(s).
Figure 9-4  
-If the market price of the product in Figure 9-4 rose to $8, indicate the firm's profit-maximizing output and total revenue.

Accepted Answer

A)  output, 5 million; total revenue, $30 million 
B)  output, 5 million; total revenue, $40 million 
C)  output, 6 million; total revenue, $10 million (approx.) 
D)  output, 6 million; total revenue, $48 million 
A)  output, 5 million; total revenue, $30 million 
B)  output, 5 million; total revenue, $40 million 
C)  output, 6 million; total revenue, $10 million (approx.) 
D)  output, 6 million; total revenue, $48 million

Question 9

Use the figure to answer the following question(s).
Figure 9-5  
-The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?

Accepted Answer

A)  output, 3; maximum profit, $3 loss 
B)  output, 5; maximum profit, zero 
C)  output, 5; maximum profit, $5 
D)  output, 6; maximum profit, $6 
A)  output, 3; maximum profit, $3 loss 
B)  output, 5; maximum profit, zero 
C)  output, 5; maximum profit, $5 
D)  output, 6; maximum profit, $6

Question 10

Firms will be much more willing to consent to significant wage increases when

Accepted Answer

A)  right-to-work laws are present. 
B)  the demand for the final product is weak. 
C)  the firm has low product inventory. 
D)  the demand for the final product is elastic. 
A)  right-to-work laws are present. 
B)  the demand for the final product is weak. 
C)  the firm has low product inventory. 
D)  the demand for the final product is elastic.

Question 11

The marginal revenue of a price taker is

Accepted Answer

A)  equal to price. 
B)  less than price. 
C)  more than price. 
D)  unrelated to price. 
A)  equal to price. 
B)  less than price. 
C)  more than price. 
D)  unrelated to price.

Question 12

The dynamic process of competition

Accepted Answer

A)  provides profit-seeking sellers with little incentive to heed consumer preferences. 
B)  was shown by Adam Smith to be a major source of economic inefficiency. 
C)  provides consumers with alternative suppliers and thus a mechanism with which they can discipline sellers. 
D)  will permit business decision makers to earn long-run economic profit unless they are regulated by government officials. 
A)  provides profit-seeking sellers with little incentive to heed consumer preferences. 
B)  was shown by Adam Smith to be a major source of economic inefficiency. 
C)  provides consumers with alternative suppliers and thus a mechanism with which they can discipline sellers. 
D)  will permit business decision makers to earn long-run economic profit unless they are regulated by government officials.

Question 13

A price-taker firm will tend to expand its output so long as its

Accepted Answer

A)  marginal revenue is positive. 
B)  marginal revenue is greater than the market price. 
C)  marginal revenue is less than the market price. 
D)  marginal cost is less than the market price. 
A)  marginal revenue is positive. 
B)  marginal revenue is greater than the market price. 
C)  marginal revenue is less than the market price. 
D)  marginal cost is less than the market price.

Question 14

In a competitive price-taker market, the actions of any single buyer or seller will

Accepted Answer

A)  have a negligible impact on the market price. 
B)  have little effect on overall production but will ultimately change final product price. 
C)  cause a noticeable change in overall production and a change in final product price. 
D)  adversely affect the profitability of more than one firm in the market. 
A)  have a negligible impact on the market price. 
B)  have little effect on overall production but will ultimately change final product price. 
C)  cause a noticeable change in overall production and a change in final product price. 
D)  adversely affect the profitability of more than one firm in the market.

Question 15

A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now

Accepted Answer

A)  greater than 3,000 and profit decreases 
B)  less than 3,000 and profit decreases 
C)  greater than 3,000 and profit is unchanged 
D)  equal to 3,000 and profit decreases 
E)  equal to 3,000 and profit increases 
A)  greater than 3,000 and profit decreases 
B)  less than 3,000 and profit decreases 
C)  greater than 3,000 and profit is unchanged 
D)  equal to 3,000 and profit decreases 
E)  equal to 3,000 and profit increases

Question 16

The demand for unionized labor will generally be more elastic, and it will be more difficult for the union to achieve above-equilibrium wages when

Accepted Answer

A)  there are no close substitutes for the unionized workers. 
B)  the domestic producers of the good produced by the unionized workers face weak competition from foreign suppliers of the good. 
C)  the cost of employing the unionized workers is a large part of the total cost of the product that they produce. 
D)  the demand for the product produced by the unionized workers is highly inelastic. 
A)  there are no close substitutes for the unionized workers. 
B)  the domestic producers of the good produced by the unionized workers face weak competition from foreign suppliers of the good. 
C)  the cost of employing the unionized workers is a large part of the total cost of the product that they produce. 
D)  the demand for the product produced by the unionized workers is highly inelastic.

Question 17

Use the figure to answer the following question(s).
Figure 9-8  
-At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

Accepted Answer

A)  total revenue, $45; total cost, $37 (approx.) 
B)  total revenue, $45; total cost, $45 
C)  total revenue, $60; total cost, $45 
D)  total revenue, $80; total cost, $65 (approx.) 
A)  total revenue, $45; total cost, $37 (approx.) 
B)  total revenue, $45; total cost, $45 
C)  total revenue, $60; total cost, $45 
D)  total revenue, $80; total cost, $65 (approx.)

Question 18

Since the demand for a narrowly defined product class (Fords, for example) is more elastic than the demand for a broadly defined product class (all automobiles), a union will be better able to raise the wages of its members without causing a reduction in their employment when

Accepted Answer

A)  it can organize an entire industry, rather than just selective firms within the industry. 
B)  it concentrates its organizational efforts on a single firm, ignoring the rest of the industry. 
C)  the demand for the product is highly elastic. 
D)  there are many good substitutes for union labor. 
A)  it can organize an entire industry, rather than just selective firms within the industry. 
B)  it concentrates its organizational efforts on a single firm, ignoring the rest of the industry. 
C)  the demand for the product is highly elastic. 
D)  there are many good substitutes for union labor.

Question 19

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

Accepted Answer

If a firm cannot cover its variable cost

Question 20

In a competitive market, profit can be considered a reward to businesses that

Accepted Answer

A)  produce a good that consumers value more highly than its component resources. 
B)  reduce the value of resources used as inputs in production. 
C)  prohibit rival firms from entering the market and competing. 
D)  control costs, rather than following the wishes of consumers when deciding what products to produce. 
A)  produce a good that consumers value more highly than its component resources. 
B)  reduce the value of resources used as inputs in production. 
C)  prohibit rival firms from entering the market and competing. 
D)  control costs, rather than following the wishes of consumers when deciding what products to produce.

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

A firm that is a price taker can

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Competitive price-taker firms respond to changing market conditions by varying their

The motivating force behind an increase in supply in a long-run adjustment to equilibrium is

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

If a firm competing in a price-taker market seeks to maximize profit, the firm should

Use the figure to answer the following question(s). Figure 9-4 -If the market price of the product in Figure 9-4 rose to $8, indicate the firm's profit-maximizing output and total revenue.

Use the figure to answer the following question(s). Figure 9-5 -The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?

Firms will be much more willing to consent to significant wage increases when

The marginal revenue of a price taker is

The dynamic process of competition

A price-taker firm will tend to expand its output so long as its

In a competitive price-taker market, the actions of any single buyer or seller will

A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now

The demand for unionized labor will generally be more elastic, and it will be more difficult for the union to achieve above-equilibrium wages when

Use the figure to answer the following question(s). Figure 9-8 -At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

Since the demand for a narrowly defined product class (Fords, for example) is more elastic than the demand for a broadly defined product class (all automobiles), a union will be better able to raise the wages of its members without causing a reduction in their employment when

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

In a competitive market, profit can be considered a reward to businesses that

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 9: Price Takers and the Competitive Process

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

A firm that is a price taker can

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Competitive price-taker firms respond to changing market conditions by varying their

The motivating force behind an increase in supply in a long-run adjustment to equilibrium is

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

If a firm competing in a price-taker market seeks to maximize profit, the firm should

Use the figure to answer the following question(s). Figure 9-4 -If the market price of the product in Figure 9-4 rose to $8, indicate the firm's profit-maximizing output and total revenue.

Use the figure to answer the following question(s). Figure 9-5 -The cost conditions for a profit-maximizing firm operating in a price-taker market are indicated in Figure 9-5. If the market price was $3, what output should the firm produce, and what would be the firm's maximum profit?

Firms will be much more willing to consent to significant wage increases when

The marginal revenue of a price taker is

The dynamic process of competition

A price-taker firm will tend to expand its output so long as its

In a competitive price-taker market, the actions of any single buyer or seller will

A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now

The demand for unionized labor will generally be more elastic, and it will be more difficult for the union to achieve above-equilibrium wages when

Use the figure to answer the following question(s). Figure 9-8 -At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

Since the demand for a narrowly defined product class (Fords, for example) is more elastic than the demand for a broadly defined product class (all automobiles), a union will be better able to raise the wages of its members without causing a reduction in their employment when

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

In a competitive market, profit can be considered a reward to businesses that

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters