Question 1

Competitive price-taker markets are characterized by

Accepted Answer

A)  low entry barriers and a large number of firms selling a homogeneous product. 
B)  intense rivalry among firms selling differentiated products. 
C)  quality competition among firms and a wide variety of products. 
D)  advertising. 
A)  low entry barriers and a large number of firms selling a homogeneous product. 
B)  intense rivalry among firms selling differentiated products. 
C)  quality competition among firms and a wide variety of products. 
D)  advertising.

Question 2

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

Accepted Answer

A)  shift the market demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses. 
A)  shift the market demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses.

Question 3

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

Accepted Answer

A)  is "U" shaped. 
B)  is downward sloping over all levels of output. 
C)  exhibits constant returns to scale over a wide range of output. 
D)  exhibits diseconomies of scale beginning at a low rate of output. 
A)  is "U" shaped. 
B)  is downward sloping over all levels of output. 
C)  exhibits constant returns to scale over a wide range of output. 
D)  exhibits diseconomies of scale beginning at a low rate of output.

Question 4

The ability of price-taker firms to freely expand or contract their businesses and to enter or exit the market means that

Accepted Answer

A)  prices will always be high enough to generate positive economic profit. 
B)  resources that would be more valuable elsewhere will be trapped, unproductively, in a particular industry. 
C)  resource owners cannot move their resources to other areas where they would be more highly valued. 
D)  resources that would be more valuable elsewhere will not be trapped, unproductively, in a particular industry. 
A)  prices will always be high enough to generate positive economic profit. 
B)  resources that would be more valuable elsewhere will be trapped, unproductively, in a particular industry. 
C)  resource owners cannot move their resources to other areas where they would be more highly valued. 
D)  resources that would be more valuable elsewhere will not be trapped, unproductively, in a particular industry.

Question 5

A perfectly elastic, long-run market supply curve is most likely to be achieved in

Accepted Answer

A)  a price-taker industry. 
B)  a constant cost industry. 
C)  an increasing cost industry. 
D)  a price searcher industry. 
A)  a price-taker industry. 
B)  a constant cost industry. 
C)  an increasing cost industry. 
D)  a price searcher industry.

Question 6

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

Accepted Answer

A)  the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
B)  all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs. 
C)  some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return. 
D)  resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit. 
A)  the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
B)  all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs. 
C)  some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return. 
D)  resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit.

Question 7

When a firm in a competitive market is earning profits, this indicates that the firm is

Accepted Answer

A)  exploiting consumers. 
B)  increasing the value of resources. 
C)  blocking the entry of competing firms. 
D)  reducing overall wealth in the market. 
A)  exploiting consumers. 
B)  increasing the value of resources. 
C)  blocking the entry of competing firms. 
D)  reducing overall wealth in the market.

Question 8

What is the primary source of higher real wages?

Accepted Answer

A)  Labor unions. 
B)  The threat of a strike by a union. 
C)  Increases in productivity. 
D)  Increases in the supply of money. 
A)  Labor unions. 
B)  The threat of a strike by a union. 
C)  Increases in productivity. 
D)  Increases in the supply of money.

Question 9

What characteristics of both the product market and the labor market enhance the likelihood that a union will be effective?

Accepted Answer

An inelastic demand in the product marke

Question 10

Competition as a dynamic process implies that the individual firms in an industry

Accepted Answer

A)  face a perfectly elastic demand curve. 
B)  utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers. 
C)  produce a homogeneous product. 
D)  cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer. 
A)  face a perfectly elastic demand curve. 
B)  utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers. 
C)  produce a homogeneous product. 
D)  cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.

Question 11

Why will the long-run market supply curve for most products slope upward to the right?

Accepted Answer

A)  The firms producing the product will be unable to expand the size of their plant and equipment in the long run. 
B)  Economies of scale are present in most industries. 
C)  Most products are produced under conditions of constant cost. 
D)  Resource prices will rise and push costs upward as the output of the industry expands. 
A)  The firms producing the product will be unable to expand the size of their plant and equipment in the long run. 
B)  Economies of scale are present in most industries. 
C)  Most products are produced under conditions of constant cost. 
D)  Resource prices will rise and push costs upward as the output of the industry expands.

Question 12

Several states require cosmetologists to undertake 1,500 hours or more of training in order to obtain a license to provide hair styling or braiding services. This is an example of

Accepted Answer

A)  antitrust legislation. 
B)  government action that promotes competition. 
C)  a barrier to entry 
D)  the legal structure that is required for the operation of price-taker markets. 
A)  antitrust legislation. 
B)  government action that promotes competition. 
C)  a barrier to entry 
D)  the legal structure that is required for the operation of price-taker markets.

Question 13

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive price-taker market when price falls below the minimum of average variable cost?

Accepted Answer

A)  The firm will continue to produce to attempt to pay fixed costs. 
B)  The firm will stop production to minimize its losses. 
C)  The firm will stop production as soon as it is able to pay its sunk costs. 
D)  The firm will continue to produce in the short run but will likely exit the market in the long run. 
A)  The firm will continue to produce to attempt to pay fixed costs. 
B)  The firm will stop production to minimize its losses. 
C)  The firm will stop production as soon as it is able to pay its sunk costs. 
D)  The firm will continue to produce in the short run but will likely exit the market in the long run.

Question 14

Which of the following statements is true for the U.S. economy?

Accepted Answer

A)  Higher wages in the unionized sectors of the economy push up wages in the nonunion sectors as well. 
B)  Inflation tends to accelerate when the proportion of the labor force that is unionized increases. 
C)  Union workers currently receive wages that are 15 to 20 percent higher, on average, than similar nonunion workers. 
D)  When we compare similar union and nonunion workers, we find virtually no difference in the wages they receive. 
A)  Higher wages in the unionized sectors of the economy push up wages in the nonunion sectors as well. 
B)  Inflation tends to accelerate when the proportion of the labor force that is unionized increases. 
C)  Union workers currently receive wages that are 15 to 20 percent higher, on average, than similar nonunion workers. 
D)  When we compare similar union and nonunion workers, we find virtually no difference in the wages they receive.

Question 15

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized. 
A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized.

Question 16

Union membership will be more attractive from the worker's viewpoint if

Accepted Answer

A)  the demand for the union labor is highly inelastic. 
B)  the supply of union labor is highly elastic. 
C)  only a few of the firms in the industry are unionized. 
D)  the membership dues charged by the union are extremely high. 
A)  the demand for the union labor is highly inelastic. 
B)  the supply of union labor is highly elastic. 
C)  only a few of the firms in the industry are unionized. 
D)  the membership dues charged by the union are extremely high.

Question 17

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

Accepted Answer

A)  it lowers the firm's unit costs. 
B)  it lowers the firm's marginal cost. 
C)  it adds more to revenue than it adds to cost. 
D)  there is additional plant capacity to produce. 
A)  it lowers the firm's unit costs. 
B)  it lowers the firm's marginal cost. 
C)  it adds more to revenue than it adds to cost. 
D)  there is additional plant capacity to produce.

Question 18

In a constant cost industry,

Accepted Answer

A)  a natural monopoly is likely to occur. 
B)  total cost is the same, no matter how much a firm produces. 
C)  the long-run supply curve will be perfectly elastic. 
D)  entry of new firms in the industry will lead to a reduction in the cost of inputs. 
A)  a natural monopoly is likely to occur. 
B)  total cost is the same, no matter how much a firm produces. 
C)  the long-run supply curve will be perfectly elastic. 
D)  entry of new firms in the industry will lead to a reduction in the cost of inputs.

Question 19

To the extent that unions can transfer profits from unionized employers to union workers, they will

Accepted Answer

A)  reduce the incentive of unionized employers to invest in fixed capital and research. 
B)  increase employment in the unionized sector. 
C)  reduce the incentive of nonunion firms to invest and expand their output. 
D)  increase the productivity of labor in the long run. 
A)  reduce the incentive of unionized employers to invest in fixed capital and research. 
B)  increase employment in the unionized sector. 
C)  reduce the incentive of nonunion firms to invest and expand their output. 
D)  increase the productivity of labor in the long run.

Question 20

Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would

Accepted Answer

A)  shut down immediately. 
B)  produce where MR = MC in the short run. 
C)  shut down in the long run but remain in business in the short run. 
D)  do both b and c. 
A)  shut down immediately. 
B)  produce where MR = MC in the short run. 
C)  shut down in the long run but remain in business in the short run. 
D)  do both b and c.

Competitive price-taker markets are characterized by

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

The ability of price-taker firms to freely expand or contract their businesses and to enter or exit the market means that

A perfectly elastic, long-run market supply curve is most likely to be achieved in

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

When a firm in a competitive market is earning profits, this indicates that the firm is

What is the primary source of higher real wages?

What characteristics of both the product market and the labor market enhance the likelihood that a union will be effective?

Competition as a dynamic process implies that the individual firms in an industry

Why will the long-run market supply curve for most products slope upward to the right?

Several states require cosmetologists to undertake 1,500 hours or more of training in order to obtain a license to provide hair styling or braiding services. This is an example of

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive price-taker market when price falls below the minimum of average variable cost?

Which of the following statements is true for the U.S. economy?

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Union membership will be more attractive from the worker's viewpoint if

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

In a constant cost industry,

To the extent that unions can transfer profits from unionized employers to union workers, they will

Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would

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

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Exam 9: Price Takers and the Competitive Process

Competitive price-taker markets are characterized by

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

The ability of price-taker firms to freely expand or contract their businesses and to enter or exit the market means that

A perfectly elastic, long-run market supply curve is most likely to be achieved in

When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,

When a firm in a competitive market is earning profits, this indicates that the firm is

What is the primary source of higher real wages?

What characteristics of both the product market and the labor market enhance the likelihood that a union will be effective?

Competition as a dynamic process implies that the individual firms in an industry

Why will the long-run market supply curve for most products slope upward to the right?

Several states require cosmetologists to undertake 1,500 hours or more of training in order to obtain a license to provide hair styling or braiding services. This is an example of

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive price-taker market when price falls below the minimum of average variable cost?

Which of the following statements is true for the U.S. economy?

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Union membership will be more attractive from the worker's viewpoint if

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

In a constant cost industry,

To the extent that unions can transfer profits from unionized employers to union workers, they will

Suppose the minimum average total cost (ATC) of a firm competing in a competitive price-taker market was $1.00 per unit and that the firm's minimum average variable cost (AVC) was $.80 per unit. If the market price was $.75 per unit, a profit-seeking firm would

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