Question 1

A firm's short-run total cost is TC = 10,100 + 7,700Q - 100Q2 + Q3/3, and its marginal cost is MC = 7,700 - 200Q + Q2. What is the firm's shutdown price?

Accepted Answer

A)  $45 
B)  $200 
C)  $1,100 
D)  $18 
A)  $45 
B)  $200 
C)  $1,100 
D)  $18

Question 2

In a perfectly competitive industry, there are two types of firms: low-cost producers and high-cost producers. The minimum average total cost of the high-cost producers is $150. The low-cost producers have a long-run total cost curve given by LTC = 150Q - 15Q2 + 0.4Q3, where LMC = 150 - 30Q + 1.2Q2. How much economic rent does the low-cost producer earn?

Accepted Answer

A)  $3,125 
B)  $14,000 
C)  $710 
D)  $45,000 
A)  $3,125 
B)  $14,000 
C)  $710 
D)  $45,000

Question 3

Suppose the market for relay switches is considered perfectly competitive and is in equilibrium at a price of $5,000 per pallet of relay switches. Callahan Relay produces relay switches at an average total cost given by ATC = and marginal cost given by MC = 2Q, where Q measures pallets of relay switches. If Callahan Relay maximizes profit, how much profit will it earn?

Accepted Answer

A)  $125,000 
B)  $88,000 
C)  $2.5 million 
D)  $4.75 million 
A)  $125,000 
B)  $88,000 
C)  $2.5 million 
D)  $4.75 million

Question 4

Why is the type of product sold in an industry an important characteristic?

Accepted Answer

A)  A firm that can differentiate its product from that of rivals may be able to charge a higher price for a superior product. 
B)  A firm that sells intangible goods is usually considered a monopoly. 
C)  Expensive products are usually sold by perfectly competitive firms. 
D)  Service industries cannot differentiate their products, which makes it easy for new firms to enter the industry. 
A)  A firm that can differentiate its product from that of rivals may be able to charge a higher price for a superior product. 
B)  A firm that sells intangible goods is usually considered a monopoly. 
C)  Expensive products are usually sold by perfectly competitive firms. 
D)  Service industries cannot differentiate their products, which makes it easy for new firms to enter the industry.

Question 5

Complete the following table, choosing from this list: one, few, identical, some, unique, differentiated, identical or differentiated, many, none. Some words may be used more than once.

Accepted Answer

The answer of Complete the following table, choosing from this...

Question 6

Use the following to answer question:
Table 8.2  
-(Table 8.2) Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce _____ output and firm B should produce _____ output.

Accepted Answer

A)  less; more 
B)  less; less 
C)  more; more 
D)  more; less 
A)  less; more 
B)  less; less 
C)  more; more 
D)  more; less

Question 7

Use the following to answer question:
Figure 8.11  
-(Figure 8.11) If this firm operates, it earns a profit of _____, but if it shuts down, it earns a profit of _____.

Accepted Answer

A)  $4,000; $0 
B)  -$9,000; -$5,000 
C)  -$5,000; -$9,000 
D)  -$2,500; -$4,000 
A)  $4,000; $0 
B)  -$9,000; -$5,000 
C)  -$5,000; -$9,000 
D)  -$2,500; -$4,000

Question 8

Use the following to answer question:
Figure 8.13  
-(Figure 8.13) What could have caused the supply and average variable cost curves to shift outward?

Accepted Answer

A)  a decrease in average fixed costs 
B)  a decrease in wages 
C)  an increase in input prices 
D)  an increase in rental payments or property taxes 
A)  a decrease in average fixed costs 
B)  a decrease in wages 
C)  an increase in input prices 
D)  an increase in rental payments or property taxes

Question 9

Use the following to answer question:
Figure 8.23  
-(Figure 8.23) For simplicity, assume that there are only three firms in a perfectly competitive industry; their short-run supply curves are depicted in the graph. Complete the following table.

Accepted Answer

The answer of Use the following to answer question:
Figure 8.23...

Question 10

The idea that firms pursue actions to maximize profits is:

Accepted Answer

A)  generally rejected by economists in favor of the idea that firms maximize revenues. 
B)  a reasonable assumption, because firms that do not maximize profits will see their market share drain away to their profit-maximizing rivals. 
C)  easier to accomplish when management has little oversight from shareholders and boards of directors. 
D)  refuted by evidence that firms engage in goodwill advertising and other charitable activities. 
A)  generally rejected by economists in favor of the idea that firms maximize revenues. 
B)  a reasonable assumption, because firms that do not maximize profits will see their market share drain away to their profit-maximizing rivals. 
C)  easier to accomplish when management has little oversight from shareholders and boards of directors. 
D)  refuted by evidence that firms engage in goodwill advertising and other charitable activities.

Question 11

A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 - 10Q + 0.1Q2 and long-run marginal cost of LMC = 800 - 20Q + 0.3Q2.

Accepted Answer

Question 12

A perfectly competitive industry consists of 50 East Coast firms and 80 West Coast firms. Each of the East Coast firms has a short-run supply curve of QE = 20P, and each of the West Coast firms has a short-run supply curve of QW = 30P.

Accepted Answer

a. The West Coast firms are the low-cost

Question 13

Under free entry and exit, to find the quantity where ATC is minimized, the firm can:

Accepted Answer

A)  set marginal cost equal to average total cost and solve for Q. 
B)  take the first-order condition of average total cost with respect to Q and solve for Q. 
C)  Either A or B. 
D)  Neither A nor B. 
A)  set marginal cost equal to average total cost and solve for Q. 
B)  take the first-order condition of average total cost with respect to Q and solve for Q. 
C)  Either A or B. 
D)  Neither A nor B.

Question 14

A perfectly competitive firm maximizes profit by producing 500 units of output, selling each unit for $10. The firm's average variable cost is $7 and average fixed cost is $2. What is the firm's producer surplus?

Accepted Answer

A)  $500 
B)  $1,500 
C)  $1,000 
D)  $1 
A)  $500 
B)  $1,500 
C)  $1,000 
D)  $1

Question 15

Which of the following statements is (are) TRUE of price-taking firms?

Accepted Answer

A)  II and III 
B)  I, II, III, and IV 
C)  I 
D)  II and IV 
A)  II and III 
B)  I, II, III, and IV 
C)  I 
D)  II and IV

Question 16

To see how the equilibrium price is affected by the increase in industry output that comes from the entry of new firms, take the derivative of _____ and see whether it is positive or negative.

Accepted Answer

A)  price with respect to industry output 
B)  the number of firms with respect to industry output 
C)  price with respect to the number of firms 
D)  the number of firms with respect to price 
A)  price with respect to industry output 
B)  the number of firms with respect to industry output 
C)  price with respect to the number of firms 
D)  the number of firms with respect to price

Question 17

Use the following to answer question:
Figure 8.19    
-(Figure 8.19) The graph represents three perfectly competitive firms. Which of the following statements is (are) TRUE?

Accepted Answer

A)  II 
B)  III 
C)  II and III 
D)  I 
A)  II 
B)  III 
C)  II and III 
D)  I

Question 18

In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _____ the market, shifting the industry's short-run supply curve _____.

Accepted Answer

A)  enter; outward until the minimum average total cost rises to $56. 
B)  enter; outward until the new equilibrium price is $40. 
C)  enter; inward until firms are making positive profit. 
D)  exit; inward until firms are breaking even. 
A)  enter; outward until the minimum average total cost rises to $56. 
B)  enter; outward until the new equilibrium price is $40. 
C)  enter; inward until firms are making positive profit. 
D)  exit; inward until firms are breaking even.

Question 19

Suppose that there are 1,000 firms in a perfectly competitive industry, each with a short-run total cost curve given by TC = 800 + 8Q + 0.1Q2 and marginal cost curve given by MC = 8 + 0.2Q.

Accepted Answer

Question 20

A perfectly competitive industry in long-run equilibrium comprises 200 identical firms. In one of the firms, the workers unionize and receive a 20% wage increase. What happens to the unionized firm in the short run and the long run? Supplement your answer with a graph.

Accepted Answer

Before the workers unionized, the firm w

A firm's short-run total cost is TC = 10,100 + 7,700Q - 100Q² + Q³/3, and its marginal cost is MC = 7,700 - 200Q + Q². What is the firm's shutdown price?

Why is the type of product sold in an industry an important characteristic?

Complete the following table, choosing from this list: one, few, identical, some, unique, differentiated, identical or differentiated, many, none. Some words may be used more than once.

Use the following to answer question: Table 8.2 -(Table 8.2) Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce _ output and firm B should produce _ output.

Use the following to answer question: Figure 8.11 -(Figure 8.11) If this firm operates, it earns a profit of _, but if it shuts down, it earns a profit of _.

Use the following to answer question: Figure 8.13 -(Figure 8.13) What could have caused the supply and average variable cost curves to shift outward?

Use the following to answer question: Figure 8.23 -(Figure 8.23) For simplicity, assume that there are only three firms in a perfectly competitive industry; their short-run supply curves are depicted in the graph. Complete the following table.

The idea that firms pursue actions to maximize profits is:

A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 - 10Q + 0.1Q² and long-run marginal cost of LMC = 800 - 20Q + 0.3Q².

A perfectly competitive industry consists of 50 East Coast firms and 80 West Coast firms. Each of the East Coast firms has a short-run supply curve of Q_E = 20P, and each of the West Coast firms has a short-run supply curve of Q_W = 30P.

Under free entry and exit, to find the quantity where ATC is minimized, the firm can:

A perfectly competitive firm maximizes profit by producing 500 units of output, selling each unit for $10. The firm's average variable cost is $7 and average fixed cost is $2. What is the firm's producer surplus?

Which of the following statements is (are) TRUE of price-taking firms?

To see how the equilibrium price is affected by the increase in industry output that comes from the entry of new firms, take the derivative of _____ and see whether it is positive or negative.

Use the following to answer question: Figure 8.19 -(Figure 8.19) The graph represents three perfectly competitive firms. Which of the following statements is (are) TRUE?

In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _ the market, shifting the industry's short-run supply curve _.

Suppose that there are 1,000 firms in a perfectly competitive industry, each with a short-run total cost curve given by TC = 800 + 8Q + 0.1Q² and marginal cost curve given by MC = 8 + 0.2Q.

A perfectly competitive industry in long-run equilibrium comprises 200 identical firms. In one of the firms, the workers unionize and receive a 20% wage increase. What happens to the unionized firm in the short run and the long run? Supplement your answer with a graph.

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Individual and Market Demand

Producer Behavior

Costs

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

Exam 8: Supply in a Competitive Market

A firm's short-run total cost is TC = 10,100 + 7,700Q - 100Q2 + Q3/3, and its marginal cost is MC = 7,700 - 200Q + Q2. What is the firm's shutdown price?

Why is the type of product sold in an industry an important characteristic?

Complete the following table, choosing from this list: one, few, identical, some, unique, differentiated, identical or differentiated, many, none. Some words may be used more than once.

Use the following to answer question: Table 8.2 -(Table 8.2) Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce _____ output and firm B should produce _____ output.

Use the following to answer question: Figure 8.11 -(Figure 8.11) If this firm operates, it earns a profit of _____, but if it shuts down, it earns a profit of _____.

Use the following to answer question: Figure 8.13 -(Figure 8.13) What could have caused the supply and average variable cost curves to shift outward?

Use the following to answer question: Figure 8.23 -(Figure 8.23) For simplicity, assume that there are only three firms in a perfectly competitive industry; their short-run supply curves are depicted in the graph. Complete the following table.

The idea that firms pursue actions to maximize profits is:

A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 - 10Q + 0.1Q2 and long-run marginal cost of LMC = 800 - 20Q + 0.3Q2.

A perfectly competitive industry consists of 50 East Coast firms and 80 West Coast firms. Each of the East Coast firms has a short-run supply curve of QE = 20P, and each of the West Coast firms has a short-run supply curve of QW = 30P.

Under free entry and exit, to find the quantity where ATC is minimized, the firm can:

A perfectly competitive firm maximizes profit by producing 500 units of output, selling each unit for $10. The firm's average variable cost is $7 and average fixed cost is $2. What is the firm's producer surplus?

Which of the following statements is (are) TRUE of price-taking firms?

To see how the equilibrium price is affected by the increase in industry output that comes from the entry of new firms, take the derivative of _____ and see whether it is positive or negative.

Use the following to answer question: Figure 8.19 -(Figure 8.19) The graph represents three perfectly competitive firms. Which of the following statements is (are) TRUE?

In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _____ the market, shifting the industry's short-run supply curve _____.

Suppose that there are 1,000 firms in a perfectly competitive industry, each with a short-run total cost curve given by TC = 800 + 8Q + 0.1Q2 and marginal cost curve given by MC = 8 + 0.2Q.

A perfectly competitive industry in long-run equilibrium comprises 200 identical firms. In one of the firms, the workers unionize and receive a 20% wage increase. What happens to the unionized firm in the short run and the long run? Supplement your answer with a graph.

Supply and Demand

Using Supply and Demand to Analyze Markets

Consumer Behavior

Individual and Market Demand

Producer Behavior

Costs

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

A firm's short-run total cost is TC = 10,100 + 7,700Q - 100Q² + Q³/3, and its marginal cost is MC = 7,700 - 200Q + Q². What is the firm's shutdown price?

Use the following to answer question: Table 8.2 -(Table 8.2) Suppose that both firms are producing 100 units of output. If the firms want to increase profit, firm A should produce _ output and firm B should produce _ output.

Use the following to answer question: Figure 8.11 -(Figure 8.11) If this firm operates, it earns a profit of _, but if it shuts down, it earns a profit of _.

A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 - 10Q + 0.1Q² and long-run marginal cost of LMC = 800 - 20Q + 0.3Q².

A perfectly competitive industry consists of 50 East Coast firms and 80 West Coast firms. Each of the East Coast firms has a short-run supply curve of Q_E = 20P, and each of the West Coast firms has a short-run supply curve of Q_W = 30P.

In a perfectly competitive industry, the equilibrium price is $56 and the minimum average total cost of the industry's firms is $40. If this is a constant-cost industry, we can expect that in the long run, firms will _ the market, shifting the industry's short-run supply curve _.

Suppose that there are 1,000 firms in a perfectly competitive industry, each with a short-run total cost curve given by TC = 800 + 8Q + 0.1Q² and marginal cost curve given by MC = 8 + 0.2Q.