Question 1

Price floors and price ceilings

Accepted Answer

A) always reduce total surplus. 
B) reduce consumer surplus and increase producer surplus. 
C) reduce producer surplus and increase consumer surplus. 
D) Not enough information to determine. 
A) always reduce total surplus. 
B) reduce consumer surplus and increase producer surplus. 
C) reduce producer surplus and increase consumer surplus. 
D) Not enough information to determine. D

Question 2

If a firm operates in a perfectly competitive market, then it will most likely

Accepted Answer

A) advertise its product on television. 
B) take the price of its product as determined by the market. 
C) have a difficult time obtaining information about the market price. 
D) have an easy time keeping other firms out of the market. 
A) advertise its product on television. 
B) take the price of its product as determined by the market. 
C) have a difficult time obtaining information about the market price. 
D) have an easy time keeping other firms out of the market. B

Question 3

Deadweight loss occurs when

Accepted Answer

A) producer surplus is greater than consumer surplus. 
B) the maximum level of total welfare is not achieved. 
C) consumer surplus is reduced. 
D) an inferior good is consumed. 
A) producer surplus is greater than consumer surplus. 
B) the maximum level of total welfare is not achieved. 
C) consumer surplus is reduced. 
D) an inferior good is consumed. B

Question 4

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Accepted Answer

A) the supply curve is flatter than if there were only 35 identical firms. 
B) the supply curve is more elastic than if there were only 25 identical firms. 
C) the supply curve is more inelastic than if the firms were identical. 
D) All of the above. 
A) the supply curve is flatter than if there were only 35 identical firms. 
B) the supply curve is more elastic than if there were only 25 identical firms. 
C) the supply curve is more inelastic than if the firms were identical. 
D) All of the above.

Question 5

Long-run market supply curves are upward sloping if

Accepted Answer

A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above. 
A) firms are identical. 
B) the number of firms is restricted in the long run. 
C) input prices fall as the industry expands. 
D) All of the above.

Question 6

A "stair-like" market supply curve is the result of

Accepted Answer

A) higher cost firms charging a higher price for their products. 
B) firms having different costs. 
C) firms shutting down in the long run. 
D) average variable costs that are higher than average fixed costs. 
A) higher cost firms charging a higher price for their products. 
B) firms having different costs. 
C) firms shutting down in the long run. 
D) average variable costs that are higher than average fixed costs.

Question 7

Deadweight loss occurs when

Accepted Answer

A) consumer surplus is greater than producer surplus. 
B) surplus losses to one group due to intervention are not offset by surplus gains to another. 
C) consumer surplus is reduced. 
D) consumer surplus is negative. 
A) consumer surplus is greater than producer surplus. 
B) surplus losses to one group due to intervention are not offset by surplus gains to another. 
C) consumer surplus is reduced. 
D) consumer surplus is negative.

Question 8

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

Accepted Answer

A) $5,000. 
B) $15,000. 
C) $20,000. 
D) not able to be calculated from the information given. 
A) $5,000. 
B) $15,000. 
C) $20,000. 
D) not able to be calculated from the information given.

Question 9

In a perfectly competitive market

Accepted Answer

A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above. 
A) firms can freely enter and exit. 
B) firms sell a differentiated product. 
C) transaction costs are high. 
D) All of the above.

Question 10

If all conditions for a perfectly competitive market are met

Accepted Answer

A) firms face sunk cost when entering the market. 
B) firms' demand curves are horizontal. 
C) the market demand curve is horizontal. 
D) the firms' demand curves are downward sloping. 
A) firms face sunk cost when entering the market. 
B) firms' demand curves are horizontal. 
C) the market demand curve is horizontal. 
D) the firms' demand curves are downward sloping.

Question 11

Government intervention in a perfectly competitive market

Accepted Answer

A) reduces economic well-being. 
B) is an illustration of the "invisible hand theorem." 
C) increases economic well-being. 
D) guarantees maximized well-being. 
A) reduces economic well-being. 
B) is an illustration of the "invisible hand theorem." 
C) increases economic well-being. 
D) guarantees maximized well-being.

Question 12

A consumer's marginal willingness to pay

Accepted Answer

A) changes with price. 
B) is equal to the marginal value to the consumer of the last unit of output. 
C) is the minimum price a consumer will pay for the last unit of output. 
D) is the first derivative of the demand curve. 
A) changes with price. 
B) is equal to the marginal value to the consumer of the last unit of output. 
C) is the minimum price a consumer will pay for the last unit of output. 
D) is the first derivative of the demand curve.

Question 13

In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and

Accepted Answer

A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers. 
A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers.

Question 14

Long-run market supply curves are upward sloping if

Accepted Answer

A) firms are identical. 
B) the number of firms is unrestricted in the long run. 
C) input prices rise as the industry expands. 
D) All of the above. 
A) firms are identical. 
B) the number of firms is unrestricted in the long run. 
C) input prices rise as the industry expands. 
D) All of the above.

Question 15

Economists define a market to be competitive when the firms

Accepted Answer

A) spend large amounts of money on advertising to lure customers away from the competition. 
B) watch each other's behavior closely. 
C) are price takers. 
D) All of the above. 
A) spend large amounts of money on advertising to lure customers away from the competition. 
B) watch each other's behavior closely. 
C) are price takers. 
D) All of the above.

Question 16

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price

Accepted Answer

A) is N times the supply of an individual firm. 
B) is N - 1 times the supply of an individual firm. 
C) is N plus the supply of an individual firm. 
D) cannot be determined from the information provided. 
A) is N times the supply of an individual firm. 
B) is N - 1 times the supply of an individual firm. 
C) is N plus the supply of an individual firm. 
D) cannot be determined from the information provided.

Question 17

With identical firms, constant input prices, and all the other characteristics of a competitive market

Accepted Answer

A) a shift in demand has no effect on the long-run average cost and so there is no change in equilibrium price and quantity. 
B) a shift in demand will change the equilibrium price and quantity. 
C) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium quantity but not price. 
D) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium price but not quantity. 
A) a shift in demand has no effect on the long-run average cost and so there is no change in equilibrium price and quantity. 
B) a shift in demand will change the equilibrium price and quantity. 
C) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium quantity but not price. 
D) a shift in demand has no effect on the long-run average cost, resulting in a change in equilibrium price but not quantity.

Question 18

If the shutdown rule, p < AVC, is the same in the short run and the long run, explain why the shutdown prices may be different.

Accepted Answer

In the short run there are fix

Question 19

If firms in a competitive market have different cost functions, then

Accepted Answer

A) there is no short run market supply curve. 
B) the market supply curve reflects those firms' operating envelopes, even in the short run. 
C) some of the firms will shut down because their costs are too high to compete. 
D) the firms' marginal costs will be different at the market price. 
A) there is no short run market supply curve. 
B) the market supply curve reflects those firms' operating envelopes, even in the short run. 
C) some of the firms will shut down because their costs are too high to compete. 
D) the firms' marginal costs will be different at the market price.

Question 20

If the market price is above a firm's average cost at the quantity produced,

Accepted Answer

A) the firm operates and makes a profit. 
B) the firm operates and makes zero economic profit. 
C) the market price of the firm's inputs will rise. 
D) total profit is maximized. 
A) the firm operates and makes a profit. 
B) the firm operates and makes zero economic profit. 
C) the market price of the firm's inputs will rise. 
D) total profit is maximized.

Price floors and price ceilings

If a firm operates in a perfectly competitive market, then it will most likely

Deadweight loss occurs when

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Long-run market supply curves are upward sloping if

A "stair-like" market supply curve is the result of

Deadweight loss occurs when

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

In a perfectly competitive market

If all conditions for a perfectly competitive market are met

Government intervention in a perfectly competitive market

A consumer's marginal willingness to pay

In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and

Long-run market supply curves are upward sloping if

Economists define a market to be competitive when the firms

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price

With identical firms, constant input prices, and all the other characteristics of a competitive market

If the shutdown rule, p < AVC, is the same in the short run and the long run, explain why the shutdown prices may be different.

If firms in a competitive market have different cost functions, then

If the market price is above a firm's average cost at the quantity produced,

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 8: Competitive Firms and Markets

Price floors and price ceilings

If a firm operates in a perfectly competitive market, then it will most likely

Deadweight loss occurs when

In a perfectly competitive market with 75 non-identical firms producing at market price p1

Long-run market supply curves are upward sloping if

A "stair-like" market supply curve is the result of

Deadweight loss occurs when

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

In a perfectly competitive market

If all conditions for a perfectly competitive market are met

Government intervention in a perfectly competitive market

A consumer's marginal willingness to pay

In deciding whether to operate in the short run, the firm must be concerned with the relationship between price of the output and

Long-run market supply curves are upward sloping if

Economists define a market to be competitive when the firms

There are currently N identical firms in a market. If it is a perfectly competitive market, the short-run market supply curve at any given price

With identical firms, constant input prices, and all the other characteristics of a competitive market

If the shutdown rule, p < AVC, is the same in the short run and the long run, explain why the shutdown prices may be different.

If firms in a competitive market have different cost functions, then

If the market price is above a firm's average cost at the quantity produced,

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters