Question 1

(Figure: Price and Quantity II) This firm maximizes profit by producing _____ units of output.

Accepted Answer

A)  3 
B)  7 
C)  10 
D)  12 
A)  3 
B)  7 
C)  10 
D)  12 C

Question 2

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. The industry's demand curve is QD = 40,000 - 70P. In long-run equilibrium, the number of firms in the industry is ____.

Accepted Answer

A)  60 
B)  50 
C)  40 
D)  30 
A)  60 
B)  50 
C)  40 
D)  30 D

Question 3

(Figure: Price and Quantity XI) Which of the following statements is (are) TRUE?   I. Producer surplus = TR - VC = $25 - $15.
II) The shaded area between the demand curve and marginal cost represents producer surplus and equals $10.
III) The firm's profit = $10 - FC.

Accepted Answer

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

Question 4

(Figure: Price and Quantity III) If the market price is $6, this perfectly competitive firm will earn profits of:

Accepted Answer

A)  $27. 
B)  $54. 
C)  $18. 
D)  $78. 
A)  $27. 
B)  $54. 
C)  $18. 
D)  $78.

Question 5

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q2 + 0.5Q3, where MC = 500 - 10Q + 1.5Q2. The output that minimizes the firm's AVC is ____.

Accepted Answer

A)  10 
B)  7 
C)  5 
D)  0 
A)  10 
B)  7 
C)  5 
D)  0

Question 6

Suppose that the market for gourmet deli sandwiches is perfectly competitive and that the supply of workers in this industry is upward-sloping, so that wages increase as industry output increases. Delis in this market face the following total cost:   where Q is the number of sandwiches and W is the daily wage paid to workers. The wage, which depends on total industry output, equals  
, where N is the number of firms. Market demand is  
) In the long-run equilibrium, the total industry output is ____.

Accepted Answer

A)  296.875 
B)  287.475 
C)  237.685 
D)  224.985 
A)  296.875 
B)  287.475 
C)  237.685 
D)  224.985

Question 7

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would ____ and total cost would ____.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 8

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

Accepted Answer

A)  The marginal cost curve will shift downward for each producer, leaving prices unchanged. 
B)  The market price of sprouts will fall, causing each firm to produce fewer sprouts. 
C)  Existing firms will expand output to make up for the decrease in demand. 
D)  The marginal cost curve will shift upward for each producer, causing prices to rise and profits to fall. 
A)  The marginal cost curve will shift downward for each producer, leaving prices unchanged. 
B)  The market price of sprouts will fall, causing each firm to produce fewer sprouts. 
C)  Existing firms will expand output to make up for the decrease in demand. 
D)  The marginal cost curve will shift upward for each producer, causing prices to rise and profits to fall.

Question 9

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would ____ and total cost would ____.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 10

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q2 + Q3. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

Accepted Answer

A)  100 - 20Q + 3Q2 = 1,000 + 100Q - 10Q2 + Q3. 
B)  100 - 20Q + 3Q2 = 100 - 10Q + Q2. 
C)  100 - 20Q + 3Q2 = 1,000/Q + 100 - 10Q + Q2. 
D)  100 - 20Q + 3Q2 = 1,000(Q + 100 - 10Q + Q2). 
A)  100 - 20Q + 3Q2 = 1,000 + 100Q - 10Q2 + Q3. 
B)  100 - 20Q + 3Q2 = 100 - 10Q + Q2. 
C)  100 - 20Q + 3Q2 = 1,000/Q + 100 - 10Q + Q2. 
D)  100 - 20Q + 3Q2 = 1,000(Q + 100 - 10Q + Q2).

Question 11

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

Question 12

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. The short-run profit-maximizing output level for each firm at a market price of $20 is ____.

Accepted Answer

A)  70 
B)  60 
C)  50 
D)  0 
A)  70 
B)  60 
C)  50 
D)  0

Question 13

(Figure: Representative Firm I) Which panel shows a representative firm (operating in a perfectly competitive industry) in a long-run equilibrium?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d 
A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d

Question 14

(Graph: Short-Run Equilibrium I)
Using the graphs, indicate the short-run equilibrium in this market and calculate any associated profits.

Accepted Answer

The market price will be $60,

Question 15

Suppose a perfectly competitive industry has 300 firms, and the short-run supply curve for each firm is given by Q = 2P. What is the short-run industry supply curve?

Accepted Answer

A)  QS = 150P 
B)  QS = 600 
C)  QS = 600P 
D)  QS = 300 + 2P 
A)  QS = 150P 
B)  QS = 600 
C)  QS = 600P 
D)  QS = 300 + 2P

Question 16

Use the following table to answer the question. At a quantity of 2, the marginal revenue is $____.

Accepted Answer

A)  15 
B)  12 
C)  10 
D)  7 
A)  15 
B)  12 
C)  10 
D)  7

Question 17

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 18

Suppose that the cost curves of the firms do not change when (identical) firms enter or exit the market. Under this scenario, a change in demand will _____ in a change in the market quantity because the number of firms will _____.

Accepted Answer

A)  not result; not change 
B)  result; not change 
C)  not result; change 
D)  result; change 
A)  not result; not change 
B)  result; not change 
C)  not result; change 
D)  result; change

Question 19

(Figure: Price and Quantity of Output and Table I) 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 (Figure: Price and Quantity of Output and...

Question 20

(Figure: Revenues and Output I) The total revenue curve for a perfectly competitive firm is represented by curve:

Accepted Answer

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

(Figure: Price and Quantity II) This firm maximizes profit by producing _____ units of output.

(Figure: Price and Quantity XI) Which of the following statements is (are) TRUE? I. Producer surplus = TR - VC = $25 - $15. II) The shaded area between the demand curve and marginal cost represents producer surplus and equals $10. III) The firm's profit = $10 - FC.

(Figure: Price and Quantity III) If the market price is $6, this perfectly competitive firm will earn profits of:

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The output that minimizes the firm's AVC is ____.

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would and total cost would .

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would and total cost would .

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

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.

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. The short-run profit-maximizing output level for each firm at a market price of $20 is ____.

(Figure: Representative Firm I) Which panel shows a representative firm (operating in a perfectly competitive industry) in a long-run equilibrium?

(Graph: Short-Run Equilibrium I) Using the graphs, indicate the short-run equilibrium in this market and calculate any associated profits.

Suppose a perfectly competitive industry has 300 firms, and the short-run supply curve for each firm is given by Q = 2P. What is the short-run industry supply curve?

Use the following table to answer the question. At a quantity of 2, the marginal revenue is $____.

The idea that firms pursue actions to maximize profits is:

Suppose that the cost curves of the firms do not change when (identical) firms enter or exit the market. Under this scenario, a change in demand will _ in a change in the market quantity because the number of firms will _.

(Figure: Price and Quantity of Output and Table I) 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.

(Figure: Revenues and Output I) The total revenue curve for a perfectly competitive firm is represented by curve:

Adventures in Microeconomics

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

(Figure: Price and Quantity II) This firm maximizes profit by producing _____ units of output.

(Figure: Price and Quantity XI) Which of the following statements is (are) TRUE? I. Producer surplus = TR - VC = $25 - $15. II) The shaded area between the demand curve and marginal cost represents producer surplus and equals $10. III) The firm's profit = $10 - FC.

(Figure: Price and Quantity III) If the market price is $6, this perfectly competitive firm will earn profits of:

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q2 + 0.5Q3, where MC = 500 - 10Q + 1.5Q2. The output that minimizes the firm's AVC is ____.

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would ____ and total cost would ____.

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would ____ and total cost would ____.

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q2 + Q3. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

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.

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. The short-run profit-maximizing output level for each firm at a market price of $20 is ____.

(Figure: Representative Firm I) Which panel shows a representative firm (operating in a perfectly competitive industry) in a long-run equilibrium?

(Graph: Short-Run Equilibrium I) Using the graphs, indicate the short-run equilibrium in this market and calculate any associated profits.

Suppose a perfectly competitive industry has 300 firms, and the short-run supply curve for each firm is given by Q = 2P. What is the short-run industry supply curve?

Use the following table to answer the question. At a quantity of 2, the marginal revenue is $____.

The idea that firms pursue actions to maximize profits is:

Suppose that the cost curves of the firms do not change when (identical) firms enter or exit the market. Under this scenario, a change in demand will _____ in a change in the market quantity because the number of firms will _____.

(Figure: Price and Quantity of Output and Table I) 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.

(Figure: Revenues and Output I) The total revenue curve for a perfectly competitive firm is represented by curve:

Adventures in Microeconomics

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

Suppose that each firm in a perfectly competitive market has a short-run total cost of TC = 75 + 500Q - 5Q² + 0.5Q³, where MC = 500 - 10Q + 1.5Q². The output that minimizes the firm's AVC is ____.

Suppose that a firm is producing where 0 < MR < MC. If the firm produced one less unit of output, total revenue would and total cost would .

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would and total cost would .

Suppose that the long-run total cost curve for each firm is given by TC = 1,000 + 100Q - 10Q² + Q³. Also, suppose there is free entry and exit. To find the quantity where ATC is minimized, solve the following equation for Q:

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. The short-run profit-maximizing output level for each firm at a market price of $20 is ____.

Suppose that the cost curves of the firms do not change when (identical) firms enter or exit the market. Under this scenario, a change in demand will _ in a change in the market quantity because the number of firms will _.