Question 1

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 2

When we say that a firm is a price taker, we are indicating that the

Accepted Answer

A)  firm takes the price established in the market then tries to increase that price through advertising. 
B)  firm can change output levels without having any significant effect on price. 
C)  demand curve faced by the firm is perfectly inelastic. 
D)  firm will have to take a lower price if it wants to increase the number of units that it sells. 
A)  firm takes the price established in the market then tries to increase that price through advertising. 
B)  firm can change output levels without having any significant effect on price. 
C)  demand curve faced by the firm is perfectly inelastic. 
D)  firm will have to take a lower price if it wants to increase the number of units that it sells.

Question 3

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 4

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s).
Figure 9-18
 
Refer to Figure 9-18. To maximize profit, the firm should produce an output level of

Accepted Answer

A)  q 1. 
B)  q 2. 
C)  q 3. 
D)  q 4. 
A)  q 1. 
B)  q 2. 
C)  q 3. 
D)  q 4.

Question 5

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 6

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 7

In competitive price-taker markets, firms

Accepted Answer

A)  can sell all of their output at the market price. 
B)  produce differentiated products. 
C)  can influence the market price by altering their output level. 
D)  are large relative to the total market. 
A)  can sell all of their output at the market price. 
B)  produce differentiated products. 
C)  can influence the market price by altering their output level. 
D)  are large relative to the total market.

Question 8

When profits occur in a competitive market, this indicates that

Accepted Answer

A)  consumers value the goods more than the resources used to produce them. 
B)  producers value the goods more than the resources used to produce them. 
C)  producers value the goods more than consumers value the goods. 
D)  consumers value the goods less than the resources used to produce them. 
A)  consumers value the goods more than the resources used to produce them. 
B)  producers value the goods more than the resources used to produce them. 
C)  producers value the goods more than consumers value the goods. 
D)  consumers value the goods less than the resources used to produce them.

Question 9

Use the figure to answer the following question(s).
Figure 9-11
 
Which of the following indicates the firm's profit (or loss) at the profit-maximizing output in Figure 9-11?

Accepted Answer

A)  profit BCFG 
B)  profit OCDM 
C)  zero economic profit 
D)  loss AEFC 
A)  profit BCFG 
B)  profit OCDM 
C)  zero economic profit 
D)  loss AEFC

Question 10

Which of the following is always true in competitive price-taker markets?

Accepted Answer

A)  There are more sellers than buyers. 
B)  Barriers to entry into the market are low. 
C)  The products of firms in the industry are differentiated. 
D)  The firms never earn economic profit. 
A)  There are more sellers than buyers. 
B)  Barriers to entry into the market are low. 
C)  The products of firms in the industry are differentiated. 
D)  The firms never earn economic profit.

Question 11

If consumers suddenly began desiring more apples and fewer oranges,

Accepted Answer

A)  the market price of apples would rise, creating short-run economic profits in the apple industry. Current firms will expand output and new firms will enter the industry. 
B)  the market price of oranges would fall, creating short-run economic losses in the orange industry. Current firms will reduce output and some will go out of business in the long run. 
C)  neither a nor b are correct. 
D)  both a and b are correct. 
A)  the market price of apples would rise, creating short-run economic profits in the apple industry. Current firms will expand output and new firms will enter the industry. 
B)  the market price of oranges would fall, creating short-run economic losses in the orange industry. Current firms will reduce output and some will go out of business in the long run. 
C)  neither a nor b are correct. 
D)  both a and b are correct.

Question 12

A firm in a price-taker market

Accepted Answer

A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price. 
A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price.

Question 13

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Refer to Scenario 9-1. At Q = 999, the firm's profit amounts to

Accepted Answer

A)  $993. 
B)  $997. 
C)  $1,003. 
D)  $1,007. 
A)  $993. 
B)  $997. 
C)  $1,003. 
D)  $1,007.

Question 14

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.
Refer to Scenario 9-1. At Q = 1,000, the firm's profit amounts to

Accepted Answer

A)  − $200. 
B)  $1,000. 
C)  $3,000. 
D)  $4,000. 
A)  − $200. 
B)  $1,000. 
C)  $3,000. 
D)  $4,000.

Question 15

In the price-taker model, what impact does the individual firm have on the price of its product?

Accepted Answer

A)  The firm must accept the price determined in the market if it is going to sell its product. 
B)  The firm may raise or lower its price to a small extent, but sales revenues will tend to be the same regardless of price. 
C)  The firm may raise its price and, thereby, increase its revenues. 
D)  The firm may raise or lower its price to a considerable extent, but sales revenues will tend to be the same regardless of price. 
A)  The firm must accept the price determined in the market if it is going to sell its product. 
B)  The firm may raise or lower its price to a small extent, but sales revenues will tend to be the same regardless of price. 
C)  The firm may raise its price and, thereby, increase its revenues. 
D)  The firm may raise or lower its price to a considerable extent, but sales revenues will tend to be the same regardless of price.

Question 16

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 17

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 18

Suppose the development of new drought-resistant hybrid seed corn leads to a 50-percent increase in the average yield per acre without increasing the cost to the farmers who use the new technology. If the conditions in the corn production industry are approximated by the price-taker model, which of the following is most likely to occur?

Accepted Answer

A)  The price of corn will increase. 
B)  The price of soybeans (a substitute for corn) will increase. 
C)  The profits of corn farmers who quickly adopt the new technology will increase. 
D)  The profits of corn farmers who do not adopt the new technology will increase. 
A)  The price of corn will increase. 
B)  The price of soybeans (a substitute for corn) will increase. 
C)  The profits of corn farmers who quickly adopt the new technology will increase. 
D)  The profits of corn farmers who do not adopt the new technology will increase.

Question 19

Use the figure to answer the following question(s).
Figure 9-8
 
The average total cost ( ATC ) and marginal costs ( MC ) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
A)  10 
B)  15 
C)  20 
D)  25

Question 20

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing

Accepted Answer

A)  to produce the quantity at which average variable cost is minimized. 
B)  to produce the quantity at which average fixed cost is minimized. 
C)  to sell its wheat at a price where marginal cost is equal to average total cost. 
D)  the quantity at which the farm's marginal cost of production is equal to the market price. 
A)  to produce the quantity at which average variable cost is minimized. 
B)  to produce the quantity at which average fixed cost is minimized. 
C)  to sell its wheat at a price where marginal cost is equal to average total cost. 
D)  the quantity at which the farm's marginal cost of production is equal to the market price.

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

When we say that a firm is a price taker, we are indicating that the

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

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s). Figure 9-18 Refer to Figure 9-18. To maximize profit, the firm should produce an output level of

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

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

In competitive price-taker markets, firms

When profits occur in a competitive market, this indicates that

Use the figure to answer the following question(s). Figure 9-11 Which of the following indicates the firm's profit (or loss) at the profit-maximizing output in Figure 9-11?

Which of the following is always true in competitive price-taker markets?

If consumers suddenly began desiring more apples and fewer oranges,

A firm in a price-taker market

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 9-1. At Q = 999, the firm's profit amounts to

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 9-1. At Q = 1,000, the firm's profit amounts to

In the price-taker model, what impact does the individual firm have on the price of its product?

The dynamic process of competition

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 9-8 The average total cost ( ATC ) and marginal costs ( MC ) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing

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

Applying the Basics: Special Topics in Economics

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Exam 9: Price Takers and the Competitive Process

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

When we say that a firm is a price taker, we are indicating that the

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

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s). Figure 9-18 Refer to Figure 9-18. To maximize profit, the firm should produce an output level of

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

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

In competitive price-taker markets, firms

When profits occur in a competitive market, this indicates that

Use the figure to answer the following question(s). Figure 9-11 Which of the following indicates the firm's profit (or loss) at the profit-maximizing output in Figure 9-11?

Which of the following is always true in competitive price-taker markets?

If consumers suddenly began desiring more apples and fewer oranges,

A firm in a price-taker market

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 9-1. At Q = 999, the firm's profit amounts to

Scenario 9-1 Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 9-1. At Q = 1,000, the firm's profit amounts to

In the price-taker model, what impact does the individual firm have on the price of its product?

The dynamic process of competition

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 9-8 The average total cost ( ATC ) and marginal costs ( MC ) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing

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

Applying the Basics: Special Topics in Economics

Filters