Question 1

Beginning from a point of long-run equilibrium, an increase in the market demand for wheat would result in

Accepted Answer

A)  an increase in the market price of wheat. 
B)  existing wheat producers increasing output in the short run and earning positive economic profits. 
C)  new firms entering the wheat industry in the long run. 
D)  all of the above. 
A)  an increase in the market price of wheat. 
B)  existing wheat producers increasing output in the short run and earning positive economic profits. 
C)  new firms entering the wheat industry in the long run. 
D)  all of the above.

Question 2

When price is greater than marginal cost for a firm in a competitive market,

Accepted Answer

A)  marginal cost must be falling. 
B)  the firm must be minimizing its losses. 
C)  there are opportunities to increase profit by increasing production. 
D)  the firm should decrease output to maximize profit. 
A)  marginal cost must be falling. 
B)  the firm must be minimizing its losses. 
C)  there are opportunities to increase profit by increasing production. 
D)  the firm should decrease output to maximize profit.

Question 3

Which of the following is a reason to study the decisions of price takers?

Accepted Answer

A)  While there are not many price-taker markets, these few markets dominate the economy. 
B)  The decision making of both price searchers and price takers is identical. 
C)  The price-taker model enhances our knowledge of competition as a dynamic process. 
D)  Price takers are the most common type of business in the real world. 
A)  While there are not many price-taker markets, these few markets dominate the economy. 
B)  The decision making of both price searchers and price takers is identical. 
C)  The price-taker model enhances our knowledge of competition as a dynamic process. 
D)  Price takers are the most common type of business in the real world.

Question 4

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 5

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

Accepted Answer

If a firm cannot cover its variable cost

Question 6

Use the figure to answer the following question(s).
Figure 9-7
 
When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately

Accepted Answer

A)  zero. 
B)  $40. 
C)  $6,000. 
D)  $40,000. 
A)  zero. 
B)  $40. 
C)  $6,000. 
D)  $40,000.

Question 7

In competitive price-taker markets, if one firm raises its price,

Accepted Answer

A)  others will follow 
B)  that firm will increase its revenues 
C)  that firm will lose revenues because other firms will not follow 
D)  all consumers will be adversely affected 
E)  the market demand curve will shift 
A)  others will follow 
B)  that firm will increase its revenues 
C)  that firm will lose revenues because other firms will not follow 
D)  all consumers will be adversely affected 
E)  the market demand curve will shift

Question 8

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

Accepted Answer

A)  approach zero. 
B)  increase. 
C)  decrease. 
D)  remain the same since time does not affect the elasticity of market supply. 
A)  approach zero. 
B)  increase. 
C)  decrease. 
D)  remain the same since time does not affect the elasticity of market supply.

Question 9

Which one of the following factors is not an explanation of the positive relationship between market price and quantity supplied?

Accepted Answer

A)  The law of diminishing returns makes it more costly for firms to expand output quickly. 
B)  As price increases, some less efficient firms will enter the market. 
C)  For most firms, unit costs decrease as output increases in the long run. 
D)  As all firms in an industry hire more factors of production, the prices paid for them often increase. 
A)  The law of diminishing returns makes it more costly for firms to expand output quickly. 
B)  As price increases, some less efficient firms will enter the market. 
C)  For most firms, unit costs decrease as output increases in the long run. 
D)  As all firms in an industry hire more factors of production, the prices paid for them often increase.

Question 10

When market conditions in a price-taker market are such that firms cannot cover their production costs,

Accepted Answer

A)  the firms will suffer long-run economic losses. 
B)  the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
C)  some firms will go out of business, causing prices to rise until the remaining firms can cover their production costs. 
D)  all firms will go out of business, since consumers will not pay prices that enable firms to cover their production costs. 
A)  the firms will suffer long-run economic losses. 
B)  the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits. 
C)  some firms will go out of business, causing prices to rise until the remaining firms can cover their production costs. 
D)  all firms will go out of business, since consumers will not pay prices that enable firms to cover their production costs.

Question 11

Figure 9-15  
 
At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

Accepted Answer

A)  $40 and 80 
B)  $8 and 70 
C)  $4 and 40 
D)  $40 and 70 
E)  $8 and zero output 
A)  $40 and 80 
B)  $8 and 70 
C)  $4 and 40 
D)  $40 and 70 
E)  $8 and zero output

Question 12

When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because

Accepted Answer

A)  producers maximize short-run, not long-run, profits. 
B)  over time, new firms will enter the industry and old firms will expand their operations in response to the price increase. 
C)  consumers are less resistant to higher prices in the long run than in the short run because they have fewer options in the long run. 
D)  consumer income will expand in the long run, causing resource prices to rise, which will induce producers to increase output. 
A)  producers maximize short-run, not long-run, profits. 
B)  over time, new firms will enter the industry and old firms will expand their operations in response to the price increase. 
C)  consumers are less resistant to higher prices in the long run than in the short run because they have fewer options in the long run. 
D)  consumer income will expand in the long run, causing resource prices to rise, which will induce producers to increase output.

Question 13

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Accepted Answer

A)  both equilibrium quantity and equilibrium price in the long run. 
B)  equilibrium price, but equilibrium quantity will be unchanged in the long run. 
C)  equilibrium quantity, but equilibrium price will be unchanged in the long run. 
D)  equilibrium quantity but reduce equilibrium price in the long run. 
A)  both equilibrium quantity and equilibrium price in the long run. 
B)  equilibrium price, but equilibrium quantity will be unchanged in the long run. 
C)  equilibrium quantity, but equilibrium price will be unchanged in the long run. 
D)  equilibrium quantity but reduce equilibrium price in the long run.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  In order to maximize profits in the short run, a price taker should always produce at the output level where marginal cost is equal to price. 
B)  In long-run equilibrium, a price taker will produce at an output level where average total cost is at its minimum. 
C)  A price taker will remain open in the short run, even if it is earning an economic loss, so long as price is sufficient to cover average variable cost. 
D)  All of the above are true. 
A)  In order to maximize profits in the short run, a price taker should always produce at the output level where marginal cost is equal to price. 
B)  In long-run equilibrium, a price taker will produce at an output level where average total cost is at its minimum. 
C)  A price taker will remain open in the short run, even if it is earning an economic loss, so long as price is sufficient to cover average variable cost. 
D)  All of the above are true.

Question 15

Use the table of expected cost and revenue data for the Tuckers Tomato Farm below to answer the following question(s). The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a competitive price-taker market.
  Refer to Table 9-1. After the increase in the market price to $570, what is the maximum profit per month the Tuckers can earn?

Accepted Answer

A)  $560 
B)  $580 
C)  $630 
D)  $1,130 
A)  $560 
B)  $580 
C)  $630 
D)  $1,130

Question 16

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Accepted Answer

A)  vertical. 
B)  more inelastic. 
C)  more elastic. 
D)  of unitary elasticity. 
A)  vertical. 
B)  more inelastic. 
C)  more elastic. 
D)  of unitary elasticity.

Question 17

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.

Question 18

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 19

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue. (II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

Accepted Answer

A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false. 
A)  I is true; II is false. 
B)  I is false; II is true. 
C)  Both I and II are true. 
D)  Both I and II are false.

Question 20

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.

Beginning from a point of long-run equilibrium, an increase in the market demand for wheat would result in

When price is greater than marginal cost for a firm in a competitive market,

Which of the following is a reason to study the decisions of price takers?

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

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

Use the figure to answer the following question(s). Figure 9-7 When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately

In competitive price-taker markets, if one firm raises its price,

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

Which one of the following factors is not an explanation of the positive relationship between market price and quantity supplied?

When market conditions in a price-taker market are such that firms cannot cover their production costs,

Figure 9-15 At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Which of the following statements is correct?

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

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

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

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue. (II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

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

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

Beginning from a point of long-run equilibrium, an increase in the market demand for wheat would result in

When price is greater than marginal cost for a firm in a competitive market,

Which of the following is a reason to study the decisions of price takers?

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

Even if a firm is optimistic about the future, why should it shut down if it cannot cover its variable cost? If it does shut down, are there ramifications not mentioned in the textbook?

Use the figure to answer the following question(s). Figure 9-7 When the market price in Figure 9-7 is $4, the firm's maximum weekly profit will be approximately

In competitive price-taker markets, if one firm raises its price,

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

Which one of the following factors is not an explanation of the positive relationship between market price and quantity supplied?

When market conditions in a price-taker market are such that firms cannot cover their production costs,

Figure 9-15 At which price and quantity is profit maximized for the competitive price-taker firm represented in Figure 9-15?

When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Which of the following statements is correct?

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

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

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

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue. (II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

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

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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