Question 1

Competitive price-taker firms respond to changing market conditions by varying their

Accepted Answer

A)  price 
B)  output 
C)  market share 
D)  information 
E)  advertising campaigns 
A)  price 
B)  output 
C)  market share 
D)  information 
E)  advertising campaigns

Question 2

Use the figure to answer the following question(s).
Figure 9-5
 
If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

Accepted Answer

A)  output, 3; maximum profit, $3 loss 
B)  output, 5; maximum profit, zero 
C)  output, 5; maximum profit, slightly less than $5 
D)  output, 6; maximum profit, slightly less than $6 
A)  output, 3; maximum profit, $3 loss 
B)  output, 5; maximum profit, zero 
C)  output, 5; maximum profit, slightly less than $5 
D)  output, 6; maximum profit, slightly less than $6

Question 3

For a price-taker firm, marginal revenue is

Accepted Answer

A)  equal to price. 
B)  equal to zero when the market is in long-run equilibrium. 
C)  equal to the change in total revenue divided by the change in output. 
D)  both a and c. 
A)  equal to price. 
B)  equal to zero when the market is in long-run equilibrium. 
C)  equal to the change in total revenue divided by the change in output. 
D)  both a and c.

Question 4

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

Accepted Answer

A)  it lowers the firm's unit costs. 
B)  it lowers the firm's marginal cost. 
C)  it adds more to revenue than it adds to cost. 
D)  there is additional plant capacity to produce. 
A)  it lowers the firm's unit costs. 
B)  it lowers the firm's marginal cost. 
C)  it adds more to revenue than it adds to cost. 
D)  there is additional plant capacity to produce.

Question 5

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits) because

Accepted Answer

A)  firms will keep their prices low under fear of government regulation. 
B)  with firms able to enter and leave the industry freely, competition will drive prices down to the level of production costs. 
C)  by definition, production costs always rise to equal the market price. 
D)  mismanagement on the part of owners generally results in the firms not equating marginal revenue and marginal cost. 
A)  firms will keep their prices low under fear of government regulation. 
B)  with firms able to enter and leave the industry freely, competition will drive prices down to the level of production costs. 
C)  by definition, production costs always rise to equal the market price. 
D)  mismanagement on the part of owners generally results in the firms not equating marginal revenue and marginal cost.

Question 6

The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Accepted Answer

A)  This firm should shut down immediately. 
B)  This firm is earning positive economic profit. 
C)  This firm is able to cover its variable cost but not its total cost. 
D)  All of the above are true. 
A)  This firm should shut down immediately. 
B)  This firm is earning positive economic profit. 
C)  This firm is able to cover its variable cost but not its total cost. 
D)  All of the above are true.

Question 7

Use the figure to answer the following question(s).
Figure 9-9
 
If the market price in Figure 9-9 increases to $60, what should the firm do?

Accepted Answer

A)  produce 10 per day 
B)  produce 15 per day 
C)  produce 20 per day 
D)  increase its price to $70 
A)  produce 10 per day 
B)  produce 15 per day 
C)  produce 20 per day 
D)  increase its price to $70

Question 8

If marginal revenue exceeds marginal cost, a price-taker firm should

Accepted Answer

A)  expand output. 
B)  reduce output. 
C)  lower its price. 
D)  do both a and c. 
A)  expand output. 
B)  reduce output. 
C)  lower its price. 
D)  do both a and c.

Question 9

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

Accepted Answer

A)  shift the market demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses. 
A)  shift the market demand curve outward so that price will rise to the level of production cost. 
B)  cause the remaining firms to collude so they can produce more efficiently. 
C)  cause the market supply to decline and the price of textiles to rise. 
D)  cause firms in the textile industry to suffer long-run economic losses.

Question 10

In a price-taker market,

Accepted Answer

A)  all firms in the market charge different prices depending upon their respective costs of production. 
B)  there are generally a small number of very large firms. 
C)  the firms all produce identical products. 
D)  firms will usually make economic losses in the long run. 
A)  all firms in the market charge different prices depending upon their respective costs of production. 
B)  there are generally a small number of very large firms. 
C)  the firms all produce identical products. 
D)  firms will usually make economic losses in the long run.

Question 11

When new firms enter a competitive price-taker market,

Accepted Answer

A)  economic profits of existing firms will continue to be zero. 
B)  entering firms will earn zero economic profit upon entry into the market. 
C)  existing firms may see their costs rise as more firms compete for limited resources. 
D)  prices will rise as existing firms raise prices to keep new firms out of the market. 
A)  economic profits of existing firms will continue to be zero. 
B)  entering firms will earn zero economic profit upon entry into the market. 
C)  existing firms may see their costs rise as more firms compete for limited resources. 
D)  prices will rise as existing firms raise prices to keep new firms out of the market.

Question 12

Use the figure to answer the following question(s).
Figure 9-3
 
Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output would the firm's per-unit cost be at a minimum?

Accepted Answer

A)  100 
B)  125 
C)  150 
D)  an output greater than 150 
A)  100 
B)  125 
C)  150 
D)  an output greater than 150

Question 13

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

Accepted Answer

A)  a one-unit increase in output will increase the firm's profit. 
B)  a one-unit decrease in output will increase the firm's profit. 
C)  total revenue exceeds total cost. 
D)  total cost exceeds total revenue. 
A)  a one-unit increase in output will increase the firm's profit. 
B)  a one-unit decrease in output will increase the firm's profit. 
C)  total revenue exceeds total cost. 
D)  total cost exceeds total revenue.

Question 14

If the ice cream industry is a competitive price-taker market and all ice cream producers are earning zero economic profit, what will be the impact of an increase in the demand for ice cream?

Accepted Answer

A)  Firms will exit the ice cream industry in the long run since they are earning zero economic profit. 
B)  The firms will now be able to earn long-run economic profit assuming that barriers to entry remain low and new firms can enter the market. 
C)  A shortage of ice cream will develop. 
D)  The price of ice cream will rise initially, inducing the existing firms to expand output and new firms to enter the industry. 
A)  Firms will exit the ice cream industry in the long run since they are earning zero economic profit. 
B)  The firms will now be able to earn long-run economic profit assuming that barriers to entry remain low and new firms can enter the market. 
C)  A shortage of ice cream will develop. 
D)  The price of ice cream will rise initially, inducing the existing firms to expand output and new firms to enter the industry.

Question 15

In a price-taker market,

Accepted Answer

A)  all firms in the market charge different prices depending upon their respective costs of production. 
B)  there are generally a small number of very large firms. 
C)  the firms all produce identical products. 
D)  firms will usually make economic losses in the long run. 
A)  all firms in the market charge different prices depending upon their respective costs of production. 
B)  there are generally a small number of very large firms. 
C)  the firms all produce identical products. 
D)  firms will usually make economic losses in the long run.

Question 16

Use the figure to answer the following question(s).
Figure 9-9
 
When the market price is $60 in Figure 9-9, the firm's maximum daily profit will be approximately

Accepted Answer

A)  zero. 
B)  $100. 
C)  $900. 
D)  $1,200. 
A)  zero. 
B)  $100. 
C)  $900. 
D)  $1,200.

Question 17

Use the figure to answer the following question(s).
Figure 9-8
 
At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

Accepted Answer

A)  total revenue, $45; total cost, $37 (approx.) 
B)  total revenue, $45; total cost, $45 
C)  total revenue, $60; total cost, $45 
D)  total revenue, $80; total cost, $65 (approx.) 
A)  total revenue, $45; total cost, $37 (approx.) 
B)  total revenue, $45; total cost, $45 
C)  total revenue, $60; total cost, $45 
D)  total revenue, $80; total cost, $65 (approx.)

Question 18

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

Accepted Answer

A)  is "U" shaped. 
B)  is downward sloping over all levels of output. 
C)  exhibits constant returns to scale over a wide range of output. 
D)  exhibits diseconomies of scale beginning at a low rate of output. 
A)  is "U" shaped. 
B)  is downward sloping over all levels of output. 
C)  exhibits constant returns to scale over a wide range of output. 
D)  exhibits diseconomies of scale beginning at a low rate of output.

Question 19

A firm that must sell its output at a market-determined price is called a

Accepted Answer

A)  price-taker firm. 
B)  price-searcher firm. 
C)  price-setter firm. 
D)  price-maker firm. 
A)  price-taker firm. 
B)  price-searcher firm. 
C)  price-setter firm. 
D)  price-maker firm.

Question 20

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

Accepted Answer

A)  The short-run average total costs of firms that are price takers will be constant. 
B)  If a price taker increased its price, consumers would buy from other suppliers. 
C)  Firms in a price-taker market will have to advertise in order to increase sales. 
D)  There are no good substitutes for the product supplied by a firm that is a price taker. 
A)  The short-run average total costs of firms that are price takers will be constant. 
B)  If a price taker increased its price, consumers would buy from other suppliers. 
C)  Firms in a price-taker market will have to advertise in order to increase sales. 
D)  There are no good substitutes for the product supplied by a firm that is a price taker.

Competitive price-taker firms respond to changing market conditions by varying their

Use the figure to answer the following question(s). Figure 9-5 If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

For a price-taker firm, marginal revenue is

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits) because

The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Use the figure to answer the following question(s). Figure 9-9 If the market price in Figure 9-9 increases to $60, what should the firm do?

If marginal revenue exceeds marginal cost, a price-taker firm should

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

In a price-taker market,

When new firms enter a competitive price-taker market,

Use the figure to answer the following question(s). Figure 9-3 Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output would the firm's per-unit cost be at a minimum?

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

If the ice cream industry is a competitive price-taker market and all ice cream producers are earning zero economic profit, what will be the impact of an increase in the demand for ice cream?

In a price-taker market,

Use the figure to answer the following question(s). Figure 9-9 When the market price is $60 in Figure 9-9, the firm's maximum daily profit will be approximately

Use the figure to answer the following question(s). Figure 9-8 At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

A firm that must sell its output at a market-determined price is called a

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

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

Competitive price-taker firms respond to changing market conditions by varying their

Use the figure to answer the following question(s). Figure 9-5 If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

For a price-taker firm, marginal revenue is

A profit-maximizing entrepreneur will produce and sell an additional unit of output as long as

A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits) because

The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Use the figure to answer the following question(s). Figure 9-9 If the market price in Figure 9-9 increases to $60, what should the firm do?

If marginal revenue exceeds marginal cost, a price-taker firm should

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that if technology, imports, and other factors remain constant, these conditions will

In a price-taker market,

When new firms enter a competitive price-taker market,

Use the figure to answer the following question(s). Figure 9-3 Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output would the firm's per-unit cost be at a minimum?

If a competitive price-taker firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then

If the ice cream industry is a competitive price-taker market and all ice cream producers are earning zero economic profit, what will be the impact of an increase in the demand for ice cream?

In a price-taker market,

Use the figure to answer the following question(s). Figure 9-9 When the market price is $60 in Figure 9-9, the firm's maximum daily profit will be approximately

Use the figure to answer the following question(s). Figure 9-8 At the market price of $3 in Figure 9-8, indicate the firm's total revenue and total cost at its profit-maximizing level of output.

In some industries, like insurance, both small and very large firms coexist and compete quite effectively in the market. This indicates that the long-run average total cost curve in these industries

A firm that must sell its output at a market-determined price is called a

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

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