Question 1

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 price but reduce equilibrium quantity in the long run. 
D)  equilibrium quantity, but equilibrium price will be unchanged 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 price but reduce equilibrium quantity in the long run. 
D)  equilibrium quantity, but equilibrium price will be unchanged in the long run.

Question 2

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 3

Table 9-2
  Refer to Table 9-2. This table provides information on a competitive price-taker firm's output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do?

Accepted Answer

A)  Decrease quantity to 13 units. 
B)  Increase quantity to 17 units. 
C)  Continue to operate at 14 units. 
D)  Increase quantity to 16 units. 
A)  Decrease quantity to 13 units. 
B)  Increase quantity to 17 units. 
C)  Continue to operate at 14 units. 
D)  Increase quantity to 16 units.

Question 4

The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which output should this price-taker firm produce to maximize profit?

Accepted Answer

A)  200 
B)  300 
C)  400 
D)  500 
A)  200 
B)  300 
C)  400 
D)  500

Question 5

The graph below depicts the cost structure for a firm in a competitive market.
Figure 9-13
 
Refer to Figure 9-13. When price rises from P3 to P4, the firm finds that

Accepted Answer

A)  fixed costs are lower at a production level of Q4. 
B)  it can earn a positive profit by increasing production to Q4. 
C)  profit is still maximized at a production level of Q3. 
D)  average revenue exceeds marginal revenue at a production level of Q4. 
A)  fixed costs are lower at a production level of Q4. 
B)  it can earn a positive profit by increasing production to Q4. 
C)  profit is still maximized at a production level of Q3. 
D)  average revenue exceeds marginal revenue at a production level of Q4.

Question 6

When a firm in a competitive market is earning profits, this indicates that the firm is

Accepted Answer

A)  exploiting consumers. 
B)  increasing the value of resources. 
C)  blocking the entry of competing firms. 
D)  reducing overall wealth in the market. 
A)  exploiting consumers. 
B)  increasing the value of resources. 
C)  blocking the entry of competing firms. 
D)  reducing overall wealth in the market.

Question 7

Which of the following is true?

Accepted Answer

A)  When firms in a price-taker market are earning zero economic profit, they will shut down. 
B)  When firms in a price-taker market are earning positive economic profits, new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C)  When firms in a price-taker market are earning economic losses, some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D)  Both b and c are true. 
A)  When firms in a price-taker market are earning zero economic profit, they will shut down. 
B)  When firms in a price-taker market are earning positive economic profits, new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit. 
C)  When firms in a price-taker market are earning economic losses, some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit. 
D)  Both b and c are true.

Question 8

In general, firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will

Accepted Answer

A)  bring total revenue into equality with total cost. 
B)  maximize the difference between the revenue received from the last unit and the cost incurred in producing the last unit. 
C)  result in the lowest possible average total costs of production. 
D)  maximize the firm's profit. 
A)  bring total revenue into equality with total cost. 
B)  maximize the difference between the revenue received from the last unit and the cost incurred in producing the last unit. 
C)  result in the lowest possible average total costs of production. 
D)  maximize the firm's profit.

Question 9

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.
Table 9-1
  Refer to Table 9-1. If the market price is $500, what is the maximum economic profit per month the Tuckers can earn?

Accepted Answer

A)  − $50 
B)  zero 
C)  $50 
D)  $100 
A)  − $50 
B)  zero 
C)  $50 
D)  $100

Question 10

Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called

Accepted Answer

A)  price searchers. 
B)  price leaders. 
C)  purely competitive. 
D)  price takers. 
A)  price searchers. 
B)  price leaders. 
C)  purely competitive. 
D)  price takers.

Question 11

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

Accepted Answer

A)  has a profit of $25 per unit of output. 
B)  should shut down if its short-run average fixed cost is less than $25. 
C)  has a loss of $100 per unit of output. 
D)  should shut down if its short-run average variable cost exceeds $25. 
A)  has a profit of $25 per unit of output. 
B)  should shut down if its short-run average fixed cost is less than $25. 
C)  has a loss of $100 per unit of output. 
D)  should shut down if its short-run average variable cost exceeds $25.

Question 12

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

Accepted Answer

A)  average revenue exceeds marginal cost. 
B)  the firm is earning a positive profit. 
C)  a one-unit decrease in output would increase the firm's profit. 
D)  All of the above are correct. 
A)  average revenue exceeds marginal cost. 
B)  the firm is earning a positive profit. 
C)  a one-unit decrease in output would increase the firm's profit. 
D)  All of the above are correct.

Question 13

Which of the following is true for a constant cost industry?

Accepted Answer

A)  The total cost of producing 500 units will be the same as the total cost of producing 250 units. 
B)  If 100 units can be produced for $500, then 200 units can be produced for $1,000. 
C)  The demand curve and, therefore, the unit price in the industry are constant. 
D)  Firms in the industry will hold output constant if the price of the product increases. 
A)  The total cost of producing 500 units will be the same as the total cost of producing 250 units. 
B)  If 100 units can be produced for $500, then 200 units can be produced for $1,000. 
C)  The demand curve and, therefore, the unit price in the industry are constant. 
D)  Firms in the industry will hold output constant if the price of the product increases.

Question 14

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements, we would expect

Accepted Answer

A)  the demand for the products of this industry to increase. 
B)  the market price of the products of this industry to decrease in the short run but not in the long run. 
C)  the firms in the industry to make long-run economic profit. 
D)  competition to force producers to pass the lower production costs on to consumers in the long run. 
A)  the demand for the products of this industry to increase. 
B)  the market price of the products of this industry to decrease in the short run but not in the long run. 
C)  the firms in the industry to make long-run economic profit. 
D)  competition to force producers to pass the lower production costs on to consumers in the long run.

Question 15

Profit-maximizing firms enter a competitive market when, for existing firms in that market,

Accepted Answer

A)  total revenue exceeds fixed costs. 
B)  total revenue exceeds total variable costs. 
C)  average total cost exceeds average revenue. 
D)  price exceeds average total cost. 
A)  total revenue exceeds fixed costs. 
B)  total revenue exceeds total variable costs. 
C)  average total cost exceeds average revenue. 
D)  price exceeds average total cost.

Question 16

Tom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes their costs. Is he correct? Is there significance to this observation?

Accepted Answer

Tom is right, but he is forgetting the f

Question 17

Figure 9-2  
Figure 9-2 illustrates a firm

Accepted Answer

A)  capable of earning economic profit. 
B)  that is only able to break even when it maximizes profit. 
C)  taking economic losses. 
D)  that should shut down immediately. 
A)  capable of earning economic profit. 
B)  that is only able to break even when it maximizes profit. 
C)  taking economic losses. 
D)  that should shut down immediately.

Question 18

When consumer demand for a good produced in a price-taker market decreases,

Accepted Answer

A)  firms in the industry will continue to produce at the same output levels as before. 
B)  total market output will generally rise, but each individual firm will reduce its output. 
C)  the market price of the good will rise, causing additional resources to flow into the industry in the long run. 
D)  some firms will shut down in the long run, making their resources available for the production of other goods. 
A)  firms in the industry will continue to produce at the same output levels as before. 
B)  total market output will generally rise, but each individual firm will reduce its output. 
C)  the market price of the good will rise, causing additional resources to flow into the industry in the long run. 
D)  some firms will shut down in the long run, making their resources available for the production of other goods.

Question 19

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 20

The marginal revenue of a price taker is

Accepted Answer

A)  equal to price. 
B)  less than price. 
C)  more than price. 
D)  unrelated to price. 
A)  equal to price. 
B)  less than price. 
C)  more than price. 
D)  unrelated to price.

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

When profits occur in a competitive market, this indicates that

Table 9-2 Refer to Table 9-2. This table provides information on a competitive price-taker firm's output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do?

The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which output should this price-taker firm produce to maximize profit?

The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price rises from P₃ to P₄, the firm finds that

When a firm in a competitive market is earning profits, this indicates that the firm is

Which of the following is true?

In general, firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will

Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

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

Which of the following is true for a constant cost industry?

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements, we would expect

Profit-maximizing firms enter a competitive market when, for existing firms in that market,

Tom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes their costs. Is he correct? Is there significance to this observation?

Figure 9-2 Figure 9-2 illustrates a firm

When consumer demand for a good produced in a price-taker market decreases,

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

The marginal revenue of a price taker is

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

Exam 9: Price Takers and the Competitive Process

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

When profits occur in a competitive market, this indicates that

Table 9-2 Refer to Table 9-2. This table provides information on a competitive price-taker firm's output, marginal revenue, and marginal cost. If the firm is currently producing 14 units, what would you advise them to do?

The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which output should this price-taker firm produce to maximize profit?

The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price rises from P3 to P4, the firm finds that

When a firm in a competitive market is earning profits, this indicates that the firm is

Which of the following is true?

In general, firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will

Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

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

Which of the following is true for a constant cost industry?

If occupational safety laws were changed so that firms no longer had to take expensive steps to meet regulatory requirements, we would expect

Profit-maximizing firms enter a competitive market when, for existing firms in that market,

Tom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes their costs. Is he correct? Is there significance to this observation?

Figure 9-2 Figure 9-2 illustrates a firm

When consumer demand for a good produced in a price-taker market decreases,

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

The marginal revenue of a price taker is

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

The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price rises from P₃ to P₄, the firm finds that