Question 1

Which of the following is a characteristic of a competitive price-taker market?

Accepted Answer

A)  Profit maximizing firms in the market will expand output until price equals average variable cost. 
B)  The market demand curve for the product is a horizontal line. 
C)  There are many firms in the market, each producing a small share of total market output. 
D)  The product produced by each of the firms is differentiated. 
A)  Profit maximizing firms in the market will expand output until price equals average variable cost. 
B)  The market demand curve for the product is a horizontal line. 
C)  There are many firms in the market, each producing a small share of total market output. 
D)  The product produced by each of the firms is differentiated.

Question 2

In the long run, in a price-taker market, the price of a good is determined primarily by the

Accepted Answer

A)  average total cost of producing it. 
B)  decision of buyers in determining how much they are willing to pay for the good. 
C)  elasticity of supply. 
D)  number of firms in the industry. 
A)  average total cost of producing it. 
B)  decision of buyers in determining how much they are willing to pay for the good. 
C)  elasticity of supply. 
D)  number of firms in the industry.

Question 3

When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because

Accepted Answer

A)  low entry barriers lead to rising costs. 
B)  profit-seeking entrepreneurs will not enter a market when entry barriers are low. 
C)  short-run profit attracts additional suppliers and drives down the market price. 
D)  consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs. 
A)  low entry barriers lead to rising costs. 
B)  profit-seeking entrepreneurs will not enter a market when entry barriers are low. 
C)  short-run profit attracts additional suppliers and drives down the market price. 
D)  consumers will refuse to pay more than the cost of producing a good once they find out the producer's per-unit costs.

Question 4

The graph below depicts the cost structure for a firm in a competitive market.
Figure 9-13
 
Refer to Figure 9-13. When price falls from P3 to P1, the firm finds that

Accepted Answer

A)  fixed cost is higher at a production level of Q1 than it is at Q3. 
B)  it should produce Q1 units of output. 
C)  it should produce Q3 units of output. 
D)  it should shut down immediately. 
A)  fixed cost is higher at a production level of Q1 than it is at Q3. 
B)  it should produce Q1 units of output. 
C)  it should produce Q3 units of output. 
D)  it should shut down immediately.

Question 5

Figure 9-1  
Figure 9-1 shows the marginal and average total cost curves for a firm producing product A. What would be the minimum price this firm could charge and still continue to supply A to the market in the long run?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $8 
A)  $4 
B)  $5 
C)  $6 
D)  $8

Question 6

In the long run, in a price-taker market, the price of a good is determined primarily by the

Accepted Answer

A)  average total cost of producing it. 
B)  decision of buyers in determining how much they are willing to pay for the good. 
C)  elasticity of supply. 
D)  number of firms in the industry. 
A)  average total cost of producing it. 
B)  decision of buyers in determining how much they are willing to pay for the good. 
C)  elasticity of supply. 
D)  number of firms in the industry.

Question 7

FYI Sanitation is currently eight months into a year-long lease contract on a garbage truck at a cost that averages $500 per month. Other variable costs (fuel, workers, etc.) for operating the truck amount to $300 per month. If the monthly revenue from operating the truck is $400, and these conditions are expected to continue into the future, to maximize its profit, FYI Sanitation should

Accepted Answer

A)  stop operating the truck immediately and not renew the lease for next year. 
B)  continue operating the truck indefinitely. 
C)  continue operating the truck until the lease expires, then not renew the lease for next year. 
D)  stop operating the truck now but renew the lease and begin operating the truck again next year. 
A)  stop operating the truck immediately and not renew the lease for next year. 
B)  continue operating the truck indefinitely. 
C)  continue operating the truck until the lease expires, then not renew the lease for next year. 
D)  stop operating the truck now but renew the lease and begin operating the truck again next year.

Question 8

The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit?

Accepted Answer

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

Question 9

In the short run, a profit-maximizing price taker will expand output as long as the market price exceeds

Accepted Answer

A)  average variable cost. 
B)  marginal cost. 
C)  average total cost. 
D)  average fixed cost. 
A)  average variable cost. 
B)  marginal cost. 
C)  average total cost. 
D)  average fixed cost.

Question 10

Historically, most economists have referred to markets where firms are price takers as

Accepted Answer

A)  purely competitive markets. 
B)  monopoly markets. 
C)  open-door markets. 
D)  price-searcher markets. 
A)  purely competitive markets. 
B)  monopoly markets. 
C)  open-door markets. 
D)  price-searcher markets.

Question 11

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

Accepted Answer

A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized. 
A)  total revenue is equal to variable cost. 
B)  total revenue is equal to fixed cost. 
C)  total revenue is equal to total cost. 
D)  profit is maximized.

Question 12

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 13

In a competitive price-taker market, the actions of any single buyer or seller will

Accepted Answer

A)  have a negligible impact on the market price. 
B)  have little effect on overall production but will ultimately change final product price. 
C)  cause a noticeable change in overall production and a change in final product price. 
D)  adversely affect the profitability of more than one firm in the market. 
A)  have a negligible impact on the market price. 
B)  have little effect on overall production but will ultimately change final product price. 
C)  cause a noticeable change in overall production and a change in final product price. 
D)  adversely affect the profitability of more than one firm in the market.

Question 14

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?

Accepted Answer

A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $1,400. 
E)  Stay at the current output; the firm is losing $1,400. 
A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $1,400. 
E)  Stay at the current output; the firm is losing $1,400.

Question 15

Use the figure to answer the following question(s).
Figure 9-8
 
If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.

Accepted Answer

A)  output, 15; total revenue, $45 
B)  output, 15; total revenue, $60 
C)  output, 17; total revenue, $68 (approx.) 
D)  output, 20; total revenue, $80 
A)  output, 15; total revenue, $45 
B)  output, 15; total revenue, $60 
C)  output, 17; total revenue, $68 (approx.) 
D)  output, 20; total revenue, $80

Question 16

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. 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 17

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 18

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

Accepted Answer

A)  Thelma must reduce output 
B)  the price Thelma can charge falls 
C)  the price Thelma can charge rises 
D)  the price Thelma can charge is unaffected 
E)  Thelma's profits must fall 
A)  Thelma must reduce output 
B)  the price Thelma can charge falls 
C)  the price Thelma can charge rises 
D)  the price Thelma can charge is unaffected 
E)  Thelma's profits must fall

Question 19

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

Accepted Answer

A)  the firms will earn long-run economic profit. 
B)  additional firms will be attracted into the market until price falls to the level of per-unit production cost. 
C)  the firms will earn short-run economic profits that will be offset by long-run economic losses. 
D)  the existing firms must be colluding or rigging the market, otherwise, they would be unable to charge such high prices. 
A)  the firms will earn long-run economic profit. 
B)  additional firms will be attracted into the market until price falls to the level of per-unit production cost. 
C)  the firms will earn short-run economic profits that will be offset by long-run economic losses. 
D)  the existing firms must be colluding or rigging the market, otherwise, they would be unable to charge such high prices.

Question 20

The schedule of total costs for a table-manufacturing company is presented in the table below. The firm sells its product in a price-taker market at $120 per table. What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

Accepted Answer

A)  $15 loss 
B)  zero 
C)  $5 profit 
D)  $10 profit 
A)  $15 loss 
B)  zero 
C)  $5 profit 
D)  $10 profit

Which of the following is a characteristic of a competitive price-taker market?

In the long run, in a price-taker market, the price of a good is determined primarily by the

When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because

The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price falls from P₃ to P₁, the firm finds that

Figure 9-1 Figure 9-1 shows the marginal and average total cost curves for a firm producing product A. What would be the minimum price this firm could charge and still continue to supply A to the market in the long run?

In the long run, in a price-taker market, the price of a good is determined primarily by the

The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit?

In the short run, a profit-maximizing price taker will expand output as long as the market price exceeds

Historically, most economists have referred to markets where firms are price takers as

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

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 a competitive price-taker market, the actions of any single buyer or seller will

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?

Use the figure to answer the following question(s). Figure 9-8 If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.

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

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

The schedule of total costs for a table-manufacturing company is presented in the table below. The firm sells its product in a price-taker market at $120 per table. What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

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

Which of the following is a characteristic of a competitive price-taker market?

In the long run, in a price-taker market, the price of a good is determined primarily by the

When entry barriers into a market are low, firms will tend to earn zero economic profit in the long run because

The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price falls from P3 to P1, the firm finds that

Figure 9-1 Figure 9-1 shows the marginal and average total cost curves for a firm producing product A. What would be the minimum price this firm could charge and still continue to supply A to the market in the long run?

In the long run, in a price-taker market, the price of a good is determined primarily by the

The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit?

In the short run, a profit-maximizing price taker will expand output as long as the market price exceeds

Historically, most economists have referred to markets where firms are price takers as

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

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 a competitive price-taker market, the actions of any single buyer or seller will

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?

Use the figure to answer the following question(s). Figure 9-8 If the market price in Figure 9-8 increases to $4, indicate the firm's profit-maximizing output and total revenue.

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

Suppose Thelma and Louise both sell fried green tomatoes in a competitive price-taker market. If Louise increases her output,

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

The schedule of total costs for a table-manufacturing company is presented in the table below. The firm sells its product in a price-taker market at $120 per table. What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

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 falls from P₃ to P₁, the firm finds that