Question 1

If a price-taker industry is in long-run equilibrium, the market price in the industry will be just sufficient to cover the firm's average

Accepted Answer

A)  total costs. 
B)  fixed costs. 
C)  variable costs. 
D)  variable costs plus a 10 percent accounting profit. 
A)  total costs. 
B)  fixed costs. 
C)  variable costs. 
D)  variable costs plus a 10 percent accounting profit.

Question 2

If long-run equilibrium is present in a competitive market, the typical firm in the market will be

Accepted Answer

A)  making economic losses. 
B)  making zero economic profit. 
C)  making economic profit. 
D)  making a rate of return that is higher than the rate earned in other industries. 
E)  both c and d are correct. 
A)  making economic losses. 
B)  making zero economic profit. 
C)  making economic profit. 
D)  making a rate of return that is higher than the rate earned in other industries. 
E)  both c and d are correct.

Question 3

When a firm is operating in a price-taker market, marginal revenue is

Accepted Answer

A)  equal to price. 
B)  always less than price. 
C)  equal to zero when the market is in long-run equilibrium. 
D)  equal to the change in output divided by the change in total revenue. 
A)  equal to price. 
B)  always less than price. 
C)  equal to zero when the market is in long-run equilibrium. 
D)  equal to the change in output divided by the change in total revenue.

Question 4

Why is it considered "ideal" for price to just equal marginal cost?

Accepted Answer

When price equals marginal cost, the cos

Question 5

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 6

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

Accepted Answer

A)  marginal cost curve. 
B)  average total cost curve. 
C)  average variable cost curve. 
D)  market demand curve. 
A)  marginal cost curve. 
B)  average total cost curve. 
C)  average variable cost curve. 
D)  market demand curve.

Question 7

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

Accepted Answer

A)  MC curves above AVC. 
B)  AVC curves above marginal revenue. 
C)  MC curves above ATC. 
D)  MC curves between AVC and ATC. 
A)  MC curves above AVC. 
B)  AVC curves above marginal revenue. 
C)  MC curves above ATC. 
D)  MC curves between AVC and ATC.

Question 8

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 9

In the absence of government regulation, which of the following products would most closely fit the competitive price-taker (purely competitive) model?

Accepted Answer

A)  beer because there are many consumers 
B)  cigarettes because there are several alternative brands that look similar 
C)  milk because there are many dairy farmers producing a virtually identical product 
D)  automobiles because there are substantial economies of scale in production 
A)  beer because there are many consumers 
B)  cigarettes because there are several alternative brands that look similar 
C)  milk because there are many dairy farmers producing a virtually identical product 
D)  automobiles because there are substantial economies of scale in production

Question 10

If the demand for a product increases in an increasing-cost industry, as the market adjusts in the long run, production costs for all firms will

Accepted Answer

A)  rise as new firms enter the industry. 
B)  fall as new firms enter the industry. 
C)  remain unchanged. 
D)  fall as firms exit the industry. 
A)  rise as new firms enter the industry. 
B)  fall as new firms enter the industry. 
C)  remain unchanged. 
D)  fall as firms exit the industry.

Question 11

The dynamic process of competition

Accepted Answer

A)  is hindered by the self-interest of business decision makers. 
B)  puts the profit motive of sellers to work for buyers. 
C)  conflicts with the interest of consumers when businesses pursue profit rather than the public interest. 
D)  will permit business decision makers to earn long-run economic profit unless they are regulated by government. 
A)  is hindered by the self-interest of business decision makers. 
B)  puts the profit motive of sellers to work for buyers. 
C)  conflicts with the interest of consumers when businesses pursue profit rather than the public interest. 
D)  will permit business decision makers to earn long-run economic profit unless they are regulated by government.

Question 12

A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because

Accepted Answer

A)  it would find it too difficult to exit from the industry in the long run. 
B)  accounting profit would be negative. 
C)  it is covering all costs, including the opportunity cost of capital and labor. 
D)  its sunk costs would prevent it from leaving the industry. 
A)  it would find it too difficult to exit from the industry in the long run. 
B)  accounting profit would be negative. 
C)  it is covering all costs, including the opportunity cost of capital and labor. 
D)  its sunk costs would prevent it from leaving the industry.

Question 13

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 14

If a firm is a price taker and wants to earn as much profit as possible, it should expand output

Accepted Answer

A)  to the quantity at which marginal cost is minimized. 
B)  as long as marginal cost is less than price. 
C)  to the quantity at which average total costs are minimized. 
D)  to try to sell all the output it can produce so that its average fixed costs will be minimized. 
A)  to the quantity at which marginal cost is minimized. 
B)  as long as marginal cost is less than price. 
C)  to the quantity at which average total costs are minimized. 
D)  to try to sell all the output it can produce so that its average fixed costs will be minimized.

Question 15

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

Accepted Answer

A)  opportunity cost 
B)  earnings of employees 
C)  economic profit 
D)  interest earnings of corporate bondholders 
A)  opportunity cost 
B)  earnings of employees 
C)  economic profit 
D)  interest earnings of corporate bondholders

Question 16

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

Accepted Answer

A)  could increase your profit by expanding output. 
B)  could increase your profit by decreasing output. 
C)  are maximizing your profit at your current output level. 
D)  will be able to earn positive economic profits in the long run. 
A)  could increase your profit by expanding output. 
B)  could increase your profit by decreasing output. 
C)  are maximizing your profit at your current output level. 
D)  will be able to earn positive economic profits in the long run.

Question 17

Figure 9-10  
In Figure 9-10, the movement from points A to B to C can best be explained by which of the following factors?

Accepted Answer

A)  a decrease in demand, followed by the entry of new firms and an expansion in supply in a constant cost industry. 
B)  an increase in demand, followed by the entry of new firms and an expansion in supply in an increasing cost industry. 
C)  a decrease in demand, followed by the exit of firms and a decline in supply in an increasing cost industry. 
D)  an increase in demand, followed by the exit of firms and a decline in supply in a constant cost industry. 
A)  a decrease in demand, followed by the entry of new firms and an expansion in supply in a constant cost industry. 
B)  an increase in demand, followed by the entry of new firms and an expansion in supply in an increasing cost industry. 
C)  a decrease in demand, followed by the exit of firms and a decline in supply in an increasing cost industry. 
D)  an increase in demand, followed by the exit of firms and a decline in supply in a constant cost industry.

Question 18

"I have been making furniture for 27 years. I have never heard of either marginal cost or marginal revenue. Fancy economic theories mean nothing to me. I just know how to do well in business. Whenever I can sell something for more than it cost me to produce it, I make it, and whenever I can't sell it for enough to cover my cost, I don't. That's how I stay in business and earn income for my family. Common sense and watching the market are good enough for me." For producers like this, economic models

Accepted Answer

A)  accurately describe their behavior and allow predictions to be made as to how they will respond to changes in market conditions. 
B)  indicate nothing about the behavior of such producers. 
C)  will generally only apply if the person has a college education. 
D)  do not apply because the producers do not understand the terminology. 
A)  accurately describe their behavior and allow predictions to be made as to how they will respond to changes in market conditions. 
B)  indicate nothing about the behavior of such producers. 
C)  will generally only apply if the person has a college education. 
D)  do not apply because the producers do not understand the terminology.

Question 19

Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum per-unit cost?

Accepted Answer

A)  homogeneous products. 
B)  few sellers. 
C)  firms face downward-sloping demand curves. 
D)  free entry and exit. 
A)  homogeneous products. 
B)  few sellers. 
C)  firms face downward-sloping demand curves. 
D)  free entry and exit.

Question 20

In a competitive price-taker market,

Accepted Answer

A)  many other sellers are offering a product that is essentially identical. 
B)  consumers have more influence over the market price than producers do. 
C)  government intervention prevents firms from influencing price. 
D)  producers agree not to change the price. 
A)  many other sellers are offering a product that is essentially identical. 
B)  consumers have more influence over the market price than producers do. 
C)  government intervention prevents firms from influencing price. 
D)  producers agree not to change the price.

If a price-taker industry is in long-run equilibrium, the market price in the industry will be just sufficient to cover the firm's average

If long-run equilibrium is present in a competitive market, the typical firm in the market will be

When a firm is operating in a price-taker market, marginal revenue is

Why is it considered "ideal" for price to just equal marginal cost?

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?

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

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

In the absence of government regulation, which of the following products would most closely fit the competitive price-taker (purely competitive) model?

If the demand for a product increases in an increasing-cost industry, as the market adjusts in the long run, production costs for all firms will

The dynamic process of competition

A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because

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

If a firm is a price taker and wants to earn as much profit as possible, it should expand output

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

Figure 9-10 In Figure 9-10, the movement from points A to B to C can best be explained by which of the following factors?

Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum per-unit cost?

In a competitive price-taker 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

If a price-taker industry is in long-run equilibrium, the market price in the industry will be just sufficient to cover the firm's average

If long-run equilibrium is present in a competitive market, the typical firm in the market will be

When a firm is operating in a price-taker market, marginal revenue is

Why is it considered "ideal" for price to just equal marginal cost?

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?

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

The short-run market supply curve in a price-taker industry equals the horizontal sum of the individual firm's

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

In the absence of government regulation, which of the following products would most closely fit the competitive price-taker (purely competitive) model?

If the demand for a product increases in an increasing-cost industry, as the market adjusts in the long run, production costs for all firms will

The dynamic process of competition

A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because

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

If a firm is a price taker and wants to earn as much profit as possible, it should expand output

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

Figure 9-10 In Figure 9-10, the movement from points A to B to C can best be explained by which of the following factors?

Which of the following best explains why price in competitive price-taker markets will tend to be driven to the minimum per-unit cost?

In a competitive price-taker 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