Question 1

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 2

A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit?

Accepted Answer

A)  Shut down. 
B)  Increase output. 
C)  Stay at current output. 
D)  Decrease output. 
E)  Decrease price. 
A)  Shut down. 
B)  Increase output. 
C)  Stay at current output. 
D)  Decrease output. 
E)  Decrease price.

Question 3

Which of the following business decisions will be made by firms that are price searchers but not those that are price takers?

Accepted Answer

A)  What combination of resources should be used to produce a product that is supplied? 
B)  What output should be produced? 
C)  What price should be charged? 
D)  What legal structure of business organization (for example, a proprietorship or corporation) should be used? 
A)  What combination of resources should be used to produce a product that is supplied? 
B)  What output should be produced? 
C)  What price should be charged? 
D)  What legal structure of business organization (for example, a proprietorship or corporation) should be used?

Question 4

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 5

Use the figure to answer the following question(s).
Figure 9-4
 
Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

Accepted Answer

A)  go out of business since it cannot make a profit 
B)  produce an output of 3 million 
C)  produce an output of 5 million 
D)  produce an output of 6 million 
A)  go out of business since it cannot make a profit 
B)  produce an output of 3 million 
C)  produce an output of 5 million 
D)  produce an output of 6 million

Question 6

When firms have an incentive to exit a competitive price-taker market, their exit will

Accepted Answer

A)  lower market price. 
B)  necessarily raise the costs of firms that remain in the market. 
C)  raise profits for firms that remain in the market. 
D)  reduce demand for the product. 
A)  lower market price. 
B)  necessarily raise the costs of firms that remain in the market. 
C)  raise profits for firms that remain in the market. 
D)  reduce demand for the product.

Question 7

If profit-seeking entrepreneurs are going to be successful, they must

Accepted Answer

A)  produce a product that the consumers value more than the resources required for its production. 
B)  produce the product more cheaply than their rivals regardless of quality. 
C)  maximize the salaries of high-level management so they will be able to attract people who will work hard. 
D)  charge a higher price than their competitors so they can make economic profits in the long run. 
A)  produce a product that the consumers value more than the resources required for its production. 
B)  produce the product more cheaply than their rivals regardless of quality. 
C)  maximize the salaries of high-level management so they will be able to attract people who will work hard. 
D)  charge a higher price than their competitors so they can make economic profits in the long run.

Question 8

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should

Accepted Answer

A)  increase output 
B)  reduce output but not to zero 
C)  maintain the present rate of output 
D)  shut down 
E)  raise the price 
A)  increase output 
B)  reduce output but not to zero 
C)  maintain the present rate of output 
D)  shut down 
E)  raise the price

Question 9

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s).
Figure 9-19
 
Refer to Figure 9-19. Given the current market conditions, in the long run,

Accepted Answer

A)  new firms will enter the industry and market price will fall. 
B)  firms will exit the industry and market price will rise. 
C)  firms will neither enter nor exit because the market is in long-run equilibrium. 
D)  firms will continue to suffer economic losses. 
A)  new firms will enter the industry and market price will fall. 
B)  firms will exit the industry and market price will rise. 
C)  firms will neither enter nor exit because the market is in long-run equilibrium. 
D)  firms will continue to suffer economic losses.

Question 10

Use the figure to answer the following question(s).
Figure 9-3
 
For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

Accepted Answer

A)  profit-maximizing output, 125; maximum profit, zero 
B)  profit-maximizing output, 125; maximum profit, between $1,000 and $1,250 
C)  profit-maximizing output, 150; maximum profit, $1,500 
D)  profit-maximizing output, 150; maximum profit, between $1,250 and $1,500 
A)  profit-maximizing output, 125; maximum profit, zero 
B)  profit-maximizing output, 125; maximum profit, between $1,000 and $1,250 
C)  profit-maximizing output, 150; maximum profit, $1,500 
D)  profit-maximizing output, 150; maximum profit, between $1,250 and $1,500

Question 11

Which of the following is the best example of a business firm operating in a competitive price-taker market?

Accepted Answer

A)  TGIFriday's, a restaurant chain that operates in numerous locations 
B)  a bookstore located a few blocks from a major university 
C)  Ford Motor company, a major manufacturer of automobiles that operates in numerous markets throughout the world 
D)  an Indiana hog farmer that raises pigs 
A)  TGIFriday's, a restaurant chain that operates in numerous locations 
B)  a bookstore located a few blocks from a major university 
C)  Ford Motor company, a major manufacturer of automobiles that operates in numerous markets throughout the world 
D)  an Indiana hog farmer that raises pigs

Question 12

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Accepted Answer

A)  short run, $.25; long run, more than $.25 
B)  short run, less than $.25; long run, $.25 
C)  short run, less than $.25; long run, more than $.25 
D)  short run, $.25; long run, less than $.25 
A)  short run, $.25; long run, more than $.25 
B)  short run, less than $.25; long run, $.25 
C)  short run, less than $.25; long run, more than $.25 
D)  short run, $.25; long run, less than $.25

Question 13

Use the figure to answer the following question(s).
Figure 9-3
 
For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

Accepted Answer

A)  profit-maximizing output, 125; maximum profit, zero 
B)  profit-maximizing output, 125; maximum profit, between $1,000 and $1,250 
C)  profit-maximizing output, 150; maximum profit, $1,500 
D)  profit-maximizing output, 150; maximum profit, between $1,250 and $1,500 
A)  profit-maximizing output, 125; maximum profit, zero 
B)  profit-maximizing output, 125; maximum profit, between $1,000 and $1,250 
C)  profit-maximizing output, 150; maximum profit, $1,500 
D)  profit-maximizing output, 150; maximum profit, between $1,250 and $1,500

Question 14

The following table gives the average total cost of production for various levels of output for a competitive price-taker firm
  If the firm's fixed cost of production is $3 and the market price is $10, how many units should the firm produce to maximize its profit?

Accepted Answer

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

Question 15

A firm that is a price taker can

Accepted Answer

A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product. 
A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product.

Question 16

Figure 9-16  
If the price-taker firm in Figure 9-16 is currently producing 6 units, then to maximize profit in the short run, it should

Accepted Answer

A)  keep producing 6 units 
B)  increase production to 12 units 
C)  increase production to 14 units 
D)  increase production to 8 units 
E)  shut down 
A)  keep producing 6 units 
B)  increase production to 12 units 
C)  increase production to 14 units 
D)  increase production to 8 units 
E)  shut down

Question 17

Fun Time Inc. uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer. Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below. Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business.
  Which of the following should Fun Time do if it wants to maximize its profit?

Accepted Answer

A)  operate in both the winter and summer 
B)  operate in the summer, but shut down during the winner 
C)  operate in the winter, but shut down during the summer 
D)  go out of business immediately 
A)  operate in both the winter and summer 
B)  operate in the summer, but shut down during the winner 
C)  operate in the winter, but shut down during the summer 
D)  go out of business immediately

Question 18

If consumers suddenly began desiring more apples and fewer oranges,

Accepted Answer

A)  the market price of apples would rise, creating short-run economic profits in the apple industry. Current firms will expand output and new firms will enter the industry. 
B)  the market price of oranges would fall, creating short-run economic losses in the orange industry. Current firms will reduce output and some will go out of business in the long run. 
C)  neither a nor b are correct. 
D)  both a and b are correct. 
A)  the market price of apples would rise, creating short-run economic profits in the apple industry. Current firms will expand output and new firms will enter the industry. 
B)  the market price of oranges would fall, creating short-run economic losses in the orange industry. Current firms will reduce output and some will go out of business in the long run. 
C)  neither a nor b are correct. 
D)  both a and b are correct.

Question 19

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

Accepted Answer

A)  reflect a waste of society's scarce resources and reflect inefficient production. 
B)  signal owners of factors of production to move their resources out of that industry. 
C)  imply that accounting costs are greater than economic costs in this industry. 
D)  signal owners of factors of production to move resources into this industry. 
A)  reflect a waste of society's scarce resources and reflect inefficient production. 
B)  signal owners of factors of production to move their resources out of that industry. 
C)  imply that accounting costs are greater than economic costs in this industry. 
D)  signal owners of factors of production to move resources into this industry.

Question 20

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

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

A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit?

Which of the following business decisions will be made by firms that are price searchers but not those that are price takers?

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

Use the figure to answer the following question(s). Figure 9-4 Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

When firms have an incentive to exit a competitive price-taker market, their exit will

If profit-seeking entrepreneurs are going to be successful, they must

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s). Figure 9-19 Refer to Figure 9-19. Given the current market conditions, in the long run,

Use the figure to answer the following question(s). Figure 9-3 For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

Which of the following is the best example of a business firm operating in a competitive price-taker market?

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Use the figure to answer the following question(s). Figure 9-3 For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

The following table gives the average total cost of production for various levels of output for a competitive price-taker firm If the firm's fixed cost of production is $3 and the market price is $10, how many units should the firm produce to maximize its profit?

A firm that is a price taker can

Figure 9-16 If the price-taker firm in Figure 9-16 is currently producing 6 units, then to maximize profit in the short run, it should

If consumers suddenly began desiring more apples and fewer oranges,

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

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

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

A firm is currently operating where the MC of the last unit produced is $64, and the MR of this unit is $70. Which of the following would increase profit?

Which of the following business decisions will be made by firms that are price searchers but not those that are price takers?

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

Use the figure to answer the following question(s). Figure 9-4 Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

When firms have an incentive to exit a competitive price-taker market, their exit will

If profit-seeking entrepreneurs are going to be successful, they must

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should

The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s). Figure 9-19 Refer to Figure 9-19. Given the current market conditions, in the long run,

Use the figure to answer the following question(s). Figure 9-3 For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

Which of the following is the best example of a business firm operating in a competitive price-taker market?

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Use the figure to answer the following question(s). Figure 9-3 For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

The following table gives the average total cost of production for various levels of output for a competitive price-taker firm If the firm's fixed cost of production is $3 and the market price is $10, how many units should the firm produce to maximize its profit?

A firm that is a price taker can

Figure 9-16 If the price-taker firm in Figure 9-16 is currently producing 6 units, then to maximize profit in the short run, it should

If consumers suddenly began desiring more apples and fewer oranges,

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

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