Question 1

The supply curve of good A,and the supply curve if good B are both depicted in the following graph.Which statement is true?

Accepted Answer

A)  Supply of good A is more elastic than the supply of good B. 
B)  Supply of good B is more elastic than the supply of good B. 
C)  Supply of good A is unit elastic. 
D)  Supply of good B is perfectly inelastic. 
A)  Supply of good A is more elastic than the supply of good B. 
B)  Supply of good B is more elastic than the supply of good B. 
C)  Supply of good A is unit elastic. 
D)  Supply of good B is perfectly inelastic. B

Question 2

Which of the costs below is an example of a fixed cost in the short run?

Accepted Answer

A)  The cost of paper to a copy shop 
B)  The wages paid to workers at a landscaping firm 
C)  Fuel costs to a taxicab service 
D)  A 3-year lease on retail space at the local mall for a clothing retailer 
A)  The cost of paper to a copy shop 
B)  The wages paid to workers at a landscaping firm 
C)  Fuel costs to a taxicab service 
D)  A 3-year lease on retail space at the local mall for a clothing retailer D

Question 3

When price is less than the firms' minimum average total cost in a perfectly competitive market in the long run,________.

Accepted Answer

A)  new firms will enter the market 
B)  existing firms will leave the market 
C)  prices are likely to fall further 
D)  firms' profits are likely to be their maximum 
A)  new firms will enter the market 
B)  existing firms will leave the market 
C)  prices are likely to fall further 
D)  firms' profits are likely to be their maximum B

Question 4

Suppose ethanol is produced in a perfectly competitive market.If a subsidy is paid to ethanol producers,the ethanol producers' profit will ________.

Accepted Answer

A)  increase in the short run but reduce to zero in the long run 
B)  increase in the short run and in the long run 
C)  increase in the short run but become negative in the long run 
D)  decrease in the short run but reduce to zero in the long run 
A)  increase in the short run but reduce to zero in the long run 
B)  increase in the short run and in the long run 
C)  increase in the short run but become negative in the long run 
D)  decrease in the short run but reduce to zero in the long run

Question 5

The entry and exit of firms in a perfectly competitive market is mostly dependent on ________.

Accepted Answer

A)  the number of firms in the market 
B)  government regulations 
C)  the profitability of the existing firms 
D)  the number of consumers in the market 
A)  the number of firms in the market 
B)  government regulations 
C)  the profitability of the existing firms 
D)  the number of consumers in the market

Question 6

Which of the following statements is true?

Accepted Answer

A)  The number of firms in the industry is fixed in the short run, but the number can change in the long run. 
B)  Free entry and exit of firms is possible in the short run, but the entry and exit of firms is restricted in the long run. 
C)  The short-run average cost curves lies below the long-run average cost curves in both the short run and the long run. 
D)  A firm can vary all its factors of production in both the short run and the long run. 
A)  The number of firms in the industry is fixed in the short run, but the number can change in the long run. 
B)  Free entry and exit of firms is possible in the short run, but the entry and exit of firms is restricted in the long run. 
C)  The short-run average cost curves lies below the long-run average cost curves in both the short run and the long run. 
D)  A firm can vary all its factors of production in both the short run and the long run.

Question 7

Suppose the market for AR-15 style rifles in the United States was in an initial long-run equilibrium.In the fall of 2012,the demand for these rifles increased substantially due to concerns that President Obama would either ban or restrict the sale of these semi-automatic rifles.As a result,the market price of these rifles increased,and gun manufacturers earned positive economic profits (shown in the figure below).
 
The presence of economic profits in the short-run will lead to the ________.

Accepted Answer

A)  entry of new firms and cause the market supply curve to shift out until the final market price equals the minimum of the average total cost for the representative firm 
B)  entry of new firms and cause the market demand curve to shift in until the final market price equals the minimum of the average total cost for the representative firm 
C)  exit of existing firms from the industry and cause the market supply curve to shift in, raising profits for existing firms 
D)  exit of existing firms from the industry and cause the market demand curve to shift in until the final market price equals the minimum of the average total cost for the representative firm 
A)  entry of new firms and cause the market supply curve to shift out until the final market price equals the minimum of the average total cost for the representative firm 
B)  entry of new firms and cause the market demand curve to shift in until the final market price equals the minimum of the average total cost for the representative firm 
C)  exit of existing firms from the industry and cause the market supply curve to shift in, raising profits for existing firms 
D)  exit of existing firms from the industry and cause the market demand curve to shift in until the final market price equals the minimum of the average total cost for the representative firm

Question 8

Scenario: In 2012, the company behind the EpiPen settled a lawsuit by agreeing to allow a generic competitor into the market in 2015, potentially cutting into a big part of its business. The company, Mylan, had already been steadily increasing the price of EpiPen, an injector containing a drug that can save people from life-threatening allergy attacks. After the settlement, it started to raise the price even faster. Now, as Mylan faces growing public furor over its pricing of EpiPen, the company's history of pricing the product highlights a common tactic in the drug industry: sharply raising prices in the years just before a generic competitor reaches the market, as a sort of final attempt to milk big profits from the brand-name drug. Whether the looming generic competition was a motive for the price increases is not entirely clear, because Mylan has declined to answer questions about its thinking. But while the company was once taking two 10 percent price increases a year, it has made two 15 percent increases annually starting in 2014, when the generic competition seemed imminent. Over all, the list price for a pack of two EpiPens is now over $600, up from a little more than $100 in 2007, the year Mylan acquired the product. Most of that increase-a rise to $609 from $265-has come in the last three years. (Source: "Mylan Raised EpiPen's Price Before the Expected Arrival of a Generic," New York Times, August 24, 2016.)
-Refer to the scenario above.Which condition of a perfectly competitive market could most directly be hampered in the market for epinephrine autoinjectors?

Accepted Answer

A)  Each seller produces a negligible fraction of the total market supply. 
B)  Each seller produces an identical good or service. 
C)  There is free entry to and exit from the market. 
D)  None. The market for the product satisfies all the condition for perfect competition. 
A)  Each seller produces a negligible fraction of the total market supply. 
B)  Each seller produces an identical good or service. 
C)  There is free entry to and exit from the market. 
D)  None. The market for the product satisfies all the condition for perfect competition.

Question 9

Gary produces handmade baseball gloves.On any given working day,it costs Gary $50 to make the first glove,$60 to make the second,$80 to make the third,and $110 to make the fourth glove.What should Gary do?

Accepted Answer

A)  He should shut down production. 
B)  He should not shut down production. 
C)  He should produce more than what he is currently producing. 
D)  There is not enough information provided to answer. 
A)  He should shut down production. 
B)  He should not shut down production. 
C)  He should produce more than what he is currently producing. 
D)  There is not enough information provided to answer.

Question 10

If marginal cost is less than average total cost,________.

Accepted Answer

A)  output must be falling 
B)  average total cost must be decreasing 
C)  average total cost must be increasing 
D)  marginal cost must be increasing 
A)  output must be falling 
B)  average total cost must be decreasing 
C)  average total cost must be increasing 
D)  marginal cost must be increasing

Question 11

The profits of a firm equal ________.

Accepted Answer

A)  total revenues minus marginal costs 
B)  the price charged by the firm minus fixed costs 
C)  total revenues minus total costs 
D)  its total revenues 
A)  total revenues minus marginal costs 
B)  the price charged by the firm minus fixed costs 
C)  total revenues minus total costs 
D)  its total revenues

Question 12

Which of the following statements is true in the short run?

Accepted Answer

A)  Only some of a firm's input can be varied. 
B)  All firms earn zero economic profits. 
C)  All factors of production can be changed. 
D)  All factors of production are fixed. 
A)  Only some of a firm's input can be varied. 
B)  All firms earn zero economic profits. 
C)  All factors of production can be changed. 
D)  All factors of production are fixed.

Question 13

The long-run average total cost (LRATC)shown below exhibits ________.

Accepted Answer

A)  economies of scale over all levels of output 
B)  constant returns to scale over all levels of output 
C)  diseconomies of scale over all levels of output 
D)  none of the above 
A)  economies of scale over all levels of output 
B)  constant returns to scale over all levels of output 
C)  diseconomies of scale over all levels of output 
D)  none of the above

Question 14

Given the following price,quantity,and cost numbers,estimate the profit-maximizing output,assuming that the firm is operating in a perfectly competitive market.What is the fixed cost that the firm faces? What is the profit at the profit-maximizing output?

Accepted Answer

A fixed cost is the cost that a firm inc

Question 15

In a perfectly competitive market,a marginal entrant ________.

Accepted Answer

A)  earns positive economic profits in the long run 
B)  is the first firm to enter the market 
C)  is indifferent between entering and not entering the market 
D)  determines the market price of the good it produces 
A)  earns positive economic profits in the long run 
B)  is the first firm to enter the market 
C)  is indifferent between entering and not entering the market 
D)  determines the market price of the good it produces

Question 16

Is the producer surplus same as the profit?

Accepted Answer

A)  Yes, they are the same, because the producer surplus is the sum of profits from each unit sold. 
B)  Yes, they are the same, because the profit is the revenue minus the sum of marginal costs of each unit sold. 
C)  No, they are different, because the profit is always at least the producer surplus. 
D)  No, they are different, because the producer surplus does not take into account the fixed cost. 
A)  Yes, they are the same, because the producer surplus is the sum of profits from each unit sold. 
B)  Yes, they are the same, because the profit is the revenue minus the sum of marginal costs of each unit sold. 
C)  No, they are different, because the profit is always at least the producer surplus. 
D)  No, they are different, because the producer surplus does not take into account the fixed cost.

Question 17

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves.
  
-Refer to the figure above.The firm is currently producing at point D.What prevents the firm from producing at E?

Accepted Answer

A)  Beyond D, the cost of labor becomes too expensive. 
B)  The firm can produce at E in the short run but decides not to do so, because at D the firm maximizes profits. 
C)  Producing at E is currently impossible, because too much time is needed to gather the level of capital to produce at E. 
D)  It is uncertain if producing at E is better than producing at D, because prices are likely to rise in the future. 
A)  Beyond D, the cost of labor becomes too expensive. 
B)  The firm can produce at E in the short run but decides not to do so, because at D the firm maximizes profits. 
C)  Producing at E is currently impossible, because too much time is needed to gather the level of capital to produce at E. 
D)  It is uncertain if producing at E is better than producing at D, because prices are likely to rise in the future.

Question 18

If a firm's supply curve is linear qˢ = p with a slope of 1 (see the graph below),
 
Then the firm's price elasticity of supply is ________.

Accepted Answer

A)  perfectly inelastic (zero) 
B)  perfectly elastic (+∞) 
C)  unit elastic 
D)  elastic 
A)  perfectly inelastic (zero) 
B)  perfectly elastic (+∞) 
C)  unit elastic 
D)  elastic

Question 19

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank.
  
-Refer to the table above.What is the total cost of producing 5 units of output?

Accepted Answer

A)  $100 
B)  $120 
C)  $110 
D)  $30 
A)  $100 
B)  $120 
C)  $110 
D)  $30

Question 20

Scenario: A car repair shop hires workers and pays them the federal minimum wage of $7.25. The following table shows the marginal returns to each worker in terms of number of cars repaired.
  
-Refer to the scenario above.Which statement is true?

Accepted Answer

A)  When this firm hires its third worker, the new worker will add 8 more repaired cars to the firm's output. 
B)  When this firm hires its third worker, the total number of repaired cars in this shop will be 8. 
C)  When this firm hires its third worker, the new worker will add 1 less repaired car to the firm's output. 
D)  When this firm hires its third worker, the new worker will add 1 more repaired car to the firm's output. 
A)  When this firm hires its third worker, the new worker will add 8 more repaired cars to the firm's output. 
B)  When this firm hires its third worker, the total number of repaired cars in this shop will be 8. 
C)  When this firm hires its third worker, the new worker will add 1 less repaired car to the firm's output. 
D)  When this firm hires its third worker, the new worker will add 1 more repaired car to the firm's output.

The supply curve of good A,and the supply curve if good B are both depicted in the following graph.Which statement is true?

Which of the costs below is an example of a fixed cost in the short run?

When price is less than the firms' minimum average total cost in a perfectly competitive market in the long run,________.

Suppose ethanol is produced in a perfectly competitive market.If a subsidy is paid to ethanol producers,the ethanol producers' profit will ________.

The entry and exit of firms in a perfectly competitive market is mostly dependent on ________.

Which of the following statements is true?

Gary produces handmade baseball gloves.On any given working day,it costs Gary $50 to make the first glove,$60 to make the second,$80 to make the third,and $110 to make the fourth glove.What should Gary do?

If marginal cost is less than average total cost,________.

The profits of a firm equal ________.

Which of the following statements is true in the short run?

The long-run average total cost (LRATC)shown below exhibits ________.

Given the following price,quantity,and cost numbers,estimate the profit-maximizing output,assuming that the firm is operating in a perfectly competitive market.What is the fixed cost that the firm faces? What is the profit at the profit-maximizing output?

In a perfectly competitive market,a marginal entrant ________.

Is the producer surplus same as the profit?

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves. -Refer to the figure above.The firm is currently producing at point D.What prevents the firm from producing at E?

If a firm's supply curve is linear qˢ = p with a slope of 1 (see the graph below), Then the firm's price elasticity of supply is ________.

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank. -Refer to the table above.What is the total cost of producing 5 units of output?

Scenario: A car repair shop hires workers and pays them the federal minimum wage of $7.25. The following table shows the marginal returns to each worker in terms of number of cars repaired. -Refer to the scenario above.Which statement is true?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

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Exam 6: Sellers and Incentives

The supply curve of good A,and the supply curve if good B are both depicted in the following graph.Which statement is true?

Which of the costs below is an example of a fixed cost in the short run?

When price is less than the firms' minimum average total cost in a perfectly competitive market in the long run,________.

Suppose ethanol is produced in a perfectly competitive market.If a subsidy is paid to ethanol producers,the ethanol producers' profit will ________.

The entry and exit of firms in a perfectly competitive market is mostly dependent on ________.

Which of the following statements is true?

Gary produces handmade baseball gloves.On any given working day,it costs Gary $50 to make the first glove,$60 to make the second,$80 to make the third,and $110 to make the fourth glove.What should Gary do?

If marginal cost is less than average total cost,________.

The profits of a firm equal ________.

Which of the following statements is true in the short run?

The long-run average total cost (LRATC)shown below exhibits ________.

Given the following price,quantity,and cost numbers,estimate the profit-maximizing output,assuming that the firm is operating in a perfectly competitive market.What is the fixed cost that the firm faces? What is the profit at the profit-maximizing output?

In a perfectly competitive market,a marginal entrant ________.

Is the producer surplus same as the profit?

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves. -Refer to the figure above.The firm is currently producing at point D.What prevents the firm from producing at E?

If a firm's supply curve is linear qˢ = p with a slope of 1 (see the graph below), Then the firm's price elasticity of supply is ________.

The following table shows the total output, variable costs, fixed costs, total costs, average total costs, and marginal costs of a firm, with some cells in the table intentionally left blank. -Refer to the table above.What is the total cost of producing 5 units of output?

Scenario: A car repair shop hires workers and pays them the federal minimum wage of $7.25. The following table shows the marginal returns to each worker in terms of number of cars repaired. -Refer to the scenario above.Which statement is true?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters