Question 1

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 2

You are the owner of an ice cream shop that earns a profit most of the year except during the cold winter months. During the month of December, your rent and other fixed costs amount to a total of $200. If you remain open, your total variable costs (workers, ice cream cones, etc.) will amount to $300. If you would be able to sell 100 ice cream cones at $4 each during December, then

Accepted Answer

A) to maximize profits, you should remain open in December. 
B) to maximize profits, you should shut down in December. 
C) you will be able to avoid making a loss by shutting down in December. 
D) you should go out of business in the long run if there is any single month in which you do not earn a profit. 
A) to maximize profits, you should remain open in December. 
B) to maximize profits, you should shut down in December. 
C) you will be able to avoid making a loss by shutting down in December. 
D) you should go out of business in the long run if there is any single month in which you do not earn a profit.

Question 3

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 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

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 6

When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because

Accepted Answer

A) producers maximize short-run, not long-run, profits. 
B) over time, new firms will enter the industry and old firms will expand their operations in response to the price increase. 
C) consumers are less resistant to higher prices in the long run than in the short run because they have fewer options in the long run. 
D) consumer income will expand in the long run, causing resource prices to rise, which will induce producers to increase output. 
A) producers maximize short-run, not long-run, profits. 
B) over time, new firms will enter the industry and old firms will expand their operations in response to the price increase. 
C) consumers are less resistant to higher prices in the long run than in the short run because they have fewer options in the long run. 
D) consumer income will expand in the long run, causing resource prices to rise, which will induce producers to increase output.

Question 7

Figure 9-6
  
-If the market price in Figure 9-6 increases to $20, what should the firm do?

Accepted Answer

A) produce an output of 15 
B) expand output to 20 
C) expand output to 25 
D) increase its price to $25 
A) produce an output of 15 
B) expand output to 20 
C) expand output to 25 
D) increase its price to $25

Question 8

In a price-taker market, the short-run market supply curve is the

Accepted Answer

A) vertical sum of the marginal cost curves of all firms in the market. 
B) vertical sum of the average variable cost curves of all firms. 
C) horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D) horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price. 
A) vertical sum of the marginal cost curves of all firms in the market. 
B) vertical sum of the average variable cost curves of all firms. 
C) horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D) horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price.

Question 9

Regardless of quantity in long-run equilibrium, the competitive price-taker market price cannot exceed the

Accepted Answer

A) long-run average cost of supplying that quantity. 
B) total variable cost of supplying that quantity. 
C) long-run total cost of supplying that quantity. 
D) minimum long-run marginal cost of supplying that quantity. 
A) long-run average cost of supplying that quantity. 
B) total variable cost of supplying that quantity. 
C) long-run total cost of supplying that quantity. 
D) minimum long-run marginal cost of supplying that quantity.

Question 10

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 11

The usefulness of the price-taker model requires that the firm's decision makers

Accepted Answer

A) act to maximize their total revenue and fully understand marginal costs and marginal revenues. 
B) be able to draw accurate marginal cost and marginal revenue curves. 
C) place the social interest of the economy above their individual self interests. 
D) seek to maximize the profits of the firm. 
A) act to maximize their total revenue and fully understand marginal costs and marginal revenues. 
B) be able to draw accurate marginal cost and marginal revenue curves. 
C) place the social interest of the economy above their individual self interests. 
D) seek to maximize the profits of the firm.

Question 12

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 13

The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

Accepted Answer

A) This firm should shut down immediately. 
B) This firm is earning positive economic profit. 
C) This firm is able to cover its variable cost but not its total cost. 
D) All of the above are true. 
A) This firm should shut down immediately. 
B) This firm is earning positive economic profit. 
C) This firm is able to cover its variable cost but not its total cost. 
D) All of the above are true.

Question 14

A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now

Accepted Answer

A) greater than 3,000 and profit decreases 
B) less than 3,000 and profit decreases 
C) greater than 3,000 and profit is unchanged 
D) equal to 3,000 and profit decreases 
E) equal to 3,000 and profit increases 
A) greater than 3,000 and profit decreases 
B) less than 3,000 and profit decreases 
C) greater than 3,000 and profit is unchanged 
D) equal to 3,000 and profit decreases 
E) equal to 3,000 and profit increases

Question 15

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 16

A price-taker firm will tend to expand its output so long as its

Accepted Answer

A) marginal revenue is positive. 
B) marginal revenue is greater than the market price. 
C) marginal revenue is less than the market price. 
D) marginal cost is less than the market price. 
A) marginal revenue is positive. 
B) marginal revenue is greater than the market price. 
C) marginal revenue is less than the market price. 
D) marginal cost is less than the market price.

Question 17

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.

Question 18

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 19

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 20

Figure 9-11
  
-If the current market price for the firm depicted in Figure 9-11 is A, given the firm's cost conditions, which output should it produce?

Accepted Answer

A) OM 
B) OL 
C) OK 
D) OI 
A) OM 
B) OL 
C) OK 
D) OI

Exam 9: A: Price Takers and the Competitive Process

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?

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

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

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?

When the price of a product rises, the increase in quantity supplied will generally be greater in the long run than the short run because

Figure 9-6 -If the market price in Figure 9-6 increases to $20, what should the firm do?

In a price-taker market, the short-run market supply curve is the

Regardless of quantity in long-run equilibrium, the competitive price-taker market price cannot exceed the

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

The usefulness of the price-taker model requires that the firm's decision makers

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?

The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure?

A firm in competitive price-taker market is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now

Figure 9-3 -For Figure 9-3, if the market price is $30, indicate the firm's profit-maximizing output and maximum profit.

A price-taker firm will tend to expand its output so long as its

The marginal revenue of a price taker is

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

Figure 9-19 -Refer to Figure 9-19. Given the current market conditions, in the long run,

Figure 9-11 -If the current market price for the firm depicted in Figure 9-11 is A, given the firm's cost conditions, which output should it produce?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: 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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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