Question 1

Even if two competitive firms in the same market have different production technologies,they will each earn long-run zero profits.Why?

Accepted Answer

The firm that has more productive resources will have the cost of those resources bid up by the marketplace.The more productive the resource,the more expensive it will be.This price is bid up until the firm's profits are zero.The firm with less productive resources will also have zero profits because it is not paying as much for its resources.There is no such thing as a free lunch or a free productivity gain for competitive firms.

Question 2

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were zero,consumer surplus equals

Accepted Answer

A)  $301.00. 
B)  $924.50. 
C)  $1,225.50. 
D)  $1,250.00. 
A)  $301.00. 
B)  $924.50. 
C)  $1,225.50. 
D)  $1,250.00. D

Question 3

Suppose when a market has four firms,average economic profit is $1,000 per month.When the market has five firms,the average economic profit is -$50 per month.This suggests that

Accepted Answer

A)  the long-run equilibrium number of firms is between four and five. 
B)  the long-run equilibrium number of firms is four. 
C)  the long-run equilibrium number of firms is five. 
D)  there is no long-run equilibrium in this market as profits can never be zero. 
A)  the long-run equilibrium number of firms is between four and five. 
B)  the long-run equilibrium number of firms is four. 
C)  the long-run equilibrium number of firms is five. 
D)  there is no long-run equilibrium in this market as profits can never be zero. A

Question 4

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

Accepted Answer

A)  The supply curve of real estate brokers will shift to the left. 
B)  The supply curve of real estate brokers will shift to the right. 
C)  Social welfare will remain unchanged. 
D)  The supply curve will remain unchanged. 
A)  The supply curve of real estate brokers will shift to the left. 
B)  The supply curve of real estate brokers will shift to the right. 
C)  Social welfare will remain unchanged. 
D)  The supply curve will remain unchanged.

Question 5

-The above figure shows the market for rice in Japan where price is expressed in dollars.S represents the domestic supply curve,and the horizontal line at P = 1 represents the world supply curve.A $1 per unit tariff has the same effect on producer and consumer surplus as a quota of

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q2 - Q1 units. 
D)  Q1 - Q2 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q2 - Q1 units. 
D)  Q1 - Q2 units.

Question 6

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $2 per gallon price ceiling to ensure that children are nourished,estimate the change in p,Q,and social welfare.

Accepted Answer

At a price of $2,only 500 gall

Question 7

In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

Accepted Answer

A) True 
 B)False

Question 8

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.To maintain the price support,government expenditures must equal

Accepted Answer

A)  k + i. 
B)  f + g + h + i + j. 
C)  f + g + h + i + j + k. 
D)  f + g + h + i + j + k + e. 
A)  k + i. 
B)  f + g + h + i + j. 
C)  f + g + h + i + j + k. 
D)  f + g + h + i + j + k + e.

Question 9

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were $2.50,consumer surplus equals

Accepted Answer

A)  $301.00. 
B)  $924.50. 
C)  $1,225.50. 
D)  $0 
A)  $301.00. 
B)  $924.50. 
C)  $1,225.50. 
D)  $0

Question 10

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market?

Accepted Answer

A)  They value consumer surplus more than producer surplus. 
B)  They value producer surplus more than consumer surplus. 
C)  They seek to avoid future regulation. 
D)  They seek to minimize total surplus. 
A)  They value consumer surplus more than producer surplus. 
B)  They value producer surplus more than consumer surplus. 
C)  They seek to avoid future regulation. 
D)  They seek to minimize total surplus.

Question 11

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

Accepted Answer

A)  d. 
B)  d + e. 
C)  d + g. 
D)  d + c + g. 
A)  d. 
B)  d + e. 
C)  d + g. 
D)  d + c + g.

Question 12

A minimum wage is an example of a

Accepted Answer

A)  price floor. 
B)  price ceiling. 
C)  quantity quota. 
D)  free market equilibrium. 
A)  price floor. 
B)  price ceiling. 
C)  quantity quota. 
D)  free market equilibrium.

Question 13

Explain why the competitive output maximizes welfare.

Accepted Answer

If less output is produced,then the last

Question 14

Long-run economic profit does not exist for fixed factors like land because

Accepted Answer

A)  bidding drives up the price of the factor until no economic profit exists. 
B)  there is no market for such factors. 
C)  these factors have L-shaped isoquants. 
D)  these factors will earn economic profits. 
A)  bidding drives up the price of the factor until no economic profit exists. 
B)  there is no market for such factors. 
C)  these factors have L-shaped isoquants. 
D)  these factors will earn economic profits.

Question 15

If a city government enacts a maximum price on rent,

Accepted Answer

A)  quantity supplied will decrease. 
B)  quantity demanded will increase. 
C)  allocational problems develop. 
D)  All of the above. 
A)  quantity supplied will decrease. 
B)  quantity demanded will increase. 
C)  allocational problems develop. 
D)  All of the above.

Question 16

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

Accepted Answer

A)  0. 
B)  5.5. 
C)  12.5. 
D)  25. 
A)  0. 
B)  5.5. 
C)  12.5. 
D)  25.

Question 17

A competitive market maximizes social welfare because in a competitive market,

Accepted Answer

A)  profits are zero. 
B)  price equals marginal cost of the last unit produced. 
C)  price equals average cost of the last unit produced. 
D)  there is free entry and exit. 
A)  profits are zero. 
B)  price equals marginal cost of the last unit produced. 
C)  price equals average cost of the last unit produced. 
D)  there is free entry and exit.

Question 18

A firm that generates zero economic profit usually has

Accepted Answer

A)  negative business profit. 
B)  zero business profit. 
C)  positive business profit. 
D)  business profit equal to half the total revenue. 
A)  negative business profit. 
B)  zero business profit. 
C)  positive business profit. 
D)  business profit equal to half the total revenue.

Question 19

-The above figure shows supply and demand curves for milk.In an effort to help farms,the government passes a law that establishes a $3 per gallon price support,but allows farmers to decide how much milk to produce.The government then provides a deficiency payment to guarantee that the farmers receive $3 per gallon.The required deficiency payment equals

Accepted Answer

A)  b + c + f + g + h + i + j. 
B)  b + c + f + g + h + i. 
C)  f + g. 
D)  b + c. 
A)  b + c + f + g + h + i + j. 
B)  b + c + f + g + h + i. 
C)  f + g. 
D)  b + c.

Question 20

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

Accepted Answer

A)  there will be a decrease in consumer surplus. 
B)  the remaining taxi cab drivers will make positive economic profits. 
C)  there will be an increase in producer surplus. 
D)  All of the above. 
A)  there will be a decrease in consumer surplus. 
B)  the remaining taxi cab drivers will make positive economic profits. 
C)  there will be an increase in producer surplus. 
D)  All of the above.

Even if two competitive firms in the same market have different production technologies,they will each earn long-run zero profits.Why?

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were zero,consumer surplus equals

Suppose when a market has four firms,average economic profit is $1,000 per month.When the market has five firms,the average economic profit is -$50 per month.This suggests that

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

-The above figure shows the market for rice in Japan where price is expressed in dollars.S represents the domestic supply curve,and the horizontal line at P = 1 represents the world supply curve.A $1 per unit tariff has the same effect on producer and consumer surplus as a quota of

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $2 per gallon price ceiling to ensure that children are nourished,estimate the change in p,Q,and social welfare.

In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.To maintain the price support,government expenditures must equal

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were $2.50,consumer surplus equals

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market?

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

A minimum wage is an example of a

Explain why the competitive output maximizes welfare.

Long-run economic profit does not exist for fixed factors like land because

If a city government enacts a maximum price on rent,

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

A competitive market maximizes social welfare because in a competitive market,

A firm that generates zero economic profit usually has

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 9: Applying the Competitive Model

Even if two competitive firms in the same market have different production technologies,they will each earn long-run zero profits.Why?

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were zero,consumer surplus equals

Suppose when a market has four firms,average economic profit is $1,000 per month.When the market has five firms,the average economic profit is -$50 per month.This suggests that

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,which of the following is most likely to occur?

-The above figure shows the market for rice in Japan where price is expressed in dollars.S represents the domestic supply curve,and the horizontal line at P = 1 represents the world supply curve.A $1 per unit tariff has the same effect on producer and consumer surplus as a quota of

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $2 per gallon price ceiling to ensure that children are nourished,estimate the change in p,Q,and social welfare.

In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

-The above figure shows supply and demand curves for milk.In an effort to help farmers,the government passes a law that establishes a $3 per gallon price support.To maintain the price support,government expenditures must equal

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone).If the price were $2.50,consumer surplus equals

What is one reason activists might lobby the government for regulation limiting the production of a product to less than would normally be in a perfectly competitive market?

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

A minimum wage is an example of a

Explain why the competitive output maximizes welfare.

Long-run economic profit does not exist for fixed factors like land because

If a city government enacts a maximum price on rent,

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.This results in a deadweight loss of

A competitive market maximizes social welfare because in a competitive market,

A firm that generates zero economic profit usually has

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters