Question 1

Suppose TC = 10 + (0.1 ∗ q2).If p = 10,the firm's profits will be

Accepted Answer

A) 240. 
B) 250. 
C) 260. 
D) -10 because the firm will shut down. 
A) 240. 
B) 250. 
C) 260. 
D) -10 because the firm will shut down. A

Question 2

If a competitive firm is in short-run equilibrium,then

Accepted Answer

A) profits equal zero. 
B) it will not operate at a loss. 
C) an increase in its fixed cost will have no effect on profit. 
D) an increase in its fixed cost will have no effect on output as long as revenue can cover its variable cost. 
A) profits equal zero. 
B) it will not operate at a loss. 
C) an increase in its fixed cost will have no effect on profit. 
D) an increase in its fixed cost will have no effect on output as long as revenue can cover its variable cost. D

Question 3

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

Accepted Answer

A) decrease output. 
B) increase output. 
C) shut down. 
D) operate at a loss. 
A) decrease output. 
B) increase output. 
C) shut down. 
D) operate at a loss. A

Question 4

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be TRUE?

Accepted Answer

A) p < AVC for all levels of output. 
B) p < AVC only for the level of output at which p = MC. 
C) p < AVC only if the firm has no fixed costs. 
D) The firm will earn zero profit. 
A) p < AVC for all levels of output. 
B) p < AVC only for the level of output at which p = MC. 
C) p < AVC only if the firm has no fixed costs. 
D) The firm will earn zero profit.

Question 5

The long-run supply curve in a competitive market is upward sloping.

Accepted Answer

A) True 
 B)False

Question 6

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

Accepted Answer

The firm operates at a loss if

Question 7

Gift shops in a small town sell identical mugs to tourists.However,tourists don't have enough time to check out the prices one by one and don't have brochures listing prices of mugs.We can conclude

Accepted Answer

A) the market for mugs is perfectly competitive. 
B) buyers have full information. 
C) sellers are price takers. 
D) the market is not perfectly competitive. 
A) the market for mugs is perfectly competitive. 
B) buyers have full information. 
C) sellers are price takers. 
D) the market is not perfectly competitive.

Question 8

Suppose the Christmas trees market is perfectly competitive.An owner is currently earning a profit of $1,000,the cost of producing and selling an additional Christmas tree is $25,the current market price is $20.The owner

Accepted Answer

A) should sell more trees. 
B) should not sell more trees. 
C) should advertise in the market to promote his sales. 
D) is not maximizing his profits. 
A) should sell more trees. 
B) should not sell more trees. 
C) should advertise in the market to promote his sales. 
D) is not maximizing his profits.

Question 9

Suppose an industry has no fixed costs.Draw two graphs side by side for the industry.In the left graph draw a U-shaped average cost curve and the corresponding marginal cost curve.In the right graph,draw a downward-sloping market demand curve.Also in the right graph,draw a short-run supply curve that would generate positive profit,and the long-run supply curve that would result.

Accepted Answer

@#IMG-DLM& See the a

Question 10

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is ________ and the economic profit is ________.

Accepted Answer

A) $20,000,$5,000 
B) $20,000,-$5,000 
C) $25,000,-$5,000 
D) $45,000,-$5,000 
A) $20,000,$5,000 
B) $20,000,-$5,000 
C) $25,000,-$5,000 
D) $45,000,-$5,000

Question 11

Firms that exhibit price-taking behavior

Accepted Answer

A) wait for other firms to set price,take it as given,and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior into their own hands. 
D) are independently capable of setting price. 
A) wait for other firms to set price,take it as given,and charge a higher price. 
B) have outputs that are too small to influence market price and thus take it as given. 
C) take pricing behavior into their own hands. 
D) are independently capable of setting price.

Question 12

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

Accepted Answer

A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers. 
A) total cost. 
B) average variable cost. 
C) total fixed cost. 
D) the number of buyers.

Question 13

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

Accepted Answer

A) 0 
B) 500 
C) 10,000 
D) 50,000 
A) 0 
B) 500 
C) 10,000 
D) 50,000

Question 14

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 15

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

Accepted Answer

A) curve A. 
B) curve B. 
C) curve C. 
D) either curve A or B,but definitely not C. 
A) curve A. 
B) curve B. 
C) curve C. 
D) either curve A or B,but definitely not C.

Question 16

The "Got Milk?" advertising campaign is a good example of

Accepted Answer

A) advertising in a competitive market. 
B) how advertising in a competitive market does not pay off for a single firm. 
C) interest groups financed by the industry advertise for the whole industry. 
D) All of the above. 
A) advertising in a competitive market. 
B) how advertising in a competitive market does not pay off for a single firm. 
C) interest groups financed by the industry advertise for the whole industry. 
D) All of the above.

Question 17

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q2,how many identical firms will there be when this industry is in long-run equilibrium?

Accepted Answer

The long-run market supply curve is hori

Question 18

As the number of firms in an industry increases,the residual demand curve becomes

Accepted Answer

A) more elastic. 
B) less elastic. 
C) larger. 
D) vertical. 
A) more elastic. 
B) less elastic. 
C) larger. 
D) vertical.

Question 19

Explain why shutting down and going out-of-business are different concepts.

Accepted Answer

Shutting down means that the firm seizes

Question 20

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

Accepted Answer

A) $0. 
B) $15. 
C) $10. 
D) $11. 
A) $0. 
B) $15. 
C) $10. 
D) $11.

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profits will be

If a competitive firm is in short-run equilibrium,then

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be TRUE?

The long-run supply curve in a competitive market is upward sloping.

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

Gift shops in a small town sell identical mugs to tourists.However,tourists don't have enough time to check out the prices one by one and don't have brochures listing prices of mugs.We can conclude

Suppose the Christmas trees market is perfectly competitive.An owner is currently earning a profit of $1,000,the cost of producing and selling an additional Christmas tree is $25,the current market price is $20.The owner

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is and the economic profit is .

Firms that exhibit price-taking behavior

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

The "Got Milk?" advertising campaign is a good example of

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?

As the number of firms in an industry increases,the residual demand curve becomes

Explain why shutting down and going out-of-business are different concepts.

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 8: Competitive Firms and Markets

Suppose TC = 10 + (0.1 ∗ q2).If p = 10,the firm's profits will be

If a competitive firm is in short-run equilibrium,then

If a profit-maximizing firm finds that,at its current level of production,MR < MC,it will

If a competitive firm finds that it maximizes short-run profits by shutting down,which of the following must be TRUE?

The long-run supply curve in a competitive market is upward sloping.

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

Gift shops in a small town sell identical mugs to tourists.However,tourists don't have enough time to check out the prices one by one and don't have brochures listing prices of mugs.We can conclude

Suppose the Christmas trees market is perfectly competitive.An owner is currently earning a profit of $1,000,the cost of producing and selling an additional Christmas tree is $25,the current market price is $20.The owner

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is ________ and the economic profit is ________.

Firms that exhibit price-taking behavior

In deciding whether to operate in the short run,the firm must be concerned with the relationship between price of the output and

Suppose that for each firm in the competitive market for potatoes,long-run average cost is minimized at 20¢ per pound when 500 pounds are grown.The demand for potatoes is Q = 10,000/p.If the long-run supply curve is horizontal,then how many pounds of potatoes will be consumed in total?

If firms in a competitive market are identical,the long-run market supply curve is horizontal.

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves.If there are 100 identical firms,the market supply curve is best represented by

The "Got Milk?" advertising campaign is a good example of

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q2,how many identical firms will there be when this industry is in long-run equilibrium?

As the number of firms in an industry increases,the residual demand curve becomes

Explain why shutting down and going out-of-business are different concepts.

-The above figure shows the cost curves for a competitive firm.If the profit-maximizing level of output is 40,price is equal to

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose TC = 10 + (0.1 ∗ q²).If p = 10,the firm's profits will be

A small business owner earns $50,000 in revenue annually.The explicit annual costs equal $30,000.The owner could work for someone else and earn $25,000 annually.The owner's business profit is and the economic profit is .

Suppose market demand is Q = 1000 - 4p.If all firms have LRAC = 50 - 5q + q²,how many identical firms will there be when this industry is in long-run equilibrium?