Question 1

Producer surplus in a perfectly competitive industry is

Accepted Answer

A)   the difference between profit at the profit-maximizing output and profit at the profit-minimizing output.
B)   the difference between revenue and total cost.
C)   the difference between revenue and variable cost.
D)   the difference between revenue and fixed cost.
E)   the same thing as revenue.

Question 2

Scenario 8.1:
Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly.
-According to Scenario 8.1, Fizzle and Sizzle

Accepted Answer

A)   would be perfectly competitive if their purification costs were equal; otherwise, not.
B)   would be perfectly competitive if it costs Fizzle $500,000 yearly to keep that land.
C)   may or may not be perfect competitors, but their position on the river has nothing to do with it.
D)   cannot be perfect competitors because they are not identical firms.

Question 3

Revenue is equal to

Accepted Answer

A)   price times quantity.
B)   price times quantity minus total cost.
C)   price times quantity minus average cost.
D)   price times quantity minus marginal cost.
E)   expenditure on production of output.

Question 4

Consider the following statements when answering this question
I. Increases in the demand for a good, which is produced by a competitive industry, will raise the short-run market price.
II. Increases in the demand for a good, which is produced by a competitive industry, will raise the long-run market price.

Accepted Answer

A)   I and II are true.
B)   I is true, and II is false.
C)   I is false, and II is true.
D)   I and II are false.

Question 5

Use the following statements to answer this question:
I. Markets may be highly (but not perfectly)  competitive even if there are a few sellers.
II. There is no simple indicator that tells us when markets are highly competitive.

Accepted Answer

A)   I and II are true
B)   I is true and II is false
C)   I is false and II is true
D)   I and II are false

Question 6

In a constant-cost industry, price always equals

Accepted Answer

A)   LRMC and minimum LRAC.
B)   LRMC and LRAC, but not necessarily minimum LRAC.
C)   minimum LRAC, but not LRMC.
D)   LRAC and minimum LRMC.
E)   minimum LRAC and minimum LRMC.

Question 7

Use the following statements to answer this question:
I. The firm's decision to produce zero output when the price is less than the average variable cost of production is known as the shutdown rule.
II. The firm's supply decision is to generate zero output for all prices below the minimum AVC.

Accepted Answer

A)   I and II are true.
B)   I is true and II is false.
C)   II is true and I is false.
D)   I and II are false.

Question 8

An increasing-cost industry is so named because of the positive slope of which curve?

Accepted Answer

A)   Each firm's short-run average cost curve
B)   Each firm's short-run marginal cost curve
C)   Each firm's long-run average cost curve
D)   Each firm's long-run marginal cost curve
E)   The industry's long-run supply curve

Question 9

Scenario 8.1:
Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly.
-Refer to the information in Scenario 8.1. If Fizzle and Sizzle sell the same output at the same price and are otherwise identical, Fizzle's profit will be

Accepted Answer

A)   higher than Sizzle's by $500,000 yearly.
B)   higher than Sizzle's by just less than $500,000 yearly.
C)   zero in the long run, and Sizzle will be out of business.
D)   the same as Sizzle's, because Fizzle must be assigned an implicit cost of $500,000 yearly for economic rent.
E)   the same as Sizzle's, because Sizzle will move to a more advantageous location in order to compete.

Exam 8: Profit Maximization and Competitive Supply

Use the following statements to answer this question: I. Markets may be highly (but not perfectly) competitive even if there are a few sellers. II. There is no simple indicator that tells us when markets are highly competitive.

Correct Answer
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Correct Answer
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Use the following statements to answer this question: I. The firm's decision to produce zero output when the price is less than the average variable cost of production is known as the shutdown rule. II. The firm's supply decision is to generate zero output for all prices below the minimum AVC.

Correct Answer
verified

Scenario 8.1: Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly. -According to Scenario 8.1, Fizzle and Sizzle

Correct Answer
verified

Correct Answer
verified

An increasing-cost industry is so named because of the positive slope of which curve?

Correct Answer
verified

Producer surplus in a perfectly competitive industry is

Correct Answer
verified

In a constant-cost industry, price always equals

Correct Answer
verified

Revenue is equal to

Correct Answer
verified

Exam 8: Profit Maximization and Competitive Supply

Use the following statements to answer this question: I. Markets may be highly (but not perfectly) competitive even if there are a few sellers. II. There is no simple indicator that tells us when markets are highly competitive.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the following statements to answer this question: I. The firm's decision to produce zero output when the price is less than the average variable cost of production is known as the shutdown rule. II. The firm's supply decision is to generate zero output for all prices below the minimum AVC.

Correct AnswerverifiedShow Answer

Scenario 8.1: Two soft-drink firms, Fizzle & Sizzle, operate on a river. Fizzle is farther upstream, and gets cleaner water, so its cost of purifying water for use in the soft drinks is lower than Sizzle's by $500,000 yearly. -According to Scenario 8.1, Fizzle and Sizzle

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increasing-cost industry is so named because of the positive slope of which curve?

Correct AnswerverifiedShow Answer

Producer surplus in a perfectly competitive industry is

Correct AnswerverifiedShow Answer

In a constant-cost industry, price always equals

Correct AnswerverifiedShow Answer

Revenue is equal to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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