Question 1

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Accepted Answer

A)   both equilibrium quantity and equilibrium price in the long run.
B)   equilibrium price, but equilibrium quantity will be unchanged in the long run.
C)   equilibrium price but reduce equilibrium quantity in the long run.
D)   equilibrium quantity, but equilibrium price will be unchanged in the long run.

Question 2

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.

Question 3

If profit-seeking entrepreneurs are going to be successful, they must

Accepted Answer

A)   produce a product that the consumers value more than the resources required for its production.
B)   produce the product more cheaply than their rivals regardless of quality.
C)   maximize the salaries of high-level management so they will be able to attract people who will work hard.
D)   charge a higher price than their competitors so they can make economic profits in the long run.

Question 4

Which of the following conditions will be present when a price-taker market is in long-run equilibrium?

Accepted Answer

A)   Price will exceed marginal revenue.
B)   Firms will earn economic profit.
C)   Marginal revenue will exceed marginal cost.
D)   Average total cost will be at a minimum.

Question 5

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

Accepted Answer

A)   marginal cost curve.
B)   average total cost curve.
C)   average variable cost curve.
D)   market demand curve.

Question 6

In a price-taker market, economic losses indicate that

Accepted Answer

A)   some firms are using unfair tactics to harm others.
B)   some firms have miscalculated, producing goods that are less valuable than the resources used to make them.
C)   the situation is normal and firms need to make no adjustments.
D)   the firms in the industry are not minimizing their cost; they should expand output in order to fully realize the economies of scale in the industry.

Question 7

Firms that are price takers

Accepted Answer

A)   are small relative to the total market.
B)   produce products that are different than their competitors.
C)   can sell only a portion of their output at the market price.
D)   have downward-sloping demand curves.

Question 8

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 shown is earning zero economic profit.
B)   The industry is in long-run equilibrium.
C)   Firms will neither enter nor exit the market.
D)   All of the above are true.

Question 9

Other things constant, if wheat production is a price-taker industry, a decrease in the price of fertilizer used to grow wheat will

Accepted Answer

A)   increase the supply of wheat.
B)   increase the demand for wheat.
C)   decrease the supply of wheat.
D)   do both a and b.

Question 10

Which of the following is a necessary condition for the presence of competition in a market?

Accepted Answer

A)   government regulations that assure firms will make excess profits
B)   suppliers that offer a homogeneous product
C)   a price that always equals per-unit production costs
D)   low barriers to entry into the market

Question 11

If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is expanded because

Accepted Answer

A)   other firms in the industry will shut down as the firm expands output.
B)   the market price will rise as the firm expands output.
C)   producing and selling an additional unit will add more to total revenue than it adds to total cost.
D)   marginal cost will decline as output is expanded.

Question 12

Use the figure to answer the following question(s) .
Figure 9-4

Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

Accepted Answer

A)   go out of business since it cannot make a profit
B)   produce an output of 3 million
C)   produce an output of 5 million
D)   produce an output of 6 million

Question 13

If factor prices rise as demand increases and the firms expand output, the long-run market supply curve will be upward sloping. In terms of economics, this describes

Accepted Answer

A)   an oligopolistic industry.
B)   a constant cost industry.
C)   an increasing cost industry.
D)   a decreasing cost industry.

Question 14

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

Accepted Answer

A)   has a profit of $25 per unit of output.
B)   should shut down if its short-run average fixed cost is less than $25.
C)   has a loss of $100 per unit of output.
D)   should shut down if its short-run average variable cost exceeds $25.

Question 15

Competition as a dynamic process implies that the individual firms in an industry

Accepted Answer

A)   face a perfectly elastic demand curve.
B)   utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers.
C)   produce a homogeneous product.
D)   cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.

Question 16

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

Accepted Answer

A)   Nothing, because each firm is already maximizing its profits.
B)   Many firms will enter the market and each firm will eventually operate at a loss.
C)   Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business.
D)   Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease.

Question 17

In the short run, a perfectly competitive firm will always shut down if total revenue is ____ at all positive output levels.

Accepted Answer

A)   less than total cost
B)   less than total cost but greater than variable cost
C)   less than total cost but greater than fixed cost
D)   greater than fixed cost
E)   less than variable cost

Question 18

Use the figure to answer the following question(s) .
Figure 9-5

If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

Accepted Answer

A)   output, 3; maximum profit, $3 loss
B)   output, 5; maximum profit, zero
C)   output, 5; maximum profit, slightly less than $5
D)   output, 6; maximum profit, slightly less than $6

Question 19

Suppose that sharply lower coffee prices lead to a decrease in the demand for tea. Tea price decreases, and the tea producers experience short-run economic losses. If the tea industry is a price-taker market, after sufficient time is allowed for the market to adjust fully to the decrease in the demand for tea, one would expect the tea industry's output to

Accepted Answer

A)   increase and economic losses to persist.
B)   decline and economic losses to persist.
C)   decline and economic losses to disappear.
D)   increase and economic losses to disappear

Question 20

When a competitive price-taker market is in long-run equilibrium

Accepted Answer

A)   the firms in the market will earn zero economic profit.
B)   the average total cost of the firms in the market will be minimized.
C)   every unit of the relevant good that is valued more than its opportunity costs will be produced and sold.
D)   all of the above are correct.

Exam 9: Price Takers and the Competitive Process

Firms that are price takers

Correct Answer
verified

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

Correct Answer
verified

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

Correct Answer
verified

In the short run, a perfectly competitive firm will always shut down if total revenue is ____ at all positive output levels.

Correct Answer
verified

If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is expanded because

Correct Answer
verified

Use the figure to answer the following question(s) . Figure 9-4 Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

Correct Answer
verified

Use the figure to answer the following question(s) . Figure 9-5 If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

Correct Answer
verified

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?

Correct Answer
verified

If factor prices rise as demand increases and the firms expand output, the long-run market supply curve will be upward sloping. In terms of economics, this describes

Correct Answer
verified

If profit-seeking entrepreneurs are going to be successful, they must

Correct Answer
verified

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

Correct Answer
verified

Which of the following conditions will be present when a price-taker market is in long-run equilibrium?

Correct Answer
verified

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Correct Answer
verified

When a competitive price-taker market is in long-run equilibrium

Correct Answer
verified

Other things constant, if wheat production is a price-taker industry, a decrease in the price of fertilizer used to grow wheat will

Correct Answer
verified

Which of the following is a necessary condition for the presence of competition in a market?

Correct Answer
verified

Competition as a dynamic process implies that the individual firms in an industry

Correct Answer
verified

In a price-taker market, economic losses indicate that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 9: Price Takers and the Competitive Process

Firms that are price takers

Correct AnswerverifiedShow Answer

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm

Correct AnswerverifiedShow Answer

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

Correct AnswerverifiedShow Answer

In the short run, a perfectly competitive firm will always shut down if total revenue is ____ at all positive output levels.

Correct AnswerverifiedShow Answer

If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is expanded because

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 9-4 Figure 9-4 indicates the cost conditions for a firm operating in a price-taker market. If the market price of the firm's product is $6, what action will maximize the firm's profit?

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 9-5 If the market price in Figure 9-5 increases to $4, what output should the firm produce, and what would be the firm's maximum profit?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If factor prices rise as demand increases and the firms expand output, the long-run market supply curve will be upward sloping. In terms of economics, this describes

Correct AnswerverifiedShow Answer

If profit-seeking entrepreneurs are going to be successful, they must

Correct AnswerverifiedShow Answer

As market price increases, in the short run, a profit-maximizing firm in a price-taker market will expand output along its

Correct AnswerverifiedShow Answer

Which of the following conditions will be present when a price-taker market is in long-run equilibrium?

Correct AnswerverifiedShow Answer

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Correct AnswerverifiedShow Answer

When a competitive price-taker market is in long-run equilibrium

Correct AnswerverifiedShow Answer

Other things constant, if wheat production is a price-taker industry, a decrease in the price of fertilizer used to grow wheat will

Correct AnswerverifiedShow Answer

Which of the following is a necessary condition for the presence of competition in a market?

Correct AnswerverifiedShow Answer

Competition as a dynamic process implies that the individual firms in an industry

Correct AnswerverifiedShow Answer

In a price-taker market, economic losses indicate that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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