Question 1

The schedule of total costs for a table-manufacturing company is presented in the table below.The firm sells its product in a price-taker market at $120 per table.What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

Accepted Answer

A)  $15 loss
B)  zero
C)  $5 profit
D)  $10 profit

Question 2

If a competitive price-taking firm is operating in long-run equilibrium and market demand suddenly falls,the short-run result will be

Accepted Answer

A)  greater economic profit.
B)  a normal profit.
C)  lower average total cost.
D)  lower average variable cost.
E)  economic losses.

Question 3

Suppose antitheft auto alarms are produced in a price-taker market that is initially in long-run equilibrium.It is estimated that only 23 percent of all autos have alarms.Due to rising auto theft,Congress mandates alarms in every vehicle.Assume complete compliance.If the industry is an increasing cost industry,price will

Accepted Answer

A)  increase in both the short run and long run.
B)  decrease in both the short run and long run.
C)  increase in the short run but not in the long run.
D)  decrease in the short run but not in the long run.

Question 4

If a firm is losing money,this implies that

Accepted Answer

A)  consumers do not understand the value of the product.
B)  the value of the resources used to make the product is being reduced.
C)  the firm must go out of business immediately.
D)  this product cannot be produced profitably in the long run.

Question 5

When a firm in a competitive market is earning profits,this indicates that the firm is

Accepted Answer

A)  exploiting consumers.
B)  increasing the value of resources.
C)  blocking the entry of competing firms.
D)  reducing overall wealth in the market.

Question 6

The dynamic process of competition

Accepted Answer

A)  provides profit-seeking sellers with little incentive to heed consumer preferences.
B)  was shown by Adam Smith to be a major source of economic inefficiency.
C)  provides consumers with alternative suppliers and thus a mechanism with which they can discipline sellers.
D)  will permit business decision makers to earn long-run economic profit unless they are regulated by government officials.

Question 7

Suppose a restaurant that is highly profitable during the summer months is unable to cover its total cost during the winter months.If it wants to maximize profits,the restaurant should

Accepted Answer

A)  shut down during the winter,even if it is able to cover its variable costs during that period.
B)  continue operating during the winter months if it is able to cover its variable costs.
C)  go a out of business immediately;losses should never be tolerated.
D)  lower its prices during the summer months.

Question 8

The market for a competitive price-taker market clears at a price of $3,and the minimum average cost for all firms is $2.50.In the long run,we would expect an increase in

Accepted Answer

A)  each firm's output.
B)  the number of firms.
C)  each firm's profit.
D)  each firm's average cost.

Question 9

Suppose product price is $24;MR = MC at Q = 200;AFC = $6;AVC = $16.What do you advise this competitive price-taker firm to do?

Accepted Answer

A)  Increase output.
B)  Decrease output.
C)  Shut down operations.
D)  Stay at the current output;the firm is earning a profit of $400.
E)  Stay at the current output even though the firm is losing $200.

Question 10

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 11

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?

Question 12

In a constant cost industry,

Accepted Answer

A)  a natural monopoly is likely to occur.
B)  total cost is the same,no matter how much a firm produces.
C)  the long-run supply curve will be perfectly elastic.
D)  entry of new firms in the industry will lead to a reduction in the cost of inputs.

Question 13

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.

Question 14

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

Question 15

If there is an increase in market demand in a competitive price-taker market,then in the short run

Accepted Answer

A)  there will be no change in the demand curves faced by individual firms in the market.
B)  the demand curves for firms will shift downward.
C)  the demand curves for firms will become more elastic.
D)  profits will rise.

Question 16

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue.
(II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

Accepted Answer

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

Question 17

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 18

A profit-maximizing firm will continue to expand output

Accepted Answer

A)  as long as the revenues from the production and sale of an additional unit exceeds the average costs of the unit.
B)  until the average cost of producing the good or service is at a minimum.
C)  as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit.
D)  until the marginal cost of producing a good or service is at a minimum.

Question 19

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5,and the market price was $7,then you

Accepted Answer

A)  could increase your profit by expanding output.
B)  could increase your profit by decreasing output.
C)  are maximizing your profit at your current output level.
D)  will be able to earn positive economic profits in the long run.

Question 20

A firm that must sell its output at a market-determined price is called a

Accepted Answer

A)  price-taker firm.
B)  price-searcher firm.
C)  price-setter firm.
D)  price-maker firm.

Exam 22: Aprice Takers and the Competitive Process

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

The schedule of total costs for a table-manufacturing company is presented in the table below.The firm sells its product in a price-taker market at $120 per table.What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

Correct Answer
verified

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?

Correct Answer
verified

If a firm is losing money,this implies that

Correct Answer
verified

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

Correct Answer
verified

The market for a competitive price-taker market clears at a price of $3,and the minimum average cost for all firms is $2.50.In the long run,we would expect an increase in

Correct Answer
verified

Suppose a restaurant that is highly profitable during the summer months is unable to cover its total cost during the winter months.If it wants to maximize profits,the restaurant should

Correct Answer
verified

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue. (II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

Correct Answer
verified

Suppose product price is $24;MR = MC at Q = 200;AFC = $6;AVC = $16.What do you advise this competitive price-taker firm to do?

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

The marginal revenue of a price taker is

Correct Answer
verified

In a constant cost industry,

Correct Answer
verified

A profit-maximizing firm will continue to expand output

Correct Answer
verified

If a competitive price-taking firm is operating in long-run equilibrium and market demand suddenly falls,the short-run result will be

Correct Answer
verified

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5,and the market price was $7,then you

Correct Answer
verified

When a firm in a competitive market is earning profits,this indicates that the firm is

Correct Answer
verified

A firm that must sell its output at a market-determined price is called a

Correct Answer
verified

If there is an increase in market demand in a competitive price-taker market,then in the short run

Correct Answer
verified

The dynamic process of competition

Correct Answer
verified

Correct Answer
verified

Exam 22: Aprice Takers and the Competitive Process

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

The schedule of total costs for a table-manufacturing company is presented in the table below.The firm sells its product in a price-taker market at $120 per table.What is the maximum monthly profit (or minimum loss) that the firm will be able to earn?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If a firm is losing money,this implies that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The market for a competitive price-taker market clears at a price of $3,and the minimum average cost for all firms is $2.50.In the long run,we would expect an increase in

Correct AnswerverifiedShow Answer

Suppose a restaurant that is highly profitable during the summer months is unable to cover its total cost during the winter months.If it wants to maximize profits,the restaurant should

Correct AnswerverifiedShow Answer

(I) A firm's short-run supply curve is equal to its average variable cost curve above marginal revenue. (II) The short-run supply curve for a price-taker market is the horizontal sum of the supply curves of all firms in the industry.

Correct AnswerverifiedShow Answer

Suppose product price is $24;MR = MC at Q = 200;AFC = $6;AVC = $16.What do you advise this competitive price-taker firm to do?

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

The marginal revenue of a price taker is

Correct AnswerverifiedShow Answer

In a constant cost industry,

Correct AnswerverifiedShow Answer

A profit-maximizing firm will continue to expand output

Correct AnswerverifiedShow Answer

If a competitive price-taking firm is operating in long-run equilibrium and market demand suddenly falls,the short-run result will be

Correct AnswerverifiedShow Answer

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5,and the market price was $7,then you

Correct AnswerverifiedShow Answer

When a firm in a competitive market is earning profits,this indicates that the firm is

Correct AnswerverifiedShow Answer

A firm that must sell its output at a market-determined price is called a

Correct AnswerverifiedShow Answer

If there is an increase in market demand in a competitive price-taker market,then in the short run

Correct AnswerverifiedShow Answer

The dynamic process of competition

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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