Question 1

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Accepted Answer

A)  Firms earn no economic profit in the long run.
B)  Marginal revenue does not have to equal marginal cost.
C)  p - MC = 0.
D)  Price equals marginal revenue.

Question 2

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone) . At the current price of $0.35 per minute, consumer surplus equals

Accepted Answer

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

Question 3

Consumers seek to

Accepted Answer

A)  maximize profits.
B)  maximize expected consumer surplus.
C)  maximize expenditures.
D)  maximize choice.

Question 4

Consumer surplus

Accepted Answer

A)  is the difference between what a consumer pays for a good and the producer's cost.
B)  is the extra money a consumer pays above the minimum necessary price for the producer to produce it.
C)  is the difference between what a consumer would willingly pay for a good and the price actually paid.
D)  equals zero in the long run.

Question 5

In the long run, firms in a competitive market

Accepted Answer

A)  shut down because profit goes to zero.
B)  lose money.
C)  are not profit maximizing.
D)  earn zero economic profit.

Question 6

Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run?

Accepted Answer

A)  p = MC
B)  p = AC
C)  profit = 0
D)  All of the above.

Question 7

Deadweight loss occurs when

Accepted Answer

A)  consumer surplus is greater than producer surplus.
B)  surplus losses to one group due to intervention are not offset by surplus gains to another.
C)  consumer surplus is reduced.
D)  consumer surplus is negative.

Question 8

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Accepted Answer

A)  the demand curve for the firm's product is horizontal.
B)  there aren't many firms in the industry.
C)  the market is in long-run equilibrium.
D)  the firms in this industry are not profitable.

Question 9

Producer surplus equals

Accepted Answer

A)  total revenue minus total variable cost.
B)  total revenue minus the sum of all marginal cost.
C)  profit plus fixed cost.
D)  All of the above.

Question 10

If a market is NOT perfectly competitive, then government intervention

Accepted Answer

A)  is always justifiable.
B)  will usually decrease economic well-being.
C)  guarantees that societal well-being will be maximized.
D)  may increase economic well-being.

Question 11

Producer surplus is equal to

Accepted Answer

A)  the area under the supply curve.
B)  the difference between price and average cost for all units sold.
C)  the difference between price and marginal cost for all units sold.
D)  the firm's profit when fixed costs exist.

Question 12

Price floors and price ceilings

Accepted Answer

A)  always reduce total surplus.
B)  reduce consumer surplus and increase producer surplus.
C)  reduce producer surplus and increase consumer surplus.
D)  Not enough information to determine.

Question 13

Government intervention in a perfectly competitive market

Accepted Answer

A)  reduces economic well-being.
B)  is an illustration of the "invisible hand theorem."
C)  increases economic well-being.
D)  guarantees maximized well-being.

Question 14

As the quantity produced of a good increases, the social welfare generated by that good increases.

Accepted Answer

A) True 
 B)False

Question 15

A market's structure is described by

Accepted Answer

A)  the number of firms in the market.
B)  the ease with which firms can enter and exit the market.
C)  the ability of firms to differentiate their product.
D)  All of the above.

Question 16

In a competitive market, if buyers did not know all the prices charged by the many firms

Accepted Answer

A)  all firms still face horizontal demand curves.
B)  firms sell a differentiated product.
C)  demand curves can be downward sloping for some or all firms.
D)  the number of firms will most likely decrease.

Question 17

The difference between producer surplus and profit is always the associated

Accepted Answer

A)  opportunity costs.
B)  total costs.
C)  variable costs.
D)  fixed costs.

Exam 8: Competitive Firms and Markets

A market's structure is described by

Correct Answer
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Price floors and price ceilings

Correct Answer
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Producer surplus equals

Correct Answer
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Deadweight loss occurs when

Correct Answer
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As the quantity produced of a good increases, the social welfare generated by that good increases.

Correct Answer
verified

In the long run, firms in a competitive market

Correct Answer
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Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Correct Answer
verified

In a competitive market, if buyers did not know all the prices charged by the many firms

Correct Answer
verified

Producer surplus is equal to

Correct Answer
verified

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone) . At the current price of $0.35 per minute, consumer surplus equals

Correct Answer
verified

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Correct Answer
verified

The difference between producer surplus and profit is always the associated

Correct Answer
verified

Consumers seek to

Correct Answer
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Consumer surplus

Correct Answer
verified

If a market is NOT perfectly competitive, then government intervention

Correct Answer
verified

Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run?

Correct Answer
verified

Government intervention in a perfectly competitive market

Correct Answer
verified

Exam 8: Competitive Firms and Markets

A market's structure is described by

Correct AnswerverifiedShow Answer

Price floors and price ceilings

Correct AnswerverifiedShow Answer

Producer surplus equals

Correct AnswerverifiedShow Answer

Deadweight loss occurs when

Correct AnswerverifiedShow Answer

As the quantity produced of a good increases, the social welfare generated by that good increases.

Correct AnswerverifiedShow Answer

In the long run, firms in a competitive market

Correct AnswerverifiedShow Answer

Which of the following statements about profit maximizing firms in a competitive market is FALSE?

Correct AnswerverifiedShow Answer

In a competitive market, if buyers did not know all the prices charged by the many firms

Correct AnswerverifiedShow Answer

Producer surplus is equal to

Correct AnswerverifiedShow Answer

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone) . At the current price of $0.35 per minute, consumer surplus equals

Correct AnswerverifiedShow Answer

In the absence of any government regulation on price, if a firm has no power to set price on its own, one can safely conclude

Correct AnswerverifiedShow Answer

The difference between producer surplus and profit is always the associated

Correct AnswerverifiedShow Answer

Consumers seek to

Correct AnswerverifiedShow Answer

Consumer surplus

Correct AnswerverifiedShow Answer

If a market is NOT perfectly competitive, then government intervention

Correct AnswerverifiedShow Answer

Assuming a horizontal long-run market supply curve, which of the following statements is (are) TRUE about competitive firms in the long run?

Correct AnswerverifiedShow Answer

Government intervention in a perfectly competitive market

Correct AnswerverifiedShow Answer

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