AP Econ Market Structures Test

see question 22 on quiz

B

For a PC, increasing cost industry, an increase in the industry's demand will lead to which of hte following in the LR? a. an upward shift in each firm's LR average cost curve b. an increase in each firm's profit c. a decrease in the price of an input and a decrease in total industry profits d. a decrease in total industry sales e. a decrease in total producer surplus and an increase in total consumer surplus

A.

See pic 6 (17 on quiz) The graph shows the cost curves facing May's fruit farm. May's SR supply curve includes which of the following points? a. STV b. TW c. RST d. STW e. RSTV

A.

Which of the following are characteristics of a perfectly competitive industry? i. New Firms can enter the industry easily ii. there is no product differentiation iii. the industry's demand curve is perfectly elastic iv. the supply curve of an individual firm in the industry is perfectly elastic a. I and II b. I and III c. II and IV d. I, II, and IV e. I, III, and IV

A.

Assume a perf competitive firm is currently producing 100 units of output. its MC is $6 and rising at that output Q. Its AVC is $7 and tis AFC is $3. If the product's price is $6, which of the following will the firm do in the SR to maximize profit? a. Shut down b. Produce, but less than 100 units c. Produce more than 100 units d. continue to produce at exactly 100 units e. increase its price above $6

A. because P = MC is below AVC

Productive efficiency occurs when a firm produces output at a level at which a. ATC equals AR b. ATC is at a minimum C. price exceeds ATC d. P = MC e. MR exceeds average revenue

B

which of the following is a result of increasing returns to scale? a. upward sloping SR marginal cost curve b. downward-sloping LRATC curve c. downward-sloping marginal physical product of labor curve d. diseconomies of scale e. diminishing returns

B

If a perfectly competitive firm is producing where MC is rising and greater than MR, to maximize profits it should a. increase the level of production b. decrease the level of production c. maintain current level of production d. increase price e. decrease price

B.

See pic 2 Which of the following will be true if the firm is in a perfectly competitive market and the price is P1? a. the firm will earn SR profits but suffer LR losses b. in the LR, existing firms in the industry will produce an output level greater than Q1 c. in the LR, existing firms will leave the industry d. Firms will leave the industry until profits are increased e. New firms will be dissuaded from entering the industry, at least until the price increases

B.

See pic 9 (21 on quiz) The graph shows SR cost and revenue curves of a PC firm. Assume that the mkt price is P0 and the firm is producing at quantity Q2. To maximize profit, the firm should a. continue to produce quantity Q2, where ATC is at its minimum b. produce quantity Q1, where price is equal to MC c. produce quantity Q0 where AVC is at its minimum d. decrease the price so that P = AVC e. increase mkt price to the level of the minimum ATC

B.

Which of the following is true for a perfectly competitive firm in LR Equilibrium? a. it earns positive economic profit b. it is allocatively efficient c. it experiences economic losses d. it is productively inefficient e. it maximizes revenue

B.

See pic 5 (16 on quiz) the graph above shows the SR cost curves of a firm in a PC market. which of the following are true at the firm's profit-maxing output level? i. price exceeds ATC ii. Economic profits are zero iii. MC = ATC iv. New firms are likely to enter the market in the LR a. I and II b. I and III c. I and IV d. ii, iii, and iv e. i, ii, iii, iv

C

See pic 1. : The graph shows a firm's LRATC. Which of the following is true as the firm increases its scale of production? a. from zero output to Q0, the firm experiences diseconomies of scale b. from Q0 to Q1, the firm experiences increasing returns to scale c. for output levels above Q1, the firm experiences diseconomies of scale d. at all output levels, the firms LR MC must be constant e. From Q0 to Q1, LRATC falls because AFC decreases; after Q1, LRATC rises due to diminishing returns to labor

C.

A PC firm is producing 10 units of output and sells the product for $5 per unit. At this level of output, the ATC is $4, AVC is $3, and the MC is $7. What should this firm do to max SR profits? a. increase output until P = ATC b. Increase output until P = MC c. Leave output unchanged because the price is greater than ATC d. Decrease output until P = MC E. decrease output until P = ATC

D

A firm is producing the allocatively efficient level of output if a. total revenue is equal to total cost b. MR = MC c. P = ATC d. P = MC e. P = TC

D

At the current level of output, a firm finds that it has the potential to increase its profit by expanding output. Which of the following must hold at the current output for this firm? a. P = MR < MC b. P = MR = MC c. P > MR = MC d. P = MR > MC e. P > MR < MC

D.

See pic 7 (18 on quiz) the diagram shows a PC firm's SR cost curves. If teh price of the output increases from $8 to $10, the profit maxing firm will a. continue producing 15 units because ATC is a minimum b. continue producing 15 units because ATC is equal to MC c. increase output to 20 units because this is the output at which P = ATC d. increase output to 18 units because this is the output at which P=MC e. decrease output to 10 units because this is the output at which AVC is at a minimum

D.

see pic 3 (#12 on PC quiz) if the market price is $10, how many widgets should this profit maxing firm produce? a. 3,000 b. 6,000 c. 12,000 d. 16,000 e. 21,000

D.

See pic 8 (20 on quiz) which of the following best describes the graph? a. Econ losses are incurred, and the firm will increase price until no losses are incurred b. Econ profits are earned, and neither exit nor entry of firms will occur in the LR c. Econ profits are earned, and costs will increase until no profits are earned. d. Econ profits are earned, and entry of firms into the market will cause prices to decrease in the LR e. Econ losses are incurred, and exit of firms from the market will cause prices to increase in the LR.

E.

See pic 4 (#15 on quiz) How many units of output (at which Q value) should a firm with the cost and demand curves in graph produce to max profits?

Q3

economies of scale can be illustrated by a. an increasing SR marginal cost curve as a firm produces more output b. a decreasing SRATC as firm produces more output c. a downward-sloping LR supply curve for an industry d. a decreasing LRATC curve as firm produces more output e. an increasing LRATC as firm produces more output

d.

F&D Manufacturing Company increases all its inputs by 50% each. If F&D's output increases by 100%, then F&D is experiencing a. increasing returns to scale b. constant returns to scale c. diseconomies of scale d. increasing marginal cost e. decreasing profits

a.

If the output of a firm doubles when the firm doubles all of its inputs, the firm must be experiencing _______ a. economies of scale b. increasing returns to scale c. constant returns to scale d. decreasing returns to scale e. diseconomies of scale

c.

see pic 7 (19 on quiz) In the SR, the firm will: a. shut down if the price falls below P3 b. continue to produce as long as price is greater than or equal to P1 c. continue to produce as long as the price is greater than or equal to P2 d. earn economic profits as long as the price is greater than P2 e. cover its fixed cost as long as the price is less than P3

c.

In the LR of a constant cost, PC industry, the supply curve is a. upward sloping b. downward sloping c. horizontal d. downward sloping at first then upward sloping e. upward sloping at first then downward sloping

c. LR supply curve horizontal in constant cost industry

Assume that a profit-maxing, PC firm has economic losses in the Sr. if the firm continues to produce and sell its gods, then which of the following must be true? a. the firm is covering all of its fixed and variable costs of production b. the firm is covering all of its fixed costs but not all of its variable costs of production c. the firm must have raised the price of its goods in order to minimize its loses d. the firm is covering all of its implicit costs but not all of its explicit costs e. the firm is covering all of its variable costs but not all of its fixed costs of production

e.

If there are many firms in an industry and each firm's product is indistinguishable from the products of all other firms, the individual firm's demand curve will be a. upward sloping and different for each firm b. downward sloping and different for each firm c. downward sloping and identical for each firm d. horizontal and different for each firm e. horizontal and identical for each firm

e.

The characteristic that causes firms in a perf comp industry to earn ZEP in the LR is a. firms are price takers b. firms produce identical products c. indivudial firms account fro a small fraction of the total market d. the industry supply curve is horizontal e. there are no barriers to entry or exit

e.

if a perfectly competitive firm increases its price above the market equilibrium price, which of the following will be true for this firm? a. its total rev will increase b. its profits will increase c. its sales will decrease but profit will not be affected d. its demand curve will become downward sloping e. it will not be able to sell any output

e.

See quiz #25

see quiz