Economics Ch. 13

A grocery store should close at night if the a. variable costs of staying open are greater than the total revenue due to staying open. b. total costs of staying open are less than the total revenue due to staying open. c. variable costs of staying open are less than the total revenue due to staying open. d. total costs of staying open are greater than the total revenue due to staying open.

a

A perfectly competitive firm a. takes its price as given by market conditions. b. sets its price to undercut other firms selling similar products. c. picks the price that yields the largest market share. d. chooses its price to maximize profits.

a

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a. keep producing in the short run but exit the market in the long run. b. shut down in the short run but return to production in the long run. c. shut down in the short run and exit the market in the long run. d. keep producing both in the short run and in the long run.

a

If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause a. an increase in the number of firms in the market but no increase in the price of the good. b. no impact on either the price of the good or the number of firms in the market. c. an increase in the price of the good but no increase in the number of firms in the market. d. an increase in the price of the good and an increase in the number of firms in the market.

a

The long-run market supply curve a. is more elastic than the short-run market supply curve. b. is less elastic than the short-run market supply curve. c. has the same elasticity as the short-run market supply curve. d. is always perfectly elastic.

a

Which of the following markets would most closely satisfy the requirements for a competitive market? a. gold bullion b. electricity c. cable television d. soda e. All of the above represent competitive markets.

a

A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve. a. average-variable-, marginal b. marginal, average-variable- c. marginal, average-total- d. average-total-, marginal

b

If a competitive firm doubles its output, its total revenue a. less than doubles. b. doubles. c. more than doubles. d. cannot be determined because the price of the good may rise or fall.

b

In the long run, some firms will exit the market if the price of the good offered for sale is less than a. marginal cost. b. average total cost. c. average revenue. d. marginal revenue.

b

In the long run, the competitive firm's supply curve is the a. portion of the marginal-cost curve that lies above the average-variable-cost curve. b. portion of the marginal-cost curve that lies above the average-total-cost curve. c. entire marginal-cost curve. d. upward-sloping portion of the average-variable-cost curve. e. upward-sloping portion of the average-total-cost curve.

b

In the long-run equilibrium of a competitive market with identical firms, what are the relationships among price P, marginal cost MC, and average total cost ATC? a. P = MC and P > ATC. b. P = MC and P = ATC. c. P > MC and P = ATC. d. P > MC and P > ATC.

b

When a perfectly competitive firm increases the quantity it produces and sells by 10 percent, its marginal revenue ________ and its total revenue rises by ________. a. stays the same, less than 10 percent b. stays the same, exactly 10 percent c. falls, less than 10 percent d. falls, exactly 10 percent

b

A competitive firm maximizes profit by choosing the quantity at which a. average total cost equals the price. b. marginal cost equals average total cost. c. marginal cost equals the price. d. average total cost is at its minimum.

c

If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be a. downward sloping. b. perfectly inelastic. c. upward sloping. d. perfectly elastic.

c

In the short-run equilibrium of a competitive market with identical firms, if new firms are getting ready to enter, what are the relationships among price P, marginal cost MC, and average total cost ATC? a. P > MC and P = ATC. b. P = MC and P = ATC. c. P = MC and P > ATC. d. P > MC and P > ATC.

c

Suppose pretzel stands in New York City are a perfectly competitive market in long-run equilibrium. One day, the city starts imposing a $100 per month tax on each stand. How does this policy affect the number of pretzels consumed in the short run and the long run? a. down in the short run, no change in the long run b. no change in the short run, up in the long run c. no change in the short run, down in the long run d. up in the short run, no change in the long run

c

The competitive firm maximizes profit when it produces output up to the point where a. marginal revenue equals average revenue. b. price equals average variable cost. c. marginal cost equals marginal revenue. d. marginal cost equals total revenue.

c

For a competitive firm, marginal revenue is a. total revenue divided by the price. b. equal to the quantity of the good sold. c. average revenue divided by the quantity sold. d. equal to the price of the good sold.

d

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it a. maintained production at the current level. b. temporarily shut down. c. decreased production. d. increased production.

d

If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be a. perfectly inelastic. b. downward sloping. c. upward sloping. d. perfectly elastic.

d

In the short run, the competitive firm's supply curve is the a. entire marginal-cost curve. b. portion of the marginal-cost curve that lies above the average-total-cost curve. c. upward-sloping portion of the average-variable-cost curve. d. portion of the marginal-cost curve that lies above the average-variable-cost curve. e. upward-sloping portion of the average-total-cost curve.

d

Which of the following is not a characteristic of a competitive market? a. There are many buyers and sellers in the market. b. The goods offered for sale are largely the same. c. Firms can freely enter or exit the market. d. Firms generate small but positive economic profits in the long run. e. All of the above are characteristics of a competitive market.

d

In long-run equilibrium in a competitive market, firms are operating at a. the minimum of their average-total-cost curves. b. the intersection of marginal cost and marginal revenue. c. their efficient scale. d. zero economic profit. e. all of the above.

e