Economic Exam Questions

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Competitive Supply A perfectly competitive firm maximizes profit by producing the quantity at which: MR. = MAC. Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and that it earns economic profits. At the profit-maximizing output, all of the following are correct except: price is equal to average total cost. People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for (or sell) food. This situation violates the perfect competition assumption of: ease of entry and exit.

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run: the industry supply curve will shift to the left The shut-down price is: the minimum of the PVC curve Suppose the market for widgets is perfectly competitive. Furthermore, suppose the total cost curve for a typical firm in this market is ETC = 175 + sq where q represents the quantity of widgets sold by a single supplier. Suppose that there are 79 sellers in this market, sharing a market demand given by P = 1127 - SQ, where P represents price per widget and Q represents the market quantity of widgets sold.

What is the worth-run equilibrium quantity in this market? 363. 55 Maximizing profits also means that a firm is attempting to: produce at the output level where the difference between total revenue and total cost is the greatest. It the price is greater than average total cost at the prompt-maximizing quantity to output in the short run, a perfectly competitive firm will: produce at a profit The market for breakfast cereal contains hundreds of similar products, such as Frost Loops, corn flakes, and Rice Crispier, that are considered to be different products by different buyers.

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This situation violates the perfect competition assumption of: standardized product. The perfectly competitive model assumes all of the following except: that firms attempt to maximize their total revenue. Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin: earning an economic profit. Zoo's Bakery operates in a perfectly competitive industry.

The variable costs at Zoo's Bakery increase, so all of the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoo's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoo's Bakery will its price and its level of production. C. Do nothing to; decrease If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will: C. Antique to produce at an economic loss A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases, one will observe that in the long and short runs: output will increase. Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect: lower apple prices due to the entry of new firms. All except one of the following are characteristics of perfect competition.

Which is the exception? There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each A perfectly competitive tall's snort-run supply curve is its: marginal cost curve above the average variable cost curve. If a competitive firm shuts down for a holiday, it must still pay its: FCC Which of the following is not an assumption that economists make when using the model of perfect competition? Each firm sets its price equal to its average total cost.

In a perfectly competitive market: no one market participant will be able to influence price. Which of the following is a necessary condition for perfect competition? Firms produce a standardized product. A perfectly competitive firm will continue producing in the short run as long as it can cover its: variable cost If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the: industry supply curve will shift to the right

In a long-run equilibrium, economic profits in a perfectly competitive industry are: O In perfectly competitive long-run equilibrium: all firms produce at the minimum point of their average total cost curves. If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a strawberries to be share of the market, and consumers will consider her . Therefore, advertising will take place in this market. Small; standardized; little, if any A competitive firm operating in the short run is producing at the output level at which TACT is at a minimum.

If TACT = $8 and MR. = $9, in order to maximize profits (or minimize losses), this firm should: Increase output Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0. 10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0. 05; there are no other changes in production costs.

Based on the information given, we can conclude that in the long run we will observe: firms leaving the industry typical till is likely to begin: earning an economic pronto If a competitive firm can sell a bushel of soybeans for $25 and it has an average variable cost of $24 per bushel and the marginal cost is $26 per bushel, the firm should: reduce output Which of the following industries is likely to be an increasing cost industry? Steel Which of the following is the best example of a commodity in a perfectly competitive industry?

Apples almost always take the market price as given, or are considered but this is often not true of . Consumers and producers; price-takers; firms that produce a differentiated product Many furniture stores run "going out of business" sales but never go out of business. In order for the shut-down decision to be the appropriate one, the price of furniture must be than the average variable cost. Lower; minimum If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a: Price taker profits.

In the long run: the industry supply curve will shift to the left Which of the following is true? Total economic profit is per-unit profit times quantity. In the short run, a perfectly competitive firm produces output and earns an economic profit if: P > TACT If there are no obstacles to new firms entering the pet-sitting industry, then we can ay that this industry: Has free entry For a perfectly competitive firm, marginal revenue is equal to: Price Ashley, who makes knitted caps, determines that her marginal cost of producing one more knitted cap is equal to $10.

A consumer offers her $12 if she sells one more knitted cap to her. Ashley will: sell the additional knitted cap, since the marginal revenue is greater than the marginal cost for the unit In a perfectly competitive industry: all firms are price-taking producers. Monopoly If a monopolist knows its price elasticity of demand is greater than one, then a(n): decrease in price will increase total revenue

The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: Market power In an industry characterized by extensive economies of scale: large companies are more profitable than small companies Price-discriminating firms will impose a price structure that offers customers with a demand a price and offers customers with a(n) price. Less elastic; higher; more elastic; lower Suppose you own a firm that produces widgets and is a monopoly. The market demand is given by the equation P = 116 - SQ, where P is the price of gadgets and Q is the quantity of gadgets sold per week.

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