Question 1

The short run is the time period

Accepted Answer

A)  Over which an investment decision can be made.
B)  Necessary so that profits can be earned from production.
C)  In which some costs are fixed.D) B) and C)
E) None of the above

Question 2

The production decision is a long-run supply decision.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a firm has an annual budget of $200,000 in wages and salaries,$75,000 in materials,$30,000 in new equipment,$20,000 in rented property,and $35,000 in interest costs on capital.The owner/manager does not choose to pay himself,but he could receive income of $90,000 by working elsewhere.The firm earns revenues of $360,000 per year. To receive a normal profit,the firm described above would have to

Accepted Answer

A)  Experience $10,000 less in cost.
B)  Receive $90,000 more in revenue.
C)  Receive $10,000 more in revenue.D) All of the above
E) B) and C)

Question 4

The demand curve for each perfectly competitive firm is

Accepted Answer

A)  Downward-sloping.
B)  Horizontal.
C)  Vertical.D) A) and B)
E) A) and C)

Question 5

Economic profit is

Accepted Answer

A)  Greater than accounting profit by the amount of implicit cost.
B)  Greater than accounting profit by the amount of explicit cost.
C)  Less than accounting profit by the amount of implicit cost.D) B) and C)
E) A) and B)

Question 6

If a firm can change market prices by altering its output,then it

Accepted Answer

A)  Has market power.
B)  Faces a horizontal demand curve.
C)  Is a price taker.D) All of the above
E) None of the above

Question 7

When a producer can control the market price for the good it sells,the producer

Accepted Answer

A)  Is an entrepreneur.
B)  Is certain to make a profit.
C)  Has market power.D) All of the above
E) B) and C)

Question 8

Shutting down a firm's operation is equivalent to exiting the industry.

Accepted Answer

A) True 
 B)False

Question 9

Implicit costs

Accepted Answer

A)  Include only payments to workers and lenders.
B)  Represent actual monetary payments made for resources used to produce a good such as oil.
C)  Are the costs to produce a good or service for which no direct payment is made.D) A) and C)
E) A) and B)

Question 10

Which of the following is generally a fixed cost?

Accepted Answer

A)  Property taxes on land used in production.
B)  Wages.
C)  Profit taxes.D) B) and C)
E) A) and B)

Question 11

When the short-run marginal cost curve is upward-sloping,

Accepted Answer

A)  The average total cost curve is upward-sloping.
B)  The average total cost curve is above the marginal cost curve.
C)  Diminishing returns occurs with greater output.D) A) and B)
E) A) and C)

Question 12

A perfectly competitive firm has no market power.

Accepted Answer

A) True 
 B)False

Question 13

Adam Weed is the owner/operator of a flower shop.Last year he earned $250,000 in total revenue.His explicit costs were $175,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources) .During the year he received three offers to work for other flower shops with the highest offer being $75,000 per year.Which of the following is true about Adam's accounting and economic profit?

Accepted Answer

A)  Accounting profit = $75,000;economic profit = $0.
B)  Accounting profit = $175,000;economic profit = $75,000.
C)  Accounting profit = $75,000;economic profit = negative $100,000.D) B) and C)
E) A) and C)

Question 14

Which of the following affects both the marginal and average total cost curves of a firm in the short run?

Accepted Answer

A)  A change in profit taxes.
B)  A change in payroll taxes.
C)  A change in property taxes.D) A) and B)
E) A) and C)

Question 15

If a perfectly competitive firm wanted to maximize its total revenues,it would produce

Accepted Answer

A)  The output where MC equals price.
B)  As much as it is capable of producing.
C)  The output where the ATC curve is at a minimum.D) None of the above
E) All of the above

Question 16

All of the following are ways a business can earn economic profits except

Accepted Answer

A)  Discover new products.
B)  Maximize implicit costs but not explicit costs.
C)  Take above-average risks.D) A) and C)
E) None of the above

Question 17

The demand curve confronting a competitive firm

Accepted Answer

A)  Equals the marginal revenue curve.
B)  Is horizontal,as is the market demand curve.
C)  Slopes downward,while the market demand curve is horizontal.D) B) and C)
E) None of the above

Question 18

Production of catfish has skyrocketed in the United States from 16 million pounds in 1975 to an expected 340 million pounds this year.The business is growing among farmers in Alabama,Arkansas,and Louisiana.Which of the following is the motive that enticed many farmers to give up the production of row crops to produce catfish?

Accepted Answer

A)  Row crops are relatively more profitable than catfish.
B)  Row crops necessarily have negative economic profits.
C)  Catfish is relatively more profitable than row crops.D) None of the above
E) B) and C)

Question 19

The market price for T-shirts sold in a perfectly competitive market is determined by

Accepted Answer

A)  The largest firm in the industry.
B)  Supply and demand.
C)  Government regulation.D) A) and B)
E) A) and C)

Question 20

A perfectly competitive firm is a price taker because

Accepted Answer

A)  The price of the product is determined by many buyers and sellers.
B)  It has market power.
C)  Market supply is upward-sloping.D) A) and B)
E) A) and C)

Exam 22: The Competitive Firm

Correct Answer
verified

The demand curve for each perfectly competitive firm is

Correct Answer
verified

All of the following are ways a business can earn economic profits except

Correct Answer
verified

The short run is the time period

Correct Answer
verified

A perfectly competitive firm has no market power.

Correct Answer
verified

The demand curve confronting a competitive firm

Correct Answer
verified

The market price for T-shirts sold in a perfectly competitive market is determined by

Correct Answer
verified

Shutting down a firm's operation is equivalent to exiting the industry.

Correct Answer
verified

Which of the following affects both the marginal and average total cost curves of a firm in the short run?

Correct Answer
verified

Economic profit is

Correct Answer
verified

When the short-run marginal cost curve is upward-sloping,

Correct Answer
verified

Correct Answer
verified

If a perfectly competitive firm wanted to maximize its total revenues,it would produce

Correct Answer
verified

Which of the following is generally a fixed cost?

Correct Answer
verified

The production decision is a long-run supply decision.

Correct Answer
verified

If a firm can change market prices by altering its output,then it

Correct Answer
verified

Implicit costs

Correct Answer
verified

When a producer can control the market price for the good it sells,the producer

Correct Answer
verified

Correct Answer
verified

A perfectly competitive firm is a price taker because

Correct Answer
verified

Exam 22: The Competitive Firm

Correct AnswerverifiedShow Answer

The demand curve for each perfectly competitive firm is

Correct AnswerverifiedShow Answer

All of the following are ways a business can earn economic profits except

Correct AnswerverifiedShow Answer

The short run is the time period

Correct AnswerverifiedShow Answer

A perfectly competitive firm has no market power.

Correct AnswerverifiedShow Answer

The demand curve confronting a competitive firm

Correct AnswerverifiedShow Answer

The market price for T-shirts sold in a perfectly competitive market is determined by

Correct AnswerverifiedShow Answer

Shutting down a firm's operation is equivalent to exiting the industry.

Correct AnswerverifiedShow Answer

Which of the following affects both the marginal and average total cost curves of a firm in the short run?

Correct AnswerverifiedShow Answer

Economic profit is

Correct AnswerverifiedShow Answer

When the short-run marginal cost curve is upward-sloping,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a perfectly competitive firm wanted to maximize its total revenues,it would produce

Correct AnswerverifiedShow Answer

Which of the following is generally a fixed cost?

Correct AnswerverifiedShow Answer

The production decision is a long-run supply decision.

Correct AnswerverifiedShow Answer

If a firm can change market prices by altering its output,then it

Correct AnswerverifiedShow Answer

Implicit costs

Correct AnswerverifiedShow Answer

When a producer can control the market price for the good it sells,the producer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A perfectly competitive firm is a price taker because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified