Question 1

Short-run supply curves for perfectly competitive firms tend to be upward sloping because:

Accepted Answer

A)   there is diminishing marginal product for one or more variable inputs.
B)   marginal costs increase as output increases.
C)   marginal fixed costs equal zero.
D)   A and B are correct.
E)   B and C are correct.F) A) and B)
G) A) and C)

Question 2

Three hundred firms supply the market for paint. For fifty of the firms, their short-run average variable costs are minimized at $10 and short-run total costs are minimized at $15. For the remaining firms, the short-run average variable costs and short-run average total costs are minimized at $20 and $25, respectively. If each firm has a U-shaped marginal cost curve then the short-run market supply curve is:

Accepted Answer

A)   U-shaped too.
B)   kinked at $10.
C)   kinked at $15.
D)   kinked at $20.
E)   kinked at $25.F) A) and B)
G) A) and C)

Question 3

The squishy industry is competitive and the market price is $0.80. Apu's long-run cost function is:  where r is the price Apu pays to lease a squishy machine and q is squishy output. The long-run marginal cost curve is:  What is Apu's optimal output if the price Apu pays to lease a squishy machine is $1.10? Suppose the lease price of squishy machines falls by $0.55. What happens to Apu's optimal output if the market price for a squishy remains at $0.80? Did profits increase for Apu when the lease rate of squishy machines fell?

Accepted Answer

The profit maximizing output level is wh...

Question 4

Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book) . Under price-taking behavior, the total revenue curve should be:

Accepted Answer

A)   an inverted U-shaped curve (first increasing and then decreasing) .
B)   a U-shaped curve (first decreasing and then increasing) .
C)   a horizontal line with vertical axis intercept equal to the market price.
D)   a straight line from the origin with slope equal to the market price.E) B) and C)
F) All of the above

Question 5

Homer's Boat Manufacturing cost function is:  The marginal cost function is:  If Homer can sell all the boats he produces for $1,200, what is his optimal output? Calculate Homer's profit or loss.

Accepted Answer

The profit maximizing output level is wh...

Question 6

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that:

Accepted Answer

A)   the firm's marginal cost curve must be flat.
B)   the firm's marginal costs of production never fall below $5.
C)   the firm's average cost of production was less than $10.
D)   the firm's total cost of producing 100 tons is less than $1000.
E)   the minimum value of the firm's average variable cost lies between $5 and $10.F) C) and D)
G) C) and E)

Question 7

If a competitive firm's marginal costs always increase with output, then at the profit maximizing output level, producer surplus is:

Accepted Answer

A)   zero because marginal costs equal marginal revenue.
B)   zero because price equals marginal costs.
C)   positive because price exceeds average variable costs.
D)   positive because price exceeds average total costs.
E)   positive because revenues are increasing faster than variable costs.F) B) and C)
G) A) and C)

Question 8

Scenario 8.2:
Yachts are produced by a perfectly competitive industry in Dystopia. Industry output (Q)  is currently 30,000 yachts per year. The government, in an attempt to raise revenue, places a $20,000 tax on each yacht. Demand is highly, but not perfectly, elastic.
-Refer to Scenario 8.2. The more elastic is demand for yachts,

Accepted Answer

A)   the more Q will fall and the more P will rise.
B)   the less Q will fall and the more P will rise.
C)   the more Q will fall and the less P will rise.
D)   the less Q will fall and the less P will rise.
E)   the closer is the new equilibrium point to the old.F) D) and E)
G) C) and D)

Question 9

Consider the following statements when answering this question: I. Increases in the demand for a good, which is produced by a competitive industry, will raise the short-run market price.
II)  Increases in the demand for a good, which is produced by a competitive industry, will raise the long-run market price.

Accepted Answer

A)   I and II are true.
B)   I is true, and II is false.
C)   I is false, and II is true.
D)   I and II are false.E) B) and C)
F) A) and B)

Question 10

Figure 8.7.3
-Refer to Figure 8.7.3 above. At P = $80, the profit-maximizing output in the short run is:

Accepted Answer

A)   22.
B)   34.
C)   39.
D)   50.
E)   64.F) A) and B)
G) None of the above

Question 11

Figure 8.4.2
-Refer to Figure 8.4.2 above. How much is the profit lost when the farmer produces 6 sacks instead of 14 sacks?

Accepted Answer

A)   $996
B)   $1.168
C)   $628
D)   None of the above. There is no profit lost because the farmer maximizes profit when it produces 6 sacks of coffee.E) B) and C)
F) A) and B)

Question 12

A firm's producer surplus equals its economic profit when:

Accepted Answer

A)   average variable costs are minimized.
B)   average fixed costs are minimized.
C)   marginal costs equal marginal revenue.
D)   fixed costs are zero.
E)   total revenues equal total variable costs.F) A) and D)
G) B) and C)

Question 13

A firm never operates:

Accepted Answer

A)   at the minimum of its ATC curve.
B)   at the minimum of its AVC curve.
C)   on the downward-sloping portion of its ATC curve.
D)   on the downward-sloping portion of its AVC curve.
E)   on its long-run marginal cost curve.F) A) and C)
G) C) and D)

Question 14

Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu)  for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should:

Accepted Answer

A)   close her doors immediately.
B)   continue producing in the short and long run.
C)   continue producing in the short run, but plan to go out of business in the long run.
D)   raise her prices above the perfectly competitive level.
E)   lower her output.F) A) and B)
G) A) and E)

Question 15

The table below provides cost information for two firms in a competitive industry. Graph the supply curves of the firms individually and jointly. For these two firms, at any positive output level, marginal cost exceeds average variable cost.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Since we know the industry is competiti...

Question 16

The textbook for your class was not produced in a perfectly competitive industry because:

Accepted Answer

A)   there are so few firms in the industry that market shares are not small, and firms' decisions have an impact on market price.
B)   upper-division microeconomics texts are not all alike.
C)   it is not costless to enter or exit the textbook industry.
D)   of all of the above reasons.E) B) and C)
F) A) and D)

Question 17

In the short run, a perfectly competitive firm earning negative economic profit is:

Accepted Answer

A)   on the downward-sloping portion of its ATC curve.
B)   at the minimum of its ATC curve.
C)   on the upward-sloping portion of its ATC curve.
D)   above its ATC curve.E) None of the above
F) A) and B)

Question 18

The manufacturing of paper products causes damage to a local river when the manufacturing plant produces more than 1,000 units in a period. To discourage the plant from producing more than 1,000 units, the local community is considering placing a tax on the plant. The long-run cost curve for the paper producing firm is:  where q is the number of units of paper produced and t is the per unit tax on paper production. The relevant marginal cost curve is:  If the manufacturing plant can sell all of its output for $2, what is the firm's optimal output if the tax is set at zero? What is the minimum tax rate necessary to ensure that the firm produces no more than 1,000 units? How much are the firm's profits reduced by the presence of a tax?

Accepted Answer

In the absence of a tax, we know the pla...

Question 19

Consider a competitive market in which the market demand for the product is expressed as
P = 75 - 1.5Q,
and the supply of the product is expressed as
P = 25 + 0.50Q.
Price, P, is in dollars per unit sold, and Q represents rate of production and sales in hundreds of units per day. The typical firm in this market has a marginal cost of
MC = 2.5 + 10q.
a. Determine the equilibrium market price and rate of sales.
b. Determine the rate of sales of the typical firm, given your answer to part (a) above.
c. If the market demand were to increase to  what would the new price and rate of sales in the market be? What would the new rate of sales for the typical firm be?
d. If the original supply and demand represented a long-run equilibrium condition in the market, would the new equilibrium (c) represent a new long-run equilibrium for the typical firm? Explain.

Accepted Answer

a.The equilibrium price and rate of sale...

Question 20

Use the following statements to answer this question: I. Markets may be highly (but not perfectly)  competitive even if there are a few sellers.
II)  There is no simple indicator that tells us when markets are highly competitive.

Accepted Answer

A)   I and II are true
B)   I is true and II is false
C)   I is false and II is true
D)   I and II are falseE) A) and D)
F) C) and D)

Exam 8: Profit Maximization and Competitive Supply

Correct Answer
verified
The profit maximizing output level is wh...
View Answer

In the short run, a perfectly competitive firm earning negative economic profit is:

Correct Answer
verified

The table below provides cost information for two firms in a competitive industry. Graph the supply curves of the firms individually and jointly. For these two firms, at any positive output level, marginal cost exceeds average variable cost.

Correct Answer
verified
Since we know the industry is competiti...
View Answer

If a competitive firm's marginal costs always increase with output, then at the profit maximizing output level, producer surplus is:

Correct Answer
verified

Short-run supply curves for perfectly competitive firms tend to be upward sloping because:

Correct Answer
verified

Correct Answer
verified

Figure 8.4.2 -Refer to Figure 8.4.2 above. How much is the profit lost when the farmer produces 6 sacks instead of 14 sacks?

Correct Answer
verified

Homer's Boat Manufacturing cost function is: The marginal cost function is: If Homer can sell all the boats he produces for $1,200, what is his optimal output? Calculate Homer's profit or loss.

Correct Answer
verified
The profit maximizing output level is wh...
View Answer

Correct Answer
verified

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that:

Correct Answer
verified

A firm never operates:

Correct Answer
verified

Correct Answer
verified
a.The equilibrium price and rate of sale...
View Answer

Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book) . Under price-taking behavior, the total revenue curve should be:

Correct Answer
verified

Correct Answer
verified

A firm's producer surplus equals its economic profit when:

Correct Answer
verified

Correct Answer
verified
In the absence of a tax, we know the pla...
View Answer

Figure 8.7.3 -Refer to Figure 8.7.3 above. At P = $80, the profit-maximizing output in the short run is:

Correct Answer
verified

Use the following statements to answer this question: I. Markets may be highly (but not perfectly) competitive even if there are a few sellers. II) There is no simple indicator that tells us when markets are highly competitive.

Correct Answer
verified

The textbook for your class was not produced in a perfectly competitive industry because:

Correct Answer
verified

Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should:

Correct Answer
verified

Exam 8: Profit Maximization and Competitive Supply

Correct AnswerverifiedThe profit maximizing output level is wh...View AnswerShow Answer

In the short run, a perfectly competitive firm earning negative economic profit is:

Correct AnswerverifiedShow Answer

The table below provides cost information for two firms in a competitive industry. Graph the supply curves of the firms individually and jointly. For these two firms, at any positive output level, marginal cost exceeds average variable cost.

Correct Answerverified Since we know the industry is competiti...View AnswerShow Answer

If a competitive firm's marginal costs always increase with output, then at the profit maximizing output level, producer surplus is:

Correct AnswerverifiedShow Answer

Short-run supply curves for perfectly competitive firms tend to be upward sloping because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8.4.2 -Refer to Figure 8.4.2 above. How much is the profit lost when the farmer produces 6 sacks instead of 14 sacks?

Correct AnswerverifiedShow Answer

Homer's Boat Manufacturing cost function is: The marginal cost function is: If Homer can sell all the boats he produces for $1,200, what is his optimal output? Calculate Homer's profit or loss.

Correct AnswerverifiedThe profit maximizing output level is wh...View AnswerShow Answer

Correct AnswerverifiedShow Answer

When the price faced by a competitive firm was $5, the firm produced nothing in the short run. However, when the price rose to $10, the firm produced 100 tons of output. From this we can infer that:

Correct AnswerverifiedShow Answer

A firm never operates:

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The equilibrium price and rate of sale...View AnswerShow Answer

Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book) . Under price-taking behavior, the total revenue curve should be:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm's producer surplus equals its economic profit when:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn the absence of a tax, we know the pla...View AnswerShow Answer

Figure 8.7.3 -Refer to Figure 8.7.3 above. At P = $80, the profit-maximizing output in the short run is:

Correct AnswerverifiedShow Answer

Use the following statements to answer this question: I. Markets may be highly (but not perfectly) competitive even if there are a few sellers. II) There is no simple indicator that tells us when markets are highly competitive.

Correct AnswerverifiedShow Answer

The textbook for your class was not produced in a perfectly competitive industry because:

Correct AnswerverifiedShow Answer

Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The profit maximizing output level is wh...
View Answer

Correct Answer
verified

Correct Answer
verified
Since we know the industry is competiti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The profit maximizing output level is wh...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.The equilibrium price and rate of sale...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In the absence of a tax, we know the pla...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified