Liberty University ECON 213 quiz 9 solutions answers right

Liberty University ECON 213 quiz 9 solutions answers right

How many versions: 9 different versions

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Question 1 Firms will always stay in the market if the price they charge is:

Question 2 If the market price is $15 and marginal cost is represented by the equation 2 Q , where Q is in thousands of units, what is the profit­maximizing quantity?

Question 3 If Firm A is making zero economic profits,

Question 4 Sunk costs:

Question 5 Refer to the accompanying graph to answer the questions that follow.

If the firm is maximizing profits, profit is represented by the area:

Question 6 The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow.

When profits are maximized, profits are equal to:

Question 7 Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

Question 8 The marginal cost curve is the short­run supply curve:

Question 9 Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ accounting profits are:

Question 10 Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

Question 11 The entry and exit of firms ensure that the _________ in the long run than in the short run.

Question 12 Because of market forces, firms have _________ when competition is widespread.

Question 13 Jim and Lisa own a dog­grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog­grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will make positive economic profits if the market price is:

Question 14 Competitive markets exist when:

Question 15 Firms will always suffer a loss only if the price they charge is:

Question 16 You can tell a firm is operating in a market that is in long­run competitive equilibrium if:

Question 17 Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. If Dave’s Batting Cages received $80,000 in revenues, what were the accounting profits?

Question 18 Refer to the accompanying table. A firm participating in a competitive market with these costs would break even if the price is:

Question 19 If the short­run market supply curve and the demand curve intersect above the long­run market supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Question 20 Total revenue minus total cost equals:

Question 1 Holding all else constant, a decrease in the market demand for a product in a competitive market would cause:

Question 2 If the short­run market supply curve and the demand curve intersect above the long­run market supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Question 3 Refer to the accompanying set of graphs to answer the questions that follow.

Which graph would result in no firms entering or exiting the perfectly competitive market?

Question 4 Which is an example of an almost perfectly competitive market?

Question 5 At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should:

Question 6 Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ economic profits are:

Question 7 Refer to the accompanying graph to answer the questions that follow.

If the firm is maximizing profits, total cost is represented by the area:

Question 8 If the market price is $15 and marginal cost is represented by the equation 2 Q , where Q is in thousands of units, what is the profit­maximizing quantity?

Question 9 Refer to the accompanying figure to answer the questions that follow.

This firm would shut down in the long run if the price:

Question 10 A good economist will ignore _________ and focus on _________ when it comes to making the right decisions.

Question 11 Refer to the accompanying table. A firm participating in a competitive market with these costs would break even if the price is:

Question 12 In the short run, a competitive firm may choose to operate at a loss:

Question 13 Because of market forces, firms have _________ when competition is widespread.

Question 14 The market for watches is perfectly competitive and is currently in equilibrium. What will happen if watches become more popular among college students?

Question 15 The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow.

Assuming that all firms have the same cost structure, the price is:

Question 16 If the short­run supply curve and the demand curve intersect below the long­run supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Question 17 A firm characterized as a price­taker:

Question 18 Many economists believe that the market for wheat in the United States is an almost perfectly competitive market. If one firm discovers a technology that makes its wheat taste better and have fewer calories than all other wheat offered in the market, the wheat market would become less competitive because:

Question 19 If firms in a competitive market are incurring economic losses, you would expect firms to:

Question 20 Refer to the accompanying figure. Point _________ corresponds to the profit­maximizing quantity that a competitive firm would produce.

Question 1

When marginal revenue equals marginal cost:

Question 2

Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. If Dave’s Batting Cages received $80,000 in revenues, what were the economics profits?

Question 3

An example of an implicit cost is:

Question 4

Total revenue minus total cost equals:

Question 5

If the shortrun market supply curve and the demand curve intersect above the longrun market supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Question 6

If the shortrun supply curve and the demand curve intersect below the longrun supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Question 7

In the short run, a competitive firm may choose to operate at a loss:

Question 8

Which of the following lists the three main characteristics of a competitive market?

Question 9

If firms in a competitive market are making zero economic profits, the longrun market supply curve:

Question 10

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow.

Assuming that all firms have the same cost structure, the price is:

Question 11

According to the accompanying figure, the longrun market supply curve would be a horizontal line:

Question 12

Kimberly owns a cupcake shop in Newport Beach, California. The market for cupcakes is very competitive. At Kimberly’s current production level, her marginal cost is $25 and her marginal revenue is $29. To maximize profits, Kimberly should:

Question 13

According to the accompanying figure, if the price is $5, the firm is making

Question 14

Refer to the accompanying graph to answer the questions that follow.

If the firm is maximizing profits, total cost is represented by the area:

Question 15

An example of an explicit cost is:

Question 16

Refer to the accompanying figure. A firm would shut down in the short run if the price is:

Question 17

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow.

Profits are maximized when producing:

Question 18

When talking about economic profits in a perfectly competitive market, the difference between the long run and the short run is that, in the short run, firms:

Question 19

A farmer’s market is close to being a perfectly competitive market. Which characteristic of a perfectly competitive market do most farmer’s markets violate?

Question 20

If Nicole’s KnickKnacks is a perfectly competitive firm and is making zero economic profits:

Question 1 In its simplest form, the long­run market supply curve is a(n):

Question 2 Refer to the accompanying figure. Point _________ corresponds to the profit­maximizing quantity that a competitive firm would produce.

Question 3 Refer to the accompanying table. A firm participating in a competitive market with these costs would be indifferent about producing or shutting down if the price is:

Question 4 If Nicole’s Knick­Knacks is a perfectly competitive firm and is making zero economic profits:

Question 5 Jim and Lisa own a dog­grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog­grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will always shut down if the market price is:

Question 6 Competitive markets exist when:

Question 7 Refer to the accompanying graph to answer the questions that follow. If the firm is maximizing profits, profit is represented by the area:

Question 8 The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:

Question 9 If the market price is $15 and marginal cost is represented by the equation 2 Q , where Q is in thousands of units, what is the profit­maximizing quantity?

Question 10 When firms exit a market, the _________, causing individual firms’ profits to _________.

Question 11 Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

Question 12 If firms in a competitive market are incurring economic losses, the long­run market supply curve:

Question 13 Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Holding all else constant, the price in this market will:

Question 14 An example of an explicit cost is:

Question 15 In a competitive market, if one firm raises its price relative to the other firms in the market, consumers are willing to go to another firm because:

Question 16 Refer to the accompanying graph to answer the questions that follow. If this firm is maximizing profits, total revenue is represented by the area:

Question 17 At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should:

Question 18 Which of the following conditions will result in the firm making an economic profit?

Question 19 If firms in a competitive market are making zero economic profits, the long­run market supply curve:

Question 20 Signals:

Which of the following lists the three main characteristics of a competitive market

Competitive markets exist when

One difference between implicit costs and explicit costs is that

In the long run, if a firm is making a loss, it will

If Firm A is making zero economic profits

A firm’s short-run supply curve is equal to the firm’s

When firms enter a market, the _________, causing individual firms’ profits to _________.

All firms, no matter what type of firm structure they are producing in, make their production decisions based on the point where their

Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ accounting profits are

An example of an implicit cost is

If a competitive firm can make enough revenue to cover its variable costs, the firm will

A firm characterized as a price-taker

When firms exit a market, the _________, causing individual firms’ profits to _________.

A firm’s willingness to supply its product in the long run is represented on a graph by the

Refer to the accompanying table. A firm participating in a competitive market with these costs would be indifferent about producing or shutting down if the price is

Refer to the accompanying set of graphs to answer the questions that follow. Which graph would result in firms entering a perfectly competitive market in the long run

If the market price is $15 and marginal cost is represented by the equation 2  Q , where Q is in thousands of units, what is the profit-maximizing quantity

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow. When profits are maximized, profits are equal to

A good economist will ignore _________ and focus on _________ when it comes to making the right decisions

According to the accompanying figure, the longrun market supply curve would be a horizontal line

Question 1 In the long run, if a firm is making a loss, it will:

Question 2 Refer to the accompanying figure. This firm’s short­run supply curve is represented by the:

Question 3 In competitive markets:

Question 4 Jim and Lisa own a dog­grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog­grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will always shut down if the market price is:

Question 5 Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. Dave’s Batting Cages incurred _________ in explicit costs.

Question 6 Refer to the accompanying figure to answer the questions that follow. If the price is $3, the firm is making:

Question 7 A firm’s willingness to supply its product in the long run is represented on a graph by the:

Question 8 The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow. Profits are maximized when producing:

Question 9 Firms will be indifferent about shutting down or producing if the price they charge is:

Question 10 The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow. When profits are maximized, profits are equal to:

Question 11 If firms in a competitive market are making positive economic profits, you would expect firms to:

Question 12 A firm will shut down in the long­run if the:

Question 13 Which of the following lists the three main characteristics of a competitive market?

Question 14 Refer to the accompanying figure. A firm would be suffering a loss but still be producing if the price is:

Question 15 Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ accounting profits are:

Question 16 Tom’s Campgrounds is a firm conducting business in a competitive market. Tom realizes he is making a loss and is trying to decide whether to shut down or stay open. He should stay open:

Question 17 If Dirk’s Doughnuts is a perfectly competitive firm and is currently incurring economic losses of $500:

Question 18 One reason why the long­run supply curve may slope upward in a competitive market is that:

Question 19 If Nicole’s Knick­Knacks is a perfectly competitive firm and is making zero economic profits:

Question 20 Refer to the accompanying set of graphs to answer the questions that follow. Which graph would result in firms exiting a perfectly competitive market in the long run?

Question 1 In a competitive market, if one firm raises its price relative to the other firms in the market, consumers are willing to go to another firm because:

Question 2 Refer to the accompanying table. A firm participating in a competitive market with these costs would be indifferent about producing or shutting down if the price is:

Question 3 Refer to the accompanying figure. Point _________ corresponds to the profit­maximizing quantity that a competitive firm would produce.

Question 4 Refer to the accompanying figure. A firm would be suffering a loss but still be producing if the price is:

Question 5 Refer to the accompanying table. A firm participating in a competitive market with these costs would be making a profit if the price is:

Question 6 The city of Tustin, California, has spent $10 million on a project to build a new community college. It will cost the city $40 million to finish the project. When making the decision to continue the project, the city’s chief economist tells the city council to ignore the $10 million because:

Question 7 A firm’s willingness to supply its product in the short run is represented on a graph by the:

Question 8 A firm’s short­run supply curve is equal to the firm’s:

Question 9 Refer to the accompanying figure to answer the questions that follow. If the price is $3, the firm is making:

Question 10 When talking about economic profits in a perfectly competitive market, the difference between the long run and the short run is that, in the short run, firms:

Question 11 Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. Dave’s Batting Cages incurred _________ in explicit costs.

Question 12 Refer to the accompanying figure. A firm would be making positive profits if the price is:

Question 13 All firms, no matter what type of firm structure they are producing in, make their production decisions based on the point where their:

Question 14 A firm characterized as a price­taker:

Question 15 A good economist will ignore _________ and focus on _________ when it comes to making the right decisions.

Question 16 The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow. Profits are maximized when producing:

Question 17 Because of market forces, firms have _________ when competition is widespread.

Question 18 A farmer’s market is close to being a perfectly competitive market. Which characteristic of a perfectly competitive market do most farmer’s markets violate?

Question 19 The University of California at Irvine (UCI) allows student organizations and private firms to sell items on campus to raise funds for various activities. Many of the organizations sell boba, a Taiwanese tea drink, because boba is popular with students. The market for boba on the UCI campus is very competitive. If legislation is passed to restrict the entry of private firms into the boba market at the UCI campus, the

Question 20 According to the accompanying figure, the longrun market supply curve would be a horizontal line:

     1.   A firm characterized as a price-taker:

a.	has control over the price it pays, or receives, in the market.
b.	sets the price for the market.
c.	has no control over the price it pays, or receives, in the market.
d.	is not a characteristic of a perfectly competitive market.
e.	takes the price that is determined from the lowest price consumers are willing to pay for an item.

     2.   In competitive markets:

a.	firms set the prices for their products with little concern for the consumer.
b.	firms control the prices they charge.
c.	market forces are much stronger than individual firms are.
d.	individual firms are much stronger than the market forces are.
e.	market forces set the quantity in the market but not the prices.

     3.   In competitive markets:

a.	firms set the prices for their products with little concern for the consumer.
b.	firms are considered to be price makers.
c.	firms are at the mercy of market forces.
d.	the individual firms are much stronger than the market forces are.
e.	the market forces set the quantity in the market but not the prices.

     4.   In competitive markets:

a.	the products sold are different depending on the firm selling the product.
b.	buyers can expect to find consistently low prices and wide availability of the good that they want.
c.	producers can expect to be able to set the price at the level they choose.
d.	it is hard for a seller to enter the market due to barriers to entry.
e.	firms will leave the market if they are making economic profits.

     5.   Because of market forces, firms have _________ when competition is widespread.

a.	control over the price that they can charge and they make little or no economic profit
b.	control over the price that they can charge and they make positive economic profit
c.	little or no control over the price that they can charge and they make negative economic profit
d.	little or no control over the price that they can charge and they make little or no economic profit
e.	little or no control over the price that they can charge and they make extreme economic profits

     6.   Which of the following lists the three main characteristics of a competitive market?

a.	many buyers and sellers, similar products, easy entry into the market
b.	many buyers and few sellers, similar products, easy entry into the market
c.	many buyers and sellers, differentiated products, easy entry into the market
d.	many buyers and sellers, similar products, barriers to entry into the market
e.	many buyers and few sellers, unique products, barriers to entry into the market

     7.   Real-life examples of competitive markets:

a.	are more common than any other market structure.
b.	are usually far short of perfection.
c.	include the fast-food industry and soda industry.
d.	are difficult to break into as an entrepreneur.
e.	do not benefit society.

     8.   Which is an example of an almost perfectly competitive market?

a.	Major League Baseball
b.	restaurants
c.	cruise liners
d.	airlines
e.	farmer’s market

     9.   Competitive markets exist when:

a.	there are so many buyers and sellers that each has only a small impact on the market price and the market output.
b.	there are more buyers than sellers, giving the buyers market power.
c.	there are more sellers than buyers, giving the sellers market power.
d.	accounting profits become zero because of price wars.
e.	prices are so low that everyone who wants the good or service gets the good or service.

   10.   A farmer’s market is close to being a perfectly competitive market. Which characteristic of a perfectly competitive market do most farmer’s markets violate?

a.	many buyers
b.	many sellers
c.	free entry into the market
d.	free exit from the market
e.	similar goods produced

   11.   The presence of many buyers and sellers is an important characteristic of competitive markets because it allows:

a.	sellers in the market to have influence over the market price.
b.	buyers in the market to have influence over the market price.
c.	sellers in the market to have influence over the market quantity.
d.	buyers in the market to have influence over the market quantity.
e.	the price and quantity in the market to be determined by market forces.

   12.   The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:

a.	there is a shortage of hot dogs.
b.	there is a surplus of hot dogs.
c.	market forces set the price in the market.
d.	firms are able to make large economic profits.
e.	firms cannot make positive accounting profits.

   13.   In a competitive market, if one firm raises its price relative to the other firms in the market, consumers are willing to go to another firm because:

a.	the products are similar, which makes them complements.
b.	the products are similar, which makes them complements.
c.	there are many sellers in the market selling different items.
d.	consumer scan get more producer surplus by going to a different firm.
e.	consumers can set the price they want to pay.

   14.   Many economists believe that the market for wheat in the United States is an almost perfectly competitive market. If one firm discovers a technology that makes its wheat taste better and have fewer calories than all other wheat offered in the market, the wheat market would become less competitive because:

a.	there would no longer be many buyers and many sellers of wheat.
b.	it would no longer be easy to enter and exit the existing wheat market.
c.	the products would no longer be similar in the wheat market.
d.	the government would want to intervene.
e.	individuals would not want to switch products.

   15.   Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

a.	many buyers
b.	many sellers
c.	similar goods
d.	easy entry into and exit from the market
e.	differentiated goods

   16.   Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

a.	many buyers
b.	many sellers
c.	similar goods
d.	differentiated goods
e.	easy entry into and exit from the market

   17.   The University of California at Irvine (UCI) allows student organizations and private firms to sell items on campus to raise funds for various activities. Many of the organizations sell boba, a Taiwanese tea drink, because boba is popular with students. The market for boba on the UCI campus is very competitive. If legislation is passed to restrict the entry of private firms into the boba market at the UCI campus, the

a.	market would become less competitive.
b.	market would become more competitive.
c.	demand for boba would fall.
d.	supply for boba would increase.
e.	demand for boba would increase.

   18.   Firms in every market structure:

a.	make long-run economic profits.
b.	are in competition with many other firms.
c.	leave the market as soon as they experience loss of profits.
d.	will attempt to maximize profits.
e.	face a horizontal demand curve.

   19.   Total revenue minus total cost equals:

a.	marginal revenue.
b.	marginal cost.
c.	change in profit.
d.	profit.
e.	quantity.

   20.   Marginal revenue is the change in total:

a.	cost when the firm produces additional units.
b.	revenue when the firm spends more money.
c.	revenue divided by the change in total cost.
d.	revenue when the firm produces additional units.
e.	cost divided by the change in total revenue.

   21.   Profit maximization occurs when:

a.	a firm expands output until marginal revenue is exceeded by marginal cost.
b.	a firm expands output until marginal revenue is equal to marginal cost.
c.	the price in the market is equal to the firm’s marginal revenue.
d.	total costs equal total revenue.
e.	a firm sets the price at a point above average total cost.

   22.   When marginal revenue equals marginal cost:

a.	profits are always equal to zero.
b.	firms should increase production.
c.	firms should decrease production.
d.	firms should shut down.
e.	firms are maximizing profits, so they should continue at that production level.

   23.   If the market price is $15 and marginal cost is represented by the equation 2  Q , where Q is in thousands of units, what is the profit-maximizing quantity?

a.	15,000
b.	8,000
c.	7,000
d.	7,500
e.	30,000

   24.   Refer to the accompanying figure. Point _________ corresponds to the profit-maximizing quantity that a competitive firm would produce.

a.	A
b.	B
c.	C
d.	D
e.	E

Refer to the accompanying graph to answer the questions that follow.

   25.   If this firm is maximizing profits, total revenue is represented by the area:

a.	B  C.
b.	A  C.
c.	B  C.
d.	A  B.
e.	(A + B)  C.

   26.   If the firm is maximizing profits, total cost is represented by the area:

a.	B  C.
b.	A  C.
c.	(A – B)  C.
d.	A  B.
e.	(A + B)  C.

   27.   If the firm is maximizing profits, profit is represented by the area:

a.	B  C.
b.	A  C.
c.	(A – B)  C.
d.	A  B.
e.	(A + B )  C.

   28.   All firms, no matter what type of firm structure they are producing in, make their production decisions based on the point where their:

a.	total revenue equals total cost.
b.	marginal revenue equals marginal costs.
c.	profits are equal to zero.
d.	marginal revenue equals price.
e.	average total cost is minimized.

The accompanying table represents the quantity produced, the total revenue, and the total cost of a firm operating in a perfectly competitive market. Refer to this table to answer the questions that follow.

   29.   Profits are maximized when producing:

a.	0 (zero) units.
b.	1 unit.
c.	2 units.
d.	3 units.
e.	4 units.

   30.   When profits are maximized, profits are equal to:

a.	$5.
b.	$3.
c.	$2.
d.	$10.
e.	$9.

   31.   Assuming that all firms have the same cost structure, the price is:

a.	$5.
b.	$3.
c.	$10.
d.	$2.
e.	$9.

   32.   Kimberly owns a cupcake shop in Newport Beach, California. The market for cupcakes is very competitive. At Kimberly’s current production level, her marginal cost is $25 and her marginal revenue is $29. To maximize profits, Kimberly should:

a.	decrease production.
b.	keep production the same.
c.	increase the price.
d.	decease the price.
e.	increase production.

   33.   Kathleen owns a photography business in Mobile, Alabama. The market for photography is very competitive. At Kathleen’s current production level, her marginal cost is $15 and her marginal revenue is $12. In order to maximize profits, Kathleen should:

a.	decrease production.
b.	keep production the same.
c.	increase the price.
d.	decease the price.
e.	increase production.

   34.   If a competitive firm can make enough revenue to cover its variable costs, the firm will:

a.	always earn a profit.
b.	always earn a loss.
c.	earn a profit in the long run.
d.	choose to remain open.
e.	shut down.

   35.   Which of the following conditions will result in the firm making an economic profit?

a.	P  ATC
b.	P  ATC
c.	P = ATC
d.	P = AVC
e.	ATC  P  AVC

   36.   Which of the following conditions will result in the firm making zero economic profits?

a.	P  ATC
b.	P  ATC
c.	P = ATC
d.	P = AVC
e.	ATC  P  AVC

   37.   Firms will always make a positive economic profit if the price they charge is:

a.	less than their minimum average total cost (ATC).
b.	less than their minimum average variable cost (AVC).
c.	greater than their minimum average variable cost (AVC).
d.	greater than their minimum average total cost (ATC).
e.	equal to their minimum average total cost (ATC).

   38.   Firms will break even if the price they charge is:

a.	less than their minimum average total cost (ATC).
b.	less than their minimum average variable cost (AVC).
c.	greater than their minimum average variable cost (AVC).
d.	greater than their minimum average total cost (ATC).
e.	equal to their minimum average total cost (ATC).

   39.   When talking about economic profits in a perfectly competitive market, the difference between the long run and the short run is that, in the short run, firms:

a.	can earn positive economic profits, but in the long run, firms have zero economic profits.
b.	can earn negative economic profits, but in the long run, firms have zero economic profits.
c.	can earn positive or negative economic profits, but in the long run, firms have negative economic profits.
d.	earn negative economic profits, but in the long run, firms have positive economic profits.
e.	can earn positive or negative economic profits, but in the long run, firms have zero economic profits.

   40.   Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will make a positive economic profit if the price is equal to:

a.	$4.00.
b.	$3.75.
c.	$3.00.
d.	$2.50.
e.	$2.00.

   41.   Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will always shut down if the price is equal to:

a.	$4.00.
b.	$3.75.
c.	$3.00.
d.	$2.50.
e.	$2.00.

   42.   Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will break even if the price is equal to:

a.	$4.00.
b.	$3.75.
c.	$3.00.
d.	$2.50.
e.	$2.00.

   43.   Refer to the accompanying table. A firm participating in a competitive market with these costs would be making a profit if the price is:

a.	$6.
b.	$8.
c.	$4.
d.	$2.
e.	either $6 or $8.

   44.   Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will make positive economic profits if the market price is:

a.	$14.
b.	between $14 and $22.
c.	below $14.
d.	$22.
e.	above $22.

   45.   Refer to the accompanying figure. If the price is $8, the firm is making:

a.	a loss and will exit the market.
b.	a profit and will exit the market.
c.	a loss and more firms will enter the market.
d.	a profit and more firms will enter the market in the long run.
e.	zero profit and the market is at long-run equilibrium.

   46.   Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will make zero economic profits if the market price is:

a.	$14.
b.	between $14 and $22.
c.	below $14.
d.	$22.
e.	above $14.

   47.   Refer to the accompanying figure. A firm would be making positive profits if the price is:

a.	anywhere below $5.
b.	below $5 but above $4.
c.	anywhere above $4.
d.	below $4.
e.	above $5.

   48.   When revenue is insufficient to cover cost, the firm:

a.	will always shut down.
b.	will always stay open.
c.	gains a profit.
d.	breaks even.
e.	suffers a loss.

   49.   Firms will always stay in the market if the price they charge is:

a.	less than their minimum average total cost (ATC).
b.	less than their minimum average variable cost (AVC).
c.	greater than their minimum average variable cost (AVC).
d.	greater than their minimum average total cost (ATC) but not greater than their minimum average variable cost (AVC).
e.	equal to their minimum average variable cost (AVC).

   50.   Firms will always suffer a loss only if the price they charge is:

a.	less than their minimum average total cost (ATC).
b.	less than their minimum average variable cost (AVC).
c.	greater than their minimum average variable cost (AVC).
d.	greater than their minimum average total cost (ATC).
e.	equal to their minimum average total cost (ATC).

   51.   In the short run, a competitive firm may choose to operate at a loss:

a.	to ensure that other firms make a loss as well.
b.	only if those losses are economic losses.
c.	to gain market power in the future.
d.	only if those losses are accounting losses.
e.	to recover a portion of its fixed costs.

   52.   Assume that a firm’s costs are split between variable costs and fixed costs. Once variable costs are covered:

a.	any extra money is profit.
b.	any extra money goes toward paying the fixed costs.
c.	the firm will shut down.
d.	the firm will make an economic profit.
e.	the firm will break even.

   53.   Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will suffer a loss but still produce if the price is equal to:

a.	$4.00.
b.	$3.75.
c.	$3.00.
d.	$2.50.
e.	$2.00.

   54.   Tom’s Campgrounds is a firm conducting business in a competitive market. Tom realizes he is making a loss and is trying to decide whether to shut down or stay open. He should stay open:

a.	regardless of the price being charged.
b.	if the price being charged is less than his minimum average variable cost (AVC).
c.	if his revenues do not cover his variable costs.
d.	if his revenues cover his variable costs.
e.	as long as he is making revenue.

   55.   Refer to the accompanying table. A firm participating in a competitive market with these costs would break even if the price is:

a.	$6.
b.	$8.
c.	$4.
d.	$2.
e.	either $6 or $8.

   56.   Refer to the accompanying figure. A firm would be suffering a loss but still be producing if the price is:

a.	anywhere below $5.
b.	below $5 but above $4.
c.	anywhere above $4.
d.	below $4.
e.	above $5.

   57.   Firms will be indifferent about shutting down or producing if the price they charge is:

a.	less than their minimum average total cost (ATC).
b.	less than their minimum average variable cost (AVC).
c.	greater than their minimum average variable cost (AVC).
d.	greater than their minimum average total cost (ATC).
e.	equal to their minimum average variable cost (AVC).

   58.   Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will always shut down if the market price is:

a.	$14.
b.	between $14 and $22.
c.	below $14.
d.	$22.
e.	above $14.

   59.   Refer to the accompanying table. A firm participating in a competitive market with these costs would always shut down if the price is:

a.	$6.
b.	$8.
c.	$4.
d.	$2.
e.	either $6 or $8.

   60.   Refer to the accompanying table. A firm participating in a competitive market with these costs would be indifferent about producing or shutting down if the price is:

a.	$6.
b.	$8.
c.	$4.
d.	$2.
e.	either $6 or $8.

   61.   Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry or exit into the food-truck market. Chuck Diesel Burger will be indifferent about staying open or shutting down if the price is equal to:

a.	$4.00.
b.	$3.75.
c.	$3.00.
d.	$2.50.
e.	$2.00.

   62.   Refer to the accompanying figure. A firm would shut down in the short run if the price is:

a.	anywhere below $5.
b.	below $5 but above $4.
c.	anywhere above $4.
d.	below $4.
e.	above $5.

   63.   The marginal cost curve is the short-run supply curve:

a.	at all points.
b.	as long as the firm is not operating.
c.	as long as the firm is operating.
d.	only between minimum average total cost (ATC) and minimum average variable cost (AVC).
e.	only above minimum average total cost (ATC).

   64.   A firm’s short-run supply curve is equal to the firm’s:

a.	marginal revenue curve.
b.	demand curve.
c.	marginal cost curve above minimum average total cost (ATC).
d.	marginal cost curve below minimum average variable cost (AVC).
e.	marginal cost curve above minimum average variable cost (AVC).

   65.   Refer to the accompanying figure. This firm’s short-run supply curve is represented by the:

a.	average total cost (ATC) curve above $20.
b.	marginal cost (MC) curve above $15.
c.	marginal cost (MC) curve above $8.
d.	marginal cost (MC) curve above $20.
e.	average variable cost (AVC) curve above $15.

   66.   Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers’ short-run supply curve would be the:

a.	marginal revenue (MR) curve above $14.
b.	marginal revenue (MR) curve above $22.
c.	marginal cost (MC) curve above $14.
d.	marginal cost (MC) curve above $22.
e.	average variable cost (AVC) curve above $14.

   67.   Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers’ long-run supply curve would be the:

a.	marginal revenue (MR) curve above $14.
b.	marginal revenue (MR) curve above $22.
c.	marginal cost (MC) curve above $14.
d.	marginal cost (MC) curve above $22.
e.	average variable cost (AVC) curve above $14.

   68.   A firm’s willingness to supply its product in the short run is represented on a graph by the:

a.	market supply curve.
b.	entire marginal cost (MC) curve.
c.	marginal revenue (MR) curve.
d.	part of the marginal cost (MC) curve above minimum average total cost (ATC).
e.	part of the marginal cost (MC) curve above minimum average variable cost (AVC).

   69.   It’s easy to determine if a firm is making long-run production decisions by looking at its cost structure because, in the long run, a firm does not have any:

a.	opportunity costs.
b.	sunk costs.
c.	fixed costs.
d.	variable costs.
e.	marginal costs.

   70.   If the market price of a product is between the minimum average variable cost (AVC) and minimum average total cost (ATC) of a firm, that firm will:

a.	always shut down.
b.	always continue to produce.
c.	produce in the short run but shut down in the long run.
d.	produce in the long run but shut down in the short run.
e.	make positive economic profits.

   71.   At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should:

a.	cut back on production.
b.	stop production all together.
c.	produce more.
d.	continue producing at current levels.
e.	raise its prices.

   72.   According to the accompanying figure, if the price is $5, the firm is making:

a.	a loss and will exit the market.
b.	a profit and will exit the market.
c.	a loss and more firms will enter the market.
d.	a profit and more firms will enter the market.
e.	zero profits and the market is at long-run equilibrium.

   73.   In the long run, if a firm is making a loss, it will:

a.	continue to operate no matter what.
b.	continue to operate if it covers its fixed costs.
c.	increase production in order to increase profits.
d.	decrease production in order to increase profits.
e.	stop producing and exit the market.

   74.   A firm will shut down in the long-run if the:

a.	price is above the minimum average total cost (ATC).
b.	price is equal to the minimum average total cost (ATC).
c.	price is anywhere above the minimum average variable cost (AVC).
d.	price is anywhere below the minimum average total cost (ATC).
e.	firm is making zero economic profits.

Refer to the accompanying figure to answer the questions that follow.

   75.   This firm would shut down in the long run if the price:

a.	fell below $3.
b.	fell below $8.
c.	rose above $5.
d.	rose above $8.
e.	fell below $5.

   76.   If the price is $3, the firm is making:

a.	a loss and will exit the market.
b.	a profit and will exit the market.
c.	a loss and more firms will enter the market.
d.	a profit and more firms will enter the market.
e.	zero profits and the market is at long-run equilibrium.

   77.   Refer to the accompanying figure. A firm would produce in the long-run only if the market price is:

a.	above $20.
b.	above $15.
c.	between $15 and $20.
d.	above $8.
e.	between $8 and $15.

   78.   A firm’s willingness to supply its product in the long run is represented on a graph by the:

a.	market supply curve.
b.	entire marginal cost (MC) curve.
c.	marginal revenue (MR) curve.
d.	part of the marginal cost (MC) curve above minimum average total cost (ATC).
e.	part of the marginal cost (MC) curve above minimum average variable cost (AVC).

   79.   Costs that have been incurred as a result of past decisions are known as:

a.	sunk costs.
b.	variable costs.
c.	fixed costs.
d.	opportunity costs.
e.	marginal costs.

   80.   A good economist will ignore _________ and focus on _________ when it comes to making the right decisions.

a.	marginal value; sunk costs
b.	sunk costs; marginal value
c.	costs; revenues
d.	marginal cost; marginal revenue
e.	opportunity costs; sunk costs

   81.   Sunk costs:

a.	should be taken into consideration when making decisions about future production.
b.	are costs that have been incurred as a result of past decisions.
c.	cause the profit-maximizing rule to no longer be useful.
d.	are future costs that you have to incur.
e.	are included only in economic profits.

   82.   The city of Tustin, California, has spent $10 million on a project to build a new community college. It will cost the city $40 million to finish the project. When making the decision to continue the project, the city’s chief economist tells the city council to ignore the $10 million because:

a.	the $10 million is a sunk cost.
b.	the $10 million doesn’t factor into the total cost of the project.
c.	$10 million is only one-fifth of the entire project cost.
d.	the $10 million is a variable cost.
e.	the $10 million can be recovered if the project is stopped.

   83.   Signals:

a.	have no importance in economics.
b.	convey information about the profitability of various markets.
c.	are only a characteristic of competitive markets.
d.	lead to less competition in markets.
e.	result in less information in a market.

   84.   If the short-run supply curve, the demand curve, and the long-run supply curve all intersect at the same point, firms will experience _________ economic profits, which means the price is _________ the minimum point on the average total cost curve.

a.	positive; above
b.	zero; at
c.	negative; below
d.	negative; at
e.	zero; above

   85.   If the short-run market supply curve and the demand curve intersect above the long-run market supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

a.	positive; above
b.	positive; below
c.	negative; above
d.	negative; below
e.	zero; above

   86.   If the short-run supply curve and the demand curve intersect below the long-run supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

a.	positive; above
b.	positive; below
c.	negative; above
d.	negative; below
e.	zero; above

   87.   In its simplest form, the long-run market supply curve is a(n):

a.	horizontal line at the shut-down price.
b.	horizontal line at the price where accounting profits equal zero.
c.	vertical line at the quantity produced by the firm.
d.	upward-sloping line equal to the marginal cost curve.
e.	upward-sloping line equal to the marginal cost curve only above the minimum average variable cost (AVC).

   88.   According to the accompanying figure, the longrun market supply curve would be a horizontal line:

a.	at $3.
b.	at $5.
c.	at $8.
d.	between $3 and $5.
e.	between $5 and $8.

   89.   If firms in a competitive market are making positive economic profits, the long-run market supply curve:

a.	is above the point where the short-run market supply curve and the demand curve intersect.
b.	is below the point where the short-run market supply curve and the demand curve intersect.
c.	and the short-run market supply curve and the demand curve all intersect at the same point.
d.	shifts upward.
e.	shifts downward.

   90.   If firms in a competitive market are incurring economic losses, the long-run market supply curve:

a.	is above the point where the short-run market supply curve and the demand curve intersect.
b.	is below the point where the short-run market supply curve and the demand curve intersect.
c.	and the short-run market supply curve and the demand curve all intersect at the same point.
d.	shifts upward.
e.	shifts downward.

   91.   If firms in a competitive market are making zero economic profits, the long-run market supply curve:

a.	is above the point where the short-run market supply curve and the demand curve intersect.
b.	is below the point where the short-run market supply curve and the demand curve intersect.
c.	and the short-run market supply curve and the demand curve all intersect at the same point.
d.	shifts upward.
e.	shifts downward.

   92.   An example of an implicit cost is:

a.	a payment on the loan for a piece of equipment not in use.
b.	a payment on an electricity bill.
c.	wages paid to employees.
d.	gasoline costs.
e.	forgone wages.

   93.   An example of an explicit cost is:

a.	a payment on a loan for a computer.
b.	the savings interest lost by investing $10,000 in capital instead of saving the money.
c.	forgone wages.
d.	the opportunity cost of a $50,000 investment into a building.
e.	the amount of money you could receive for renting a company truck to another business.

   94.   If Firm A is making zero economic profits,

a.	Firm A is also making negative accounting profits.
b.	Firm A is breaking even when opportunity cost is taken into consideration.
c.	other firms want to enter the market.
d.	Firm A wants to leave the market.
e.	Firm A wants to shut down in the short run.

   95.   One difference between implicit costs and explicit costs is that:

a.	implicit costs are included in accounting profits, whereas explicit costs are not.
b.	implicit costs are included in economic profits, whereas explicit costs are not.
c.	explicit costs are included in accounting profits, whereas implicit costs are not.
d.	explicit costs are included in economic profits, whereas implicit costs are not.
e.	explicit costs involve opportunity costs, whereas implicit costs involve a monetary transaction.

   96.   Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. Dave’s Batting Cages incurred _________ in implicit costs.

a.	$9,500
b.	$7,000
c.	$51,500
d.	$8,000
e.	$50,000

   97.   Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ economic profits are:

a.	$40,000.
b.	$15,000.
c.	$25,000.
d.	$0.
e.	$80,000.

   98.   Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. If Dave’s Batting Cages received $80,000 in revenues, what were the economics profits?

a.	$20,500
b.	$72,000
c.	$51,500
d.	$80,000
e.	$50,000

   99.   Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. Dave’s Batting Cages incurred _________ in explicit costs.

a.	$9,500
b.	$7,000
c.	$51,500
d.	$8,000
e.	$50,000

100.   Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Charlie’s Churros’ accounting profits are:

a.	$40,000.
b.	$15,000.
c.	$25,000.
d.	$0.
e.	$80,000.

101.   Dave’s Batting Cages is located in Boston, Massachusetts. During the first year of operation, Dave’s Batting Cages incurred many costs. In that year, Dave spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Dave took out a loan to open his business, in which he would have earned $1,500, and his previous job, which he could get back at any time, paid him $50,000. If Dave’s Batting Cages received $80,000 in revenues, what were the accounting profits?

a.	$20,500
b.	$72,000
c.	$51,500
d.	$80,000
e.	$50,000

102.   You can tell a firm is operating in a market that is in long-run competitive equilibrium if:

a.	economic profits are positive.
b.	economic profits are negative.
c.	accounting profits are negative.
d.	accounting profits are zero.
e.	economic profits are zero.

103.   If Nicole’s Knick-Knacks is a perfectly competitive firm and is making zero economic profits:

a.	firms will enter the market.
b.	firms will exit the market.
c.	Nicole’s Knick-Knacks will stay in the market.
d.	the market supply curve will shift to the left.
e.	the market supply curve will shift to the right.

104.   Charlie’s Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Charlie’s Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs. Holding all else constant, the price in this market will:

a.	increase in the long run.
b.	decrease in the long run.
c.	increase in the short run.
d.	decrease in the short run.
e.	stay where it is.

105.   If firms in a competitive market are making positive economic profits, you would expect firms to:

a.	enter the market, causing the demand curve to shift to the right.
b.	enter the market, causing the demand curve to shift to the left.
c.	enter the market, causing the market supply curve to shift to the right.
d.	enter the market, causing the market supply curve to shift to the left.
e.	leave the market, causing the market supply curve to shift to the left.

106.   If firms in a competitive market are incurring economic losses, you would expect firms to:

a.	leave the market, causing the demand curve to shift to the right.
b.	enter the market, causing the demand curve to shift to the left.
c.	leave the market, causing the supply curve to shift to the right.
d.	enter the market, causing the supply curve to shift to the left.
e.	leave the market, causing the supply curve to shift to the left.

Refer to the accompanying set of graphs to answer the questions that follow.

107.   Which graph would result in firms entering a perfectly competitive market in the long run?

a.	A
b.	B
c.	C
d.	D
e.	E

108.   Which graph would result in firms exiting a perfectly competitive market in the long run?

a.	A
b.	B
c.	C
d.	D
e.	E

109.   Which graph would result in no firms entering or exiting the perfectly competitive market?

a.	A
b.	B
c.	C
d.	D
e.	E

110.   If Tommy’s Tank Tops is a perfectly competitive firm and is currently making positive economic profits of $1,000:

a.	firms will enter the market.
b.	firms will exit the market.
c.	individuals will demand more tank tops.
d.	individuals will demand fewer tank tops.
e.	the market supply curve will shift to the left.

111.   If Dirk’s Doughnuts is a perfectly competitive firm and is currently incurring economic losses of $500:

a.	firms will enter the market.
b.	firms will exit the market.
c.	individuals will demand more doughnuts.
d.	individuals will demand fewer doughnuts.
e.	the market supply curve will shift to the right.

112.   The market for watches is perfectly competitive and is currently in equilibrium. What will happen if watches become more popular among college students?

a.	In the short run, firms will experience economic profits, but in the long run, firms will leave the market, bringing economic profits back down to zero.
b.	In the short run, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero.
c.	In the short run, firms will incur economic losses, but in the long run, firms will leave the market, bringing economic profits back down to zero.
d.	In the short run, firms will incur economic losses, but in the long run, firms will enter the market, bringing economic profits back down to zero.
e.	In both the short run and the long run, firms will experience zero economic profits.

113.   The market for candles is perfectly competitive and is currently in equilibrium. What will happen if candles are later linked to more houses catching on fire?

a.	In the short run, firms will experience economic profits, but in the long run, firms will leave the market, bringing economic profits back down to zero.
b.	In the short run, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero.
c.	In the short run, firms will incur economic losses, but in the long run, firms will leave the market, bringing economic profits back up to zero.
d.	In the short run, firms will incur economic losses, but in the long run, firms will enter the market, bringing economic profits back up to zero.
e.	In both the short run and the long run, firms will experience zero economic profits.

114.   Holding all else constant, a decrease in the market demand for a product in a competitive market would cause:

a.	the average total cost (ATC) curve of the firms to decrease.
b.	an increase in the price a firm could charge for the product.
c.	the marginal cost (MC) curve of the firms to decrease.
d.	the marginal revenue (MR) curve of the firms to shift downward.
e.	an increase in profits for the firm.

115.   Holding all else constant, an increase in the market demand for a product in a competitive market would cause:

a.	the average total cost (ATC) curve of the firms to increase.
b.	a decrease in the price a firm could charge for the product.
c.	the marginal revenue (MR) curve of the firms to increase.
d.	the marginal cost (MC) curve of the firms to increase.
e.	a decrease in profits for the firm.

116.   Holding all else constant, an increase in the price of hot dogs would cause the:

a.	marginal revenue (MR) curve in the market for hot dog buns to increase.
b.	marginal revenue (MR) curve in the market for hot dogs to decrease.
c.	average total cost (ATC) curve in the market for hot dog buns to increase.
d.	profits in the market for hot dog buns to increase.
e.	marginal revenue (MR) curve in the market for hot dog buns to decrease.

117.   When firms enter a market, the _________, causing individual firms’ profits to _________.

a.	long-run market supply curve shifts right; decrease
b.	short-run market supply curve shifts left; decrease
c.	short-run market supply curve shifts left; increase
d.	short-run market supply curve shifts right; decrease
e.	short-run market supply curve shifts right; increase

118.   When firms exit a market, the _________, causing individual firms’ profits to _________.

a.	long-run market supply curve shifts right; decrease
b.	short-run market supply curve shifts left; decrease
c.	short-run market supply curve shifts left; increase
d.	short-run market supply curve shifts right; decrease
e.	short-run market supply curve shifts right; increase

119.   As a firm attempts to expand production, it must _________ the wage it pays to attract additional help. This leads to _________ costs, making the long-run supply curve slope _________.

a.	increase; higher; upward
b.	increase; higher; downward
c.	increase; lower; upward
d.	decrease; lower; upward
e.	decrease; higher; upward

120.   One reason why the long-run supply curve may slope upward in a competitive market is that:

a.	firms can exit the industry easily.
b.	firms can enter the industry easily.
c.	there are many buyers and many sellers.
d.	some resources necessary to produce the product may be available only in limited supplies.
e.	some resources necessary to produce the product are not limited.

121.   The entry and exit of firms ensure that the _________ in the long run than in the short run.

a.	market demand curve is much more elastic
b.	market demand curve is much more inelastic
c.	market supply curve is much closer to vertical
d.	market supply curve is much more inelastic
e.	market supply curve is much more elastic

____       1.    A firm’s accounting profit is always greater than its economic profit because:

a.	economic profit considers implicit costs, which accounting profit does not.
b.	accounting profit considers explicit costs, which economic profit does not.
c.	economic profit is always zero, no matter what kind of firm it is.
d.	accounting profit considers implicit costs, which economic profit does not.
e.	accounting profit is always positive, no matter what kind of firm it is.

____       2.    Lauren is the owner of a bakery. Last year, her total revenue was $145,000, her rent was $12,000, her labor costs were $65,000, and her overhead expenses were $15,000. From this information, we know that her accounting profit was:

a.	$145,000.
b.	$53,000.
c.	$65,000.
d.	$15,000.
e.	$27,000.

____       3.    Madison owns a boxing gym. She recently expanded the size of her gym by adding another boxing ring and moving into a larger building so that she can serve more clients. How would Madison know if she is experiencing economies of scale from increasing the size of her boxing gym?

a.	Her average cost per client increases.
b.	Her total cost increases.
c.	Her average cost per client remains the same.
d.	Her average cost per client decreases.
e.	Her total cost remains unchanged.

____       4.    Which is the best example of economies of scale?

a.	the local power company
b.	the pizza business
c.	the restaurant industry
d.	a parking garage
e.	a small family farm

____       5.    Darrell owns a furniture store. If he decided to expand the size of his store in order to sell more furniture, how would he know if he is experiencing diseconomies of scale?

a.	His total cost of selling furniture decreases.
b.	His average cost of selling furniture increases.
c.	His total cost of selling furniture remains unchanged.
d.	His average cost of selling furniture remains unchanged.
e.	His average cost of selling furniture decreases.

____       6.    A firm characterized as a price-taker:

a.	has control over the price it pays, or receives, in the market.
b.	sets the price for the market.
c.	has no control over the price it pays, or receives, in the market.
d.	is not a characteristic of a perfectly competitive market.
e.	takes the price that is determined from the lowest price consumers are willing to pay for an item.

____       7.    In competitive markets:

a.	firms set the prices for their products with little concern for the consumer.
b.	firms control the prices they charge.
c.	market forces are much stronger than individual firms are.
d.	individual firms are much stronger than the market forces are.
e.	market forces set the quantity in the market but not the prices.

____       8.    In competitive markets:

a.	firms set the prices for their products with little concern for the consumer.
b.	firms are considered to be price makers.
c.	firms are at the mercy of market forces.
d.	the individual firms are much stronger than the market forces are.
e.	the market forces set the quantity in the market but not the prices.

____       9.    Which characteristic of competitive markets is mainly responsible for ensuring that prices will be kept low?

a.	many buyers
b.	many sellers
c.	similar goods
d.	easy entry into and exit from the market
e.	differentiated goods

____     10.    Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

a.	many buyers
b.	many sellers
c.	similar goods
d.	differentiated goods
e.	easy entry into and exit from the market

____     11.    If Firm A is making zero economic profits,

a.	Firm A is also making negative accounting profits.
b.	Firm A is breaking even when opportunity cost is taken into consideration.
c.	other firms want to enter the market.
d.	Firm A wants to leave the market.
e.	Firm A wants to shut down in the short run.

____     12.    One difference between implicit costs and explicit costs is that:

a.	implicit costs are included in accounting profits, whereas explicit costs are not.
b.	implicit costs are included in economic profits, whereas explicit costs are not.
c.	explicit costs are included in accounting profits, whereas implicit costs are not.
d.	explicit costs are included in economic profits, whereas implicit costs are not.
e.	explicit costs involve opportunity costs, whereas implicit costs involve a monetary transaction.

____     13.    A monopoly:

a.	always makes a profit.
b.	can force consumers to purchase what it is selling.
c.	is characterized by a single seller who produces a well-defined product for which there are no good substitutes.
d.	always has naturally created barriers.
e.	always has government-created barriers.

____     14.    Monopolists:

a.	enjoy market power for their specific product.
b.	have no market power for their specific product.
c.	will never experience a loss.
d.	always experience economies of scale.
e.	exist in all markets.

____     15.    Barriers to entry:

a.	measure the ability of firms to set the price for a good.
b.	do not exist for monopolies.
c.	always lead to profits.
d.	restrict the entry of new firms into the market.
e.	exist for perfectly competitive firms.

____     16.    Monopolies result in a(n) __________ level of output and provide __________ choice to consumers.

a.	inefficient; less
b.	inefficient; more
c.	efficient; less
d.	efficient; more
e.	high; more

____     17.    Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly because:

a.	it costs the owners of the baseball teams more money to buy the beer from distributors.
b.	demand is much higher at a baseball game than at a bar.
c.	baseball team owners have market power and can charge a higher price when they are the only sellers of the beer.
d.	the government forces the owner of baseball teams to charge a high price.
e.	the owners’ baseball teams are not profit-maximizing.

____     18.    Reducing trade barriers creates _________ competition, _________ the influence of monopoly, and _________ the efficient use of resources.

a.	less; reduces; promotes
b.	more; reduces; promotes
c.	less; increases; promotes
d.	more; reduces; hinders
e.	more; increases; hinders

____     19.    Price discrimination exists when a firm sells __________ goods at more than one price to __________ groups of customers.

a.	different; similar
b.	existing; distinct
c.	discounted; large
d.	identical; different
e.	limited; restricted

____     20.    Price discrimination exists when a firm is able to sell the same good at more than one price to different groups of:

a.	producers.
b.	firms.
c.	consumers.
d.	promoters.
e.	commodities.

____     21.    A firm can be identified as practicing price discrimination when:

a.	consumers engage in comparison shopping to find the lowest advertised price.
b.	firms behave as price-takers, whereas consumers react with price-making behavior.
c.	buyers in a perfectly competitive market are able to influence the prices that firms set.
d.	producers pass on differences in costs to those price-conscious consumers willing to buy in bulk.
e.	producers set different prices for distinct groups of consumers, despite selling identical products to each group.

____     22.    Despite the gain from higher profits, firms are not always able to price-discriminate because:

a.	they are unable to partition their customers into distinct groups.
b.	it is always illegal to price-discriminate in the United States.
c.	they already hold a large degree of market power.
d.	they already provide their goods at the lowest possible prices.
e.	they can easily determine each customer’s reservation price.

____     23.    Price discrimination can help improve efficiency in the market because goods are sold to more people, thus increasing profits. If all consumers have similar tastes, will a firm be able to price-discriminate?

a.	Yes, because the market is homogeneous
b.	Yes, as long as reselling is prohibited in the market
c.	No, because the firm will not be able to distinguish among groups of consumers
d.	No, because the similarities among consumers will lead to collusion among buyers
e.	Yes, because there will be a monopoly in the market (because all consumers want to purchase the same goods and services)

____     24.    An example of price discrimination is when:

a.	movie theaters do not allow children into R-rated movies without a parent or guardian.
b.	you can purchase a new PC for half the price of a new Mac, even though they are both computers.
c.	Procter & Gamble charges $9 for a bottle of Tide laundry detergent, while the store brand costs the consumer significantly less, despite being somewhat similar products.
d.	out-of-state students pay more for the same education as in-state students.
e.	a single box of Froot Loops costs $3.50, but when purchased in a case of six, it costs only $3.00 per box.

____     25.    Monopolistic competition means:

a.	firms are in a monopoly but they compete.
b.	firms are in perfect competition but they collude similar to monopolies.
c.	firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent.
d.	oligopoly firms collude until they become monopolies.
e.	firms have downward-sloping demand.

____     26.    If we are to discuss why the term “monopolistic competition” is used, the best description would be that the industry is “monopolistic” because it:

a.	has high barriers to entry but is “competitive” because it has many firms.
b.	has low barriers to entry but is “competitive” because it has few firms.
c.	has product differentiation but is “competitive” because it has many firms.
d.	has a monopoly but is “competitive” because there are low barriers to entry, meaning it has potential rivals.
e.	holds patents but is “competitive” because other firms might invent similar patentable products.

____     27.    One critical characteristic of monopolistic competition is:

a.	one firm dominates the industry.
b.	a few firms collude with each other by agreeing on price.
c.	a few firms compete without agreeing on price.
d.	there are many small firms in the industry.
e.	there is one large firm in the industry but it has no control over the price.

____     28.    A monopolistically competitive market is characterized by:

a.	many small sellers selling a differentiated product.
b.	a single seller of a unique product that has few or no substitutes.
c.	very high barriers to entry.
d.	many small sellers selling an identical product.
e.	a few firms producing either differentiated or identical products.

____     29.    Like a pure monopoly, an oligopoly is characterized by:

a.	free entry and exit in the long run.
b.	free entry and exit in the short run.
c.	significant barriers to entry.
d.	all firms in the market producing the socially efficient level of output in the long run.
e.	a single firm selling a product with no close substitutes.

____     30.    A monopolistically competitive market consists of many sellers, an oligopoly consists of __________ seller(s), and a monopoly consists of __________ seller(s).

a.	one; one
b.	one; two
c.	a few; many
d.	a few; one
e.	many; one

Which of the following conditions will result in the firm making zero economic profits

A good economist will ignore _________ and focus on _________ when it comes to making the right decisions

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows

At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should

Marginal revenue is the change in total

Firms will break even if the price they charge is

Firms will always make a positive economic profit if the price they charge is

If firms in a competitive market are incurring economic losses, you would expect firms to

The marginal cost curve is the short-run supply curve

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market

Firms in a monopolistically competitive industry produce

A monopoly

One critical characteristic of monopolistic competition is

Monopolistically competitive firms that are earning zero economic profit would most likely

We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms

The accompanying table shows two firms in a single- stage duopoly game. Each firm makes its decision without knowledge of the other firm’s decision. The payoffs for each firm represent economic profits, and each firm strictly prefers more economic profit than less. Assume firms are not able to collude. The Nash equilibrium total quantity of potatoes on the market is

Which of the following industry structures is best associated with low barriers to entry

A price-maker

Sunk costs

If firms in a competitive market are making positive economic profits, you would expect firms to

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows

Firms will always make a positive economic profit if the price they charge is

A firm’s short-run supply curve is equal to the firm’s

If firms in a competitive market are incurring economic losses, you would expect firms to

Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run

When marginal revenue equals marginal cost

Firms in every market structure

If monopolistically competitive firms are making positive economic profits, then new firms would

Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created

If barriers to entry are high and products are somewhat differentiated

If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should

If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17, the monopolist should

Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market

Monopolistic competition

Which of the following is the best description of monopolistic competition

If we are to discuss why the term “monopolistic competition” is used, the best description would be that the industry is “monopolistic” because it

Question 1

The University of California at Irvine (UCI) allows student organizations and private firms to sell items on campus to raise funds for various activities. Many of the organizations sell boba, a Taiwanese tea drink, because boba is popular with students. The market for boba on the UCI campus is very competitive. If legislation is passed to restrict the entry of private firms into the boba market at the UCI campus, the

Select one:

a. market would become more competitive.

b. demand for boba would fall.

c. supply for boba would increase.

d. demand for boba would increase.

e. market would become less competitive.

Question 2

Refer to the accompanying graph to answer the questions that follow.

If this firm is maximizing profits, total revenue is represented by the area:

Select one:

a. B x C

b. A x B

c. (A+B) x C

d. A x C

e. B x C

Question 3

All firms, no matter what type of firm structure they are producing in, make their production decisions based on the point where their:

Select one:

a. marginal revenue equals price.

b. average total cost is minimized.

c. marginal revenue equals marginal costs.

d. total revenue equals total cost.

e. profits are equal to zero.

Question 4

Firms will always make a positive economic profit if the price they charge is:

Select one:

a. less than their minimum average total cost (ATC).

b. less than their minimum average variable cost (AVC).

c. greater than their minimum average total cost (ATC).

d. greater than their minimum average variable cost (AVC).

e. equal to their minimum average total cost (ATC).

Question 5

Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry into or exit from the food-truck market. Chuck Diesel Burger will break even if the price is equal to:

Select one:

a. $4.00.

b. $2.00.

c. $3.00.

d. $3.75.

e. $2.50.

Question 6

Refer to the accompanying figure. If the price is $8, the firm is making:

Select one:

a. a loss and more firms will enter the market.

b. a loss and will exit the market.

c. zero profit and the market is at long-run equilibrium.

d. a profit and will exit the market.

e. a profit and more firms will enter the market in the long run.

Question 7

Refer to the accompanying figure. A firm would be making positive profits if the price is:

Select one:

a. below $5 but above $4.

b. below $4.

c. anywhere below $5.

d. above $5.

e. anywhere above $4.

Question 8

In the short run, a competitive firm may choose to operate at a loss:

Select one:

a. only if those losses are accounting losses.

b. only if those losses are economic losses.

c. to ensure that other firms make a loss as well.

d. to gain market power in the future.

e. to recover a portion of its fixed costs.

Question 9

Refer to the accompanying table. A firm participating in a competitive market with these costs would break even if the price is:

Select one:

a. $4.

b. $6.

c. $2.

d. $8.

e. yes

Question 10

Refer to the accompanying figure. A firm would shut down in the short run if the price is:

Select one:

a. anywhere above $4.

b. anywhere below $5.

c. below $4.

d. below $5 but above $4.

e. above $5.

Question 11

A firm’s short-run supply curve is equal to the firm’s:

Select one:

a. demand curve.

b. marginal cost curve above minimum average variable cost (AVC).

c. marginal cost curve below minimum average variable cost (AVC).

d. marginal revenue curve.

e. marginal cost curve above minimum average total cost (ATC).

Question 12

It’s easy to determine if a firm is making long-run production decisions by looking at its cost structure because, in the long run, a firm does not have any:

Select one:

a. fixed costs.

b. sunk costs.

c. marginal costs.

d. opportunity costs.

e. variable costs.

Question 13

Refer to the accompanying figure. A firm would produce in the long-run only if the market price is:

Select one:

a. above $15.

b. between $8 and $15.

c. above $20.

d. above $8.

e. between $15 and $20.

Question 14

Costs that have been incurred as a result of past decisions are known as:

Select one:

a. opportunity costs.

b. marginal costs.

c. sunk costs.

d. fixed costs.

e. variable costs.

Question 15

If the short-run supply curve and the demand curve intersect below the long-run supply curve, firms will experience _________ economic profits, meaning the price is _________ the minimum point on the average total cost curve.

Select one:

a. zero; above

b. negative; above

c. negative; below

d. positive; above

e. positive; below

Question 16

One difference between implicit costs and explicit costs is that:

Select one:

a. explicit costs are included in accounting profits, whereas implicit costs are not.

b. explicit costs are included in economic profits, whereas implicit costs are not.

c. implicit costs are included in accounting profits, whereas explicit costs are not.

d. implicit costs are included in economic profits, whereas explicit costs are not.

e. explicit costs are included in economic profits, whereas implicit costs are not.

Question 17

You can tell a firm is operating in a market that is in long-run competitive equilibrium if:

Select one:

a. economic profits are positive.

b. economic profits are negative.

c. economic profits are zero.

d. accounting profits are negative.

e. accounting profits are zero.

Question 18

If Nicole’s Knick-Knacks is a perfectly competitive firm and is making zero economic profits:

Select one:

a. the market supply curve will shift to the right.

b. firms will exit the market.

c. the market supply curve will shift to the left.

d. Nicole’s Knick-Knacks will stay in the market.

e. firms will enter the market.

Question 19

If Tommy’s Tank Tops is a perfectly competitive firm and is currently making positive economic profits of $1,000:

Select one:

a. individuals will demand more tank tops.

b. firms will exit the market.

c. the market supply curve will shift to the left.

d. firms will enter the market.

e. individuals will demand fewer tank tops.

Question 20

The market for candles is perfectly competitive and is currently in equilibrium. What will happen if candles are later linked to more houses catching on fire?

Select one:

a. In the short run, firms will incur economic losses, but in the long run, firms will leave the market, bringing economic profits back up to zero.

b. In the short run, firms will experience economic profits, but in the long run, firms will enter the market, bringing economic profits back down to zero.

c. In the short run, firms will incur economic losses, but in the long run, firms will enter the market, bringing economic profits back up to zero.

d. In both the short run and the long run, firms will experience zero economic profits.

e. In the short run, firms will experience economic profits, but in the long run, firms will leave the market, bringing economic profits back down to zero.