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The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s) . Figure 9-19 The figure depicts a firm in a price-taker market. Use this figure to answer the following question(s) . Figure 9-19 Refer to Figure 9-19. At the profit-maximizing level of output, the firm will earn an economic A) profit of AHEB. B) loss of AGDC. C) loss of AHEB. D) loss of AIFB. Refer to Figure 9-19. At the profit-maximizing level of output, the firm will earn an economic


A) profit of AHEB.
B) loss of AGDC.
C) loss of AHEB.
D) loss of AIFB.

E) A) and B)
F) All of the above

Correct Answer

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Which of the following is a necessary condition for the presence of competition in a market?


A) government regulations that assure firms will make excess profits
B) suppliers that offer a homogeneous product
C) a price that always equals per-unit production costs
D) low barriers to entry into the market

E) B) and C)
F) A) and D)

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Use the figure to answer the following question(s) . Figure 9-5 Use the figure to answer the following question(s) . Figure 9-5 If the market price in Figure 9-5 fell to $2.50, what should the firm do? A) raise its price B) shut down and wait for conditions to improve C) continue operating in the short run if it expects conditions to improve D) go out of business immediately If the market price in Figure 9-5 fell to $2.50, what should the firm do?


A) raise its price
B) shut down and wait for conditions to improve
C) continue operating in the short run if it expects conditions to improve
D) go out of business immediately

E) A) and B)
F) None of the above

Correct Answer

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Use the figure to answer the following question(s) . Figure 9-7 Use the figure to answer the following question(s) . Figure 9-7 If the market price in Figure 9-7 increases to $4, what should the firm do? A) produce 5,000 per week B) produce 7,500 per week C) produce 10,000 per week D) increase its price to $5 If the market price in Figure 9-7 increases to $4, what should the firm do?


A) produce 5,000 per week
B) produce 7,500 per week
C) produce 10,000 per week
D) increase its price to $5

E) C) and D)
F) A) and C)

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The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure? The figure shows a representative firm in a price-taker market. Which of the following is true regarding the situation depicted in the figure? A) This firm shown is earning zero economic profit. B) The industry is in long-run equilibrium. C) Firms will neither enter nor exit the market. D) All of the above are true.


A) This firm shown is earning zero economic profit.
B) The industry is in long-run equilibrium.
C) Firms will neither enter nor exit the market.
D) All of the above are true.

E) A) and B)
F) All of the above

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The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which of the output levels should this price-taker firm produce in order to maximize profit? The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which of the output levels should this price-taker firm produce in order to maximize profit? A) 10 B) 20 C) 30 D) 40


A) 10
B) 20
C) 30
D) 40

E) B) and C)
F) B) and D)

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When we say that a firm is a price taker, we are indicating that the


A) firm takes the price established in the market then tries to increase that price through advertising.
B) firm can change output levels without having any significant effect on price.
C) demand curve faced by the firm is perfectly inelastic.
D) firm will have to take a lower price if it wants to increase the number of units that it sells.

E) None of the above
F) B) and C)

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In a competitive price-taker market, the actions of any single buyer or seller will


A) have a negligible impact on the market price.
B) have little effect on overall production but will ultimately change final product price.
C) cause a noticeable change in overall production and a change in final product price.
D) adversely affect the profitability of more than one firm in the market.

E) A) and D)
F) All of the above

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The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which of the output levels should this price-taker firm produce in order to maximize profit? The schedule of total costs for a chair-manufacturing firm is presented in the table below. If the market price of chairs is $100, which of the output levels should this price-taker firm produce in order to maximize profit? A) 10 B) 20 C) 30 D) 40


A) 10
B) 20
C) 30
D) 40

E) C) and D)
F) A) and D)

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If firms in a price-taker industry were forced to install antipollution devices that increased their production costs, we should expect


A) the cost curves for the firms in this industry to shift downward.
B) the market price of the product to decrease.
C) that the firms in the industry would suffer long-run economic losses.
D) that the firms in the industry would earn normal economic profits in the long run, as the higher production costs were passed along to consumers in the form of higher prices.

E) B) and D)
F) C) and D)

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If a firm is making zero economic profit, it


A) will be forced to shutdown and leave the market.
B) will also generally be making zero accounting profit.
C) is doing as well as typical firms in other markets.
D) will not survive in the long run.

E) B) and C)
F) None of the above

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Suppose product price is $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this competitive price-taker firm to do?


A) Increase output.
B) Decrease output.
C) Shut down operations.
D) Stay at the current output; the firm is earning a profit of $400.
E) Stay at the current output even though the firm is losing $200.

F) A) and D)
G) D) and E)

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Use the figure to answer the following question(s) . Figure 9-4 Use the figure to answer the following question(s) . Figure 9-4 If the market price of the product in Figure 9-4 rose to $8, indicate the firm's profit-maximizing output and total revenue. A) output, 5 million; total revenue, $30 million B) output, 5 million; total revenue, $40 million C) output, 6 million; total revenue, $10 million (approx.) D) output, 6 million; total revenue, $48 million If the market price of the product in Figure 9-4 rose to $8, indicate the firm's profit-maximizing output and total revenue.


A) output, 5 million; total revenue, $30 million
B) output, 5 million; total revenue, $40 million
C) output, 6 million; total revenue, $10 million (approx.)
D) output, 6 million; total revenue, $48 million

E) C) and D)
F) B) and D)

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Which one of the following factors is not an explanation of the positive relationship between market price and quantity supplied?


A) The law of diminishing returns makes it more costly for firms to expand output quickly.
B) As price increases, some less efficient firms will enter the market.
C) For most firms, unit costs decrease as output increases in the long run.
D) As all firms in an industry hire more factors of production, the prices paid for them often increase.

E) A) and B)
F) A) and C)

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There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?


A) Nothing, because each firm is already maximizing its profits.
B) Many firms will enter the market and each firm will eventually operate at a loss.
C) Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business.
D) Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease.

E) A) and B)
F) A) and C)

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Fun Time Inc. uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer. Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below. Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business. Fun Time Inc. uses the same property and equipment to provide skiing services for six months during the winter and mountain roller boarding for six months during the summer. Monthly revenue and cost figures during the summer and winter months for Fun Time are shown below. Fun Time's $1,000 monthly fixed costs will be incurred as long as it remains in business. Which of the following should Fun Time do if it wants to maximize its profit? A) operate in both the winter and summer B) operate in the summer, but shut down during the winner C) operate in the winter, but shut down during the summer D) go out of business immediately Which of the following should Fun Time do if it wants to maximize its profit?


A) operate in both the winter and summer
B) operate in the summer, but shut down during the winner
C) operate in the winter, but shut down during the summer
D) go out of business immediately

E) A) and D)
F) A) and C)

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Competition as a dynamic process implies that individual firms in a market


A) seek to utilize a variety of techniques, such as product, style, and convenience of location, to win the dollar vote of consumers, but they never use price to compete.
B) use price competition as well as other forms of competition to gain the dollar votes of consumers.
C) produce a homogeneous product.
D) cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.

E) B) and D)
F) All of the above

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The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 The graph below depicts the cost structure for a firm in a competitive market. Figure 9-13 Refer to Figure 9-13. When price falls from P<sub>3</sub> to P<sub>1</sub>, the firm finds that A) fixed cost is higher at a production level of Q<sub>1</sub> than it is at Q<sub>3</sub>. B) it should produce Q<sub>1</sub> units of output. C) it should produce Q<sub>3</sub> units of output. D) it should shut down immediately. Refer to Figure 9-13. When price falls from P3 to P1, the firm finds that


A) fixed cost is higher at a production level of Q1 than it is at Q3.
B) it should produce Q1 units of output.
C) it should produce Q3 units of output.
D) it should shut down immediately.

E) A) and C)
F) None of the above

Correct Answer

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Figure 9-12 Figure 9-12 Figure 9-12 illustrates a A) competitive price-taker firm that is earning economic profit. B) competitive price-taker firm that is only able to break even when it is maximizing economic profit. C) firm that should shut down immediately. D) competitive price-taker firm that is making economic losses. Figure 9-12 illustrates a


A) competitive price-taker firm that is earning economic profit.
B) competitive price-taker firm that is only able to break even when it is maximizing economic profit.
C) firm that should shut down immediately.
D) competitive price-taker firm that is making economic losses.

E) A) and B)
F) A) and C)

Correct Answer

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The entry of new firms into a competitive market will


A) increase market supply and increase market prices.
B) increase market supply and decrease market prices.
C) decrease market supply and increase market prices.
D) decrease market supply and decrease market prices.

E) C) and D)
F) A) and B)

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