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Economic
Q:
Refer to the accompanying set of graphs to answer the following questions.A. D. B. E. C. Which graph would result in no firms entering or exiting the perfectly competitive market?a. A b. B c. Cd. De. E
Q:
If firms in a competitive market are incurring economic losses, we would expect firms to ________ the market, causing the ________ curve to shift to the ________.a. leave; demand; right b. enter; demand; left c. leave; supply; rightd. enter; supply; lefte. leave; supply; left
Q:
If firms in a competitive market are making positive economic profits, you would expect firms to ________ the market, causing the ________ curve to shift to the ________.a. enter; demand; right b. enter; demand; left c. enter; market supply; rightd. enter; market supply; lefte. leave; market supply; left
Q:
If Kangs 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. Kangs 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.
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You can tell a firm is operating in a market that is in long-run competitive equilibrium ifa. economic profits are positive. b. economic profits are negative. c. accounting profits are negative.d. accounting profits are zero.e. economic profits are zero.
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Holding all else constant, the price of churros in this market willa. 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.
Q:
Use the following scenario to answer the following questions:Carmelas Churros is a perfectly competitive firm that sells desserts in Houston, Texas. Carmelas Churros currently is taking in $40,000 in revenues, and has $15,000 in explicit costs and $25,000 in implicit costs.Carmelas Churros accounting profits area. $40,000.b. $15,000. c. $25,000.d. $0.e. $80,000.
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Use the following scenario to answer the following questions:Babak owns a sports practice facility called Boston Batting Cages in Boston, Massachusetts. During the first year of operation, Boston Batting Cages incurred many costs. In that year, Babak spent $5,000 on labor, $2,000 on maintenance, and $1,000 on electricity. Babak 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 Boston Batting Cages received $80,000 in revenues, what were the accounting profits?a. $20,500 b. $72,000 c. $51,500d. $80,000e. $50,000
Q:
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.
Q:
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.
Q:
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 one could receive for renting a company truck to another business.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
In its simplest form, the long-run market supply curve is a(n)
a. horizontal line at the minimum average total cost (ATC).
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).
Q:
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; belowc. negative; aboved. negative; below e. zero; above
Q:
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; aboved. negative; belowe. zero; above
Q:
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; belowd. negative; ate. zero; above
Q:
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.
Q:
Refer to the following figure to answer the following questions.A perfectly competitive industrys short-run supply curve isa. horizontal.b. perfectly elastic.c. perfectly inelastic.d. the upward-sloping portion of the largest firms marginal cost curve.e. the horizontal summation of the supply curve for individual firms.
Q:
Refer to the following figure to answer the following questions.Firm 1 and firm 2 are the sole producers in the industry. At price P1, the industrys total quantity supplied isa. Q1+ Q2+ Q3+ Q4. b. Q1+ Q3. c. Q2+ Q4.d. Q1- Q4.e. Q4- Q1.
Q:
The perfectly competitive firms short-run supply curve is the
a. region of the firms marginal cost curve below the average variable cost curve.
b. region of the firms marginal cost curve above the average variable cost curve.
c. entire marginal revenue curve.
d. entire marginal cost curve.
e. region of the firms marginal cost curve above the average total cost curve.
Q:
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 citys chief economist tells the city council to ignore the $10 million because
a. the $10 million is a sunk cost.
b. the $10 million doesnt 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.
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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 one has to incur.
e. are included only in economic profits.
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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; revenuesd. marginal cost; marginal revenuee. opportunity costs; sunk costs
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Costs that have been incurred as a result of past decisions are known as ________ costs.a. sunk b. variable c. fixedd. opportunitye. marginal
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Refer to the accompanying figure to answer the following questions.A firms willingness to supply its product in the long run is represented on a graph by thea. 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).
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Q:
Refer to the accompanying figure to answer the following questions.The long-run market supply curve would be a horizontal linea. at $3. .b. at $5. c. at $8.d. between $3 and $5e. between $5 and $8.
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Refer to the accompanying figure to answer the following questions.If the price is $3, the firm is makinga. 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.
Q:
19. Draw the market demand (MD), market supply (MS), and long-run (LR) market supply curve associated with the firm in the accompanying graph.
Q:
Refer to the accompanying figure to answer the following questions.This firm would shut down in the long run if the pricea. fell below $3. b. fell below $8. c. rose above $5.d. rose above $8.e. fell below $5.
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18. Draw the market demand (MD), market supply (MS), and long-run (LR) market supply curves associated with the firm in the accompanying graph.
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17. Draw the market demand (MD), market supply (MS), and long-run (LR) market supply curves associated with the firm in the accompanying graph.
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Refer to the accompanying figure to answer the following questions.A firm will shut down in the long-run if thea. 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.
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Q:
Refer to the accompanying figure to answer the following questions.In the long run, if a firm is making a loss, it willa. 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.
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Q:
Refer to the accompanying figure to answer the following questions.At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm shoulda. cut back on production.b. stop production all together.c. produce more.d. continue producing at current levels.e. raise its prices.
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Refer to the accompanying figure to answer the following questions.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 willa. 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.
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Refer to the accompanying figure to answer the following questions.Its 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 ________ costs.a. opportunity b. sunk c. fixedd. variablee. marginal
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Refer to the accompanying figure to answer the following questions.A firm would produce in the long run only if the market price isa. at or above $20. b. above $15. c. between $15 and $20.d. above $8.e. between $8 and $15.
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Refer to the accompanying figure to answer the following questions.This firms short-run supply curve is represented by thea. 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.
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A firms short-run supply curve is equal to the firms
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).
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Q:
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).
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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 isPriceAverage Fixed CostAverage Variable Cost$2$5$6$4$3$4$6$1$5$8$0.50$7a. $6. b. $8. c. $4.d. $2.e. either $6 or $8.
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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).
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Q:
Calvins Campgrounds is a firm conducting business in a competitive market. Calvin 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.
Q:
1. Describe, in detail, each of the following characteristics of a highly competitive firm and explain why each characteristic is important:a. many buyers and many sellers.b. similar products.c. no barriers to entry or exit.
Q:
Assume that a firms 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.
Q:
The entry and exit of firms ensure that the market ________ curve is much ________ in the long run than in the short run.a. demand; more elastic b. demand; more inelastic c. supply; closer to verticald. supply; more inelastice. supply; more elastic
Q:
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.
Q:
Refer to the accompanying figure to answer the following questions.Firms will always suffer a loss only if the price they charge isa. less than their minimum average total cost (ATC).b. equal to 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).
Q:
Refer to the accompanying figure to answer the following questions.When revenue is insufficient to cover cost, the firma. will always shut down. b. will always stay open. c. gains a profit.d. breaks even.e. suffers a loss.
Q:
Use the following scenario to answer the following questions:Lenora and Uma own a dog-grooming business in upstate New York, called Pawkeepsie Groomers. There are many buyers and many sellers in the dog-grooming service market. Pawkeepsie 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.Pawkeepsie Groomers long-run supply curve would be thea. 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.
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Pawkeepsie Groomers will make positive economic profits if the market price isa. $14.b. between $14 and $22. c. below $14.d. $22.e. above $22.
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