Question 1

The perfectly competitive market structure includes all of the following except

Accepted Answer

A)  Many firms.
B)  Identical products.
C)  Large advertising budgets.
D)  Low entry barriers.

Question 2

Implicit costs

Accepted Answer

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

Question 3

Accounting costs and economic costs differ because

Accepted Answer

A)  Accounting costs exceed economic costs whenever any factor is not paid an explicit wage.
B)  Accounting costs include implicit costs,and economic costs do not.
C)  Economic costs include the opportunity costs of all resources used,while accounting costs include actual dollar outlays.
D)  Accounting costs include explicit costs,and economic costs do not.

Question 4

Economic profit is the difference between

Accepted Answer

A)  Accounting profits and external costs.
B)  Total costs and total economic costs.
C)  Accounting profit and explicit costs.
D)  Total revenues and total economic costs. D

Question 5

Table 22.1   Assume an apple farmer incurs the following costs and revenues  Fertilizer $200 Seeds $75 Water $250 Wages $750 Property taxes $600 Interest paynents on borrowed funds $1,200 Bales of apples $4,000\begin{array}{l}	ext { Assume an apple farmer incurs the following costs and revenues }\\begin{array} {| l | r| } \hline 	ext { Fertilizer } & \$ 200 \\hline 	ext { Seeds } & \$ 75 \\hline 	ext { Water } & \$ 250 \\hline 	ext { Wages } & \$ 750 \\hline 	ext { Property taxes } & \$ 600 \\hline 	ext { Interest paynents on borrowed funds } & \$ 1,200 \\hline 	ext { Bales of apples } & \$ 4,000 \\hline\end{array}\end{array} Assume an apple farmer incurs the following costs and revenues  Fertilizer  Seeds  Water  Wages  Property taxes  Interest paynents on borrowed funds  Bales of apples ​$200$75$250$750$600$1,200$4,000​​​  Suppose the entrepreneur could earn $1,000 as an employee elsewhere.This means the accounting profit is

Accepted Answer

A)  $1,525.
B)  $925.
C)  -$75.
D)  -$1,000.

Question 6

Explain what is necessary if a business is to earn economic profits.

Accepted Answer

To earn economic profits,a bus...

Question 7

Which of the following is a production decision?

Accepted Answer

A)  How much output the firm should produce in the long run.
B)  Whether the firm should shut down or produce.
C)  Whether the firm should exit or enter the market.
D)  Whether the firm should merge with one of its rivals.

Question 8

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

Accepted Answer

A)  -$90,000.
B)  $0.
C)  $90,000.
D)  $200,000.

Question 9

Refer to Figure 22.3 for a perfectly competitive firm.Which of the following statements is true for this firm between the prices of $10 and $15?

Accepted Answer

A)  The firm is experiencing zero economic profits.
B)  The firm is experiencing economic profits because the market price is greater than or equal to the minimum AVC.
C)  The firm is experiencing economic losses and should shut down.
D)  The firm is experiencing economic losses but should continue to produce.

Question 10

Refer to Figure 22.3 for a perfectly competitive firm.At a market price of $23,profit per unit is maximized at an output of

Accepted Answer

A)  13 units.
B)  25 units.
C)  31 units.
D)  39 units. C

Question 11

The demand curve confronting a competitive firm

Accepted Answer

A)  Equals the marginal revenue curve.
B)  Is horizontal,as is the market demand curve.
C)  Slopes downward,while the market demand curve is horizontal.
D)  Slopes downward,and the marginal revenue curve is below it. A

Question 12

The production decision is another term for the investment decision.

Accepted Answer

A) True 
 B)False

Question 13

Normal profit implies that

Accepted Answer

A)  Economic profit must be positive.
B)  Economic profit must be negative.
C)  The factors employed are earning as much as they could in the best alternative employment.
D)  Firms will expand their scale of production.

Question 14

An In the News article discusses "Too Many Sellers: The Woes of T-Shirt Shops." If T-shirt shops are perfectly competitive firms,then

Accepted Answer

A)  The barriers to entry are low.
B)  Shops can definitely earn an economic profit in the long run.
C)  There are few T-shirt shops.
D)  Each shop has market power.

Question 15

When businesses earn zero economic profit,they have no incentive to stay in business.

Accepted Answer

A) True 
 B)False

Question 16

A firm that makes zero economic profits

Accepted Answer

A)  Must eventually go bankrupt and exit the industry.
B)  Does not cover its variable costs and should shut down in the short run.
C)  Incurs an accounting loss if fixed costs are greater than variable costs.
D)  Covers all its costs,including a provision for normal profit.

Question 17

Which of the following industries is perfectly competitive?

Accepted Answer

A)  Heavy duty trucks.
B)  Cell phone service.
C)  Wholesale fresh flowers.
D)  Fast-food restaurants.

Question 18

Refer to Figure 22.3 for a perfectly competitive firm.If the market price is $15,

Accepted Answer

A)  The firm should produce 39 units.
B)  The firm should shut down.
C)  The firm will have above-normal profits.
D)  Economic profits will be zero.

Question 19

An investment decision involves choosing

Accepted Answer

A)  A rate of output and is a short-run decision.
B)  A rate of output and is a long-run decision.
C)  The amount of plants and equipment and is a short-run decision.
D)  The amount of plants and equipment and is a long-run decision.

Question 20

Economic profit is zero when a firm's revenues just cover its economic cost.

Accepted Answer

A) True 
 B)False

Exam 22: The Competitive Firm

The perfectly competitive market structure includes all of the following except

Correct Answer
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Implicit costs

Correct Answer
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Accounting costs and economic costs differ because

Correct Answer
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Economic profit is the difference between

Correct Answer
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D

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Explain what is necessary if a business is to earn economic profits.

Correct Answer
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To earn economic profits,a bus...
View Answer

Which of the following is a production decision?

Correct Answer
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Refer to Figure 22.3 for a perfectly competitive firm.Which of the following statements is true for this firm between the prices of $10 and $15?

Correct Answer
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Refer to Figure 22.3 for a perfectly competitive firm.At a market price of $23,profit per unit is maximized at an output of

Correct Answer
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C

The demand curve confronting a competitive firm

Correct Answer
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A

The production decision is another term for the investment decision.

Correct Answer
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Normal profit implies that

Correct Answer
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An In the News article discusses "Too Many Sellers: The Woes of T-Shirt Shops." If T-shirt shops are perfectly competitive firms,then

Correct Answer
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When businesses earn zero economic profit,they have no incentive to stay in business.

Correct Answer
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A firm that makes zero economic profits

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Which of the following industries is perfectly competitive?

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Refer to Figure 22.3 for a perfectly competitive firm.If the market price is $15,

Correct Answer
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An investment decision involves choosing

Correct Answer
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Economic profit is zero when a firm's revenues just cover its economic cost.

Correct Answer
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Exam 22: The Competitive Firm

The perfectly competitive market structure includes all of the following except

Correct AnswerverifiedShow Answer

Implicit costs

Correct AnswerverifiedShow Answer

Accounting costs and economic costs differ because

Correct AnswerverifiedShow Answer

Economic profit is the difference between

Correct AnswerverifiedD

Correct AnswerverifiedShow Answer

Explain what is necessary if a business is to earn economic profits.

Correct AnswerverifiedTo earn economic profits,a bus...View AnswerShow Answer

Which of the following is a production decision?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to Figure 22.3 for a perfectly competitive firm.Which of the following statements is true for this firm between the prices of $10 and $15?

Correct AnswerverifiedShow Answer

Refer to Figure 22.3 for a perfectly competitive firm.At a market price of $23,profit per unit is maximized at an output of

Correct AnswerverifiedC

The demand curve confronting a competitive firm

Correct AnswerverifiedA

The production decision is another term for the investment decision.

Correct AnswerverifiedShow Answer

Normal profit implies that

Correct AnswerverifiedShow Answer

An In the News article discusses "Too Many Sellers: The Woes of T-Shirt Shops." If T-shirt shops are perfectly competitive firms,then

Correct AnswerverifiedShow Answer

When businesses earn zero economic profit,they have no incentive to stay in business.

Correct AnswerverifiedShow Answer

A firm that makes zero economic profits

Correct AnswerverifiedShow Answer

Which of the following industries is perfectly competitive?

Correct AnswerverifiedShow Answer

Refer to Figure 22.3 for a perfectly competitive firm.If the market price is $15,

Correct AnswerverifiedShow Answer

An investment decision involves choosing

Correct AnswerverifiedShow Answer

Economic profit is zero when a firm's revenues just cover its economic cost.

Correct AnswerverifiedShow Answer

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D

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To earn economic profits,a bus...
View Answer

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C

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A

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