iVAT Chapter 13

A  Some firms will exit this market and the price will remain at P1.

B  New firms will enter this market and the price will remain at P1.

C  New firms will enter this market and the price will return to P0.

D  Some firms will exit this market and the price will return to P0.

A  Some firms will exit this market and price will remain at P1.

B  New firms will enter this market and price will remain at P1.

C  Some firms will exit this market and price will return to P0.

D  New firms will enter this market and price will return to P0.

A  Market price remains at P0 because perfectly competitive firms can’t earn positive economic profit.

B  The firm’s output remains at q0 because perfectly competitive firms can’t earn positive economic profit.

C  Market price rises from P0 to P1 and the firm’s output rises from q0 to q1.

D  Market price rises from P0 to P1 and the firm’s output rises from Q0 to Q1.

A  Output of the firm shown in the graph is the same as quantity supplied in the market.

B  Firm is not producing at the output where profit is maximized.

C  Firm shown in the graph will produce q1, but all the firms in the market will produce a total of Q1.

D  Firm shown in the graph will produce q0, but all the firms in the market will produce a total of Q0.

A  The firm will raise the price above P0 to increase profit.

B  This market is in long-run equilibrium because the firm is earning positive economic profit.

C  This market is in long-run equilibrium because the firm is earning zero economic profit.

D  This market is in short-run equilibrium but not long-run equilibrium.

A  Shut down immediately.

B  Continue to produce in both the short run and the long run.

C  Shut down in the short run but continue production in the long run.

D  Continue to produce in the short run but shut down in the long run.

A  Once fixed costs decrease, or the ATC curve shifts downwards.

B  If price was equal to, or went above AVC.

C  Once fixed costs increase, or the ATC curve shifts upwards.

D  If price was equal to, or went below AVC.

A  No, due to the fact that the operating loss is -$24, which is much smaller than the loss incurred if they were to shutdown.  If they were to shutdown, the loss would equal the fixed costs or -$84.50.

B  No, due to the fact that the operating loss is -$24, which is much smaller than the loss incurred if they were to shutdown. If they were to shutdown, the loss would equal the fixed costs or -$84.50. However, the firm should shutdown once the price goes above average variable costs.

C  No, due to the fact that the operating loss is -$48, which is much smaller than the loss incurred if they were to shutdown. If they were to shutdown, the loss would equal the fixed costs or -$169.

D  Yes, due to the fact that the shutdown loss is -$169.  This is much smaller than the operating loss.

A  Economic profits are positive, and the quantity supplied from the firm is 120 units per day.

B  Economic profits are negative, which means there is economic losses, and the quantity supplied from the firm is 80 units per day.

C  Economic profits are negative, which means there is economic losses, and the quantity supplied from the firm is 100 units per day.

D  Economic profits are negative, which means there is economic losses, and the quantity supplied from the firm is 60 units per day.

A  Economic profits are $500 and the quantity supplied from the firm is 200 units per day.

B  Economic profits are $0 and the quantity supplied from the firm is 100 units per day.

C  Economic profits are -$100 and the quantity supplied from the firm is 80 units per day.

D  Economic profits are $100 and the quantity supplied from the firm is 100 units per day.

A  MC >MR.

B  The prevailing price is $8 and economic profits are positive.

C  The prevailing price is $4 and economic profits are $0.

D  The prevailing price is $3 and economic profits are negative.

A  The firm will earn $0 in economic profits.

B  Average cost of the product will be at the minimum possible level.

C  The firm will earn economic profits.

D  Output will be 100 units per day.

A  Are the total labor costs from production.

B  Are the total costs of production.

C  Are the amount of labor that needs to be employed.

D  Is the amount of money that could have been earned by renting out that firm’s capital.

A  $0

B  –$30.

C  $38

D  $30

A  $0

B  $30

C  $38

D  –$38.

A  Decrease output from 850 to 750.

B  Continue to produce 850 units.

C  Produce 850 units of output.

D  Increase output from 650 to 750.

A  Between 550 and 650 units of output.

B  850 units of output.

C  450 units of output.

D  650 units of output.

A  Quantity supplied is 25.

B  Quantity supplied is 27.

C  Quantity supplied is greater than 25, but less than 27.

D  Quantity supplied is 26.

A  Demand curve.

B  Supply curve.

C  Horizontal demand curve.

D  None of the available answers.

E  Profit per unit.

A  40 units of output.

B  50 units of output.

C  30 units of output.

D  60 units of output.

A  $3.00.

B  $6.50.

C  $5.00.

D  $3.50.

A  $6.50 and marginal revenue for the firm is $5.00.

B  $5.00 and marginal revenue for the firm is $3.00.

C  $5.00 and marginal revenue for the firm is $5.00.

D  $6.50 and marginal revenue for the firm is $6.50.

A  FALSE

B  TRUE

A  TRUE

B  FALSE

A  A horizontal line.

B  A vertical line.

C  Downward-sloping.

D  Upward-sloping.

A  Perfectly elastic.

B  Relatively elastic.

C  Perfectly inelastic.

D  Relatively inelastic.

A  Soda.

B  Soy beans.

C  Textbooks.

D  Energy drinks.

A  Corn production.

B  Landscaping industry.

C  Fast-food industry.

D  Automobile production industry.

A  Both buyers and sellers are usually price makers.

B  Buyers are often price takers, but sellers are usually price makers.

C  Buyers are often price makers, but sellers are usually price takers.

D  Both buyers and sellers are usually price takers.

A  Both sellers and consumers are price takers and have no impact on the price in the market.

B  Both sellers and consumers are not price takers and can impact the price in the market.

C  Sellers are price takers, but consumers do have an impact on the price.

D  Consumers are price takers, but sellers do have an impact on the price.

A  Chooses its own price, but after consulting with other comp.anies

B  Chooses the price it sells at.

C  Chooses own price based on the demand curve it faces.

D  Chooses output in response to a market-determined price.

E  Chooses output based off of weather conditions.

A  Due to the fact that perfect competition is an optimal economic situation.

B  Because it allows us to analyze how markets work when the invisible hand is completely impeded and market forces are not allowed to work. This can be used as a reference point when analyzing a market that is not perfectly competitive.

C  Because it allows us to analyze how markets work when the invisible hand is completely impeded and market forces are not allowed to work. This can be used as a reference point when analyzing a market that is perfectly competitive.

D  Because it allows us to analyze how markets work when the invisible hand is completely unimpeded. This can be used as a reference point when analyzing a market that is not perfectly competitive.