ECON Midterm and Final Exam Study Guide
Assume that the graphs show a competitive market for the product stated in the question.
Select the graph above that best shows the change in the market for gasoline, when the price of oil, which is used to produce gasoline, increases because of reduced production by major oil-producing nations.
Graph A
Graph B
Graph C
D. Graph D
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
405.
Assume that the graphs show a competitive market for the product stated in the question.
Select the graph that best shows the change in the market for Florida oranges, when a major frost damages the orange crop in California.
Graph A
Graph B
Graph C
D. Graph D
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 03-05 Explain how changes in supply and demand affect equilibrium prices and quantities.
Test Bank: II Topic: Changes in Supply, Demand, and Equilibrium
406.
Assume that the graphs show a competitive market for the product stated in the question.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 14-03 Explain the three main models of oligopoly pricing and output: kinked-demand theory, collusive pricing, and price leadership.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 14-01 Describe the characteristics of oligopoly.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Apply Difficulty: 03 Hard
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its
A. total variable costs.
total costs.
total fixed costs.
marginal costs.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
54.
The data in the accompanying table indicates that this firm is selling its output in a(n)
monopolistically competitive market.
monopolistic market.
C. purely competitive market.
D. oligopolistic market.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
55.
Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be
A. 2.
B. 3.
4.
5.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
56.
Refer to the data in the accompanying table. At the profit-maximizing output, the firm's total revenue is
A. $48.
B. $32.
C. $80.
D. $64.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
57.
Refer to the data in the accompanying table. Assuming total fixed costs equal to zero, the firm's
A. economic profit is $12.
B. economic profit is $16.
loss is $14.
economic profit is $3.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
In the short run, a purely competitive firm will always make an economic profit if
P = ATC.
P > AVC.
P = MC.
D. P > ATC.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Suppose that at 500 units of output, marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit, and average total cost at 500 units of output is $6. On the basis of this information, we
can say that the firm should close down in the short run.
can say that the firm can produce and realize an economic profit in the short run.
C. cannot determine whether the firm should produce or shut down in the short run.
D. can assume the firm is not using the most efficient technology.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing
A. marginal revenue and marginal cost.
B. price and average variable cost.
total revenue and total cost.
total revenue and total fixed cost.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should
A. shut down in the short run.
B. produce because the resulting loss is less than its TFC.
produce because it will realize an economic profit.
liquidate its assets and go out of business.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
The lowest point on a purely competitive firm's short-run supply curve corresponds to
A. the minimum point on its ATC curve.
B. the minimum point on its AVC curve.
the minimum point on its AFC curve.
the minimum point on its MC curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as its supply curve.
Test Bank: I Topic: Marginal Cost and Short-Run Supply
63.
Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is
A. P1.
B. P2.
P3.
P4.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as its supply curve.
Test Bank: I Topic: Marginal Cost and Short-Run Supply
Type: Graph
64.
Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices
below P2.
below P1.
below P3.
D. between P2 and P3.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
65.
Refer to the diagram for a purely competitive producer. If product price is P3,
the firm will maximize profit at point d.
the firm will earn an economic profit.
C. economic profits will be zero.
D. new firms will enter this industry.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
66.
Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is
A. the abcd segment and above on the MC curve.
B. the bcd segment and above on the MC curve.
the cd segment and above on the MC curve.
not shown.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as its supply curve.
Test Bank: I Topic: Marginal Cost and Short-Run Supply
Type: Graph
The short-run supply curve of a purely competitive producer is based primarily on its
AVC curve.
ATC curve.
AFC curve.
D. MC curve.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as its supply curve.
Test Bank: I Topic: Marginal Cost and Short-Run Supply
On a per-unit basis, economic profit can be determined as the difference between
A. marginal revenue and product price.
B. product price and average total cost.
marginal revenue and marginal cost.
average fixed cost and product price.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
In the short run, a purely competitive seller will shut down if
A. it cannot produce at an economic profit.
B. price is less than average variable cost at all outputs.
price is less than average fixed cost at all outputs.
there is no point at which marginal revenue and marginal cost are equal.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
70.
According to the accompanying diagram, to maximize profit or minimize losses, this firm will produce
K units at price C.
D units at price J.
C. E units at price A.
D. E units at price B.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
71.
Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be
A. 0AHE.
0BGE.
0CFE.
ABGE.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
72.
According to the accompanying diagram, at the profit-maximizing output, total fixed cost is equal to
0AHE.
0BGE.
0CFE.
D. BCFG.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
73.
According to the accompanying diagram, at the profit-maximizing output, total variable cost is equal to
A. 0AHE.
B. 0CFE.
0BGE.
ABGH.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
74.
According to the accompanying diagram, at the profit-maximizing output, the firm will realize
a loss equal to BCFG.
a loss equal to ACFH.
an economic profit of ACFH.
D. an economic profit of ABGH.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Graph
75. If a purely competitive firm is producing at some output level less than the profit-maximizing output, then
price is necessarily greater than average total cost.
fixed costs are large relative to variable costs.
price exceeds marginal revenue.
D. marginal revenue exceeds marginal cost.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
76.
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $12, the competitive firm should produce
4 units at a loss of $109.
4 units at an economic profit of $31.75.
8 units at a loss of $48.80.
D. zero units at a loss of $100.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
77.
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $32, the competitive firm will produce
A. 8 units at an economic profit of $16.
6 units at an economic profit of $7.98.
10 units at an economic profit of $4.
7 units at an economic profit of $41.50.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
78.
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will
A. produce 4 units at a loss of $17.40.
B. produce 7 units at a loss of $14.00.
shut down in the short run.
produce 6 units at a loss of $23.80.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-05 Explain how purely competitive firms can use the marginal-revenue–marginal-cost approach to maximize profits or minimize losses in the short run.
Test Bank: I Topic: Profit Maximization in the Short Run: Marginal-Revenue–Marginal-Cost Approach
Type: Table
79.
The accompanying table gives cost data for a firm that is selling in a purely competitive market. Which of the following tables gives the firm's short- run supply schedule?
A.
B.
C.
D.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 10-06 Explain why a competitive firms marginal cost curve is the same as its supply curve.
Test Bank: I Topic: Marginal Cost and Short-Run Supply
Type: Table
80.
The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be
Price Quantity Demanded
$50 3,000