Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / University of Waterloo MICROECONO AFM101 CHAPTER 11 1)The market for portable CD players is in long-run equilibrium
University of Waterloo
MICROECONO AFM101
CHAPTER 11
1)The market for portable CD players is in long-run equilibrium. Then the demand for portable CD players decreases.
Describe what happens in the market for portable CD players.
As a result, firms will the market, and the market supply curve will shift .
A. enter; rightward
B. enter; leftward
C. exit; rightward
D. exit; leftward
2) A competitive market is in long-run equilibrium.
Some firms in the market adopt new technology that reduces the average total cost of producing the good. Describe what happens in the market in the long run.
In the long run, the price is and firms with the new technology make economic profit.
A. lower; zero
B. lower; positive
C. constant; zero
D. constant; positive
3) In the long run, firms with the old technology .
A. definitely exit the market
B. switch to the new technology or exit the market
C. definitely switch to the new technology
D. incur an economic loss
4) In perfect competition, each firm .
A. faces a perfectly inelastic demand for its product
B. can influence the price that it charges
C. is a price taker
D. produces as much as it can
5) The table shows the total cost of producing sweaters in Henry's factory. The market for sweaters is perfectly competitive, and the price of a sweater is
$22.50.
What is Henry's profit-maximizing output? Henry's profit-maximizing output is .
a. 2 sweaters an hour
b. 3 sweaters an hour
c. 4 sweaters an hour
d. zero sweaters an hour
6) In the short run, the equilibrium market price and market output are determined by .
A. the firm's supply and demand
B. short-run market supply only
C. the firm's marginal cost
D. short-run market supply and market demand
7) The market for strawberries is in long-run equilibrium.
Then a medical paper explains the health benefits of strawberries, which increases the demand for strawberries.
Describe what happens in the market for strawberries.
As a result, some firms will the market, and the market supply curve will shift .
a. enter; rightward
b. enter; leftward
c. exit; leftward
d. exit; rightward
8) Along the short-run market supply curve, .
A. marginal cost equals total revenue
B. the number of firms remains constant
C. the quantity produced by each firm remains constant
D. the quantity supplied at the shutdown point is zero
9) If firms in a competitive market are , then there is an incentive for firms to the market.
A. making zero economic profit; enter
B. making a positive economic profit; exit
C. incurring an economic loss; enter
D. making a positive economic profit; enter
10) In perfect competition, .
A. there are many firms that sell similar products
B. only firms know their competitors' prices
C. firms in the market have advantages over firms that plan to enter the market
D. there are no restrictions on entry into the market
11) An example of a highly competitive market is the market for .
A. pizza
B. diamonds
C. cable TV
D. electricity
12) In a competitive market, the market demand curve measures . In a competitive market, the market supply curve measures .
a. marginal social benefit if the people who consume a good or service are the only ones who benefit from it;
marginal social cost if the firms that produce a good or service bear all the costs of producing it
b. marginal social benefit if the firms that produce a good or service bear all the costs of producing it;
marginal social cost if the people who consume a good or service are the only ones who benefit from it
c. marginal social cost if the firms that produce a good or service bear all the costs of producing it;
marginal social benefit if the people who consume a good or service are the only ones who benefit from it
d. marginal social cost if the people who consume a good or service are the only ones who benefit from it;
marginal social benefit if the firms that produce a good or service bear all the costs of producing it
13) The top table shows the market demand schedule for DVDs and the bottom table shows the cost structure of each firm.
The market for DVDs is perfectly competitive. There are 100 identical firms, and each firm's total fixed costs are $200 a week.
In long-run equilibrium, what is the number of firms in the market and what is the market price of a DVD?
In long-run equilibrium, the number of firms in the market is and the market price of a DVD is .
A. 50; $10.00 ? 200, MARGINAL COST 10.00 ? 10,000/200=50
B. 100; $9.50
C. 200; $10.00
D. 150; $8.50
14) The graph shows the perfectly competitive market for sunhats. Draw a shape that shows the consumer surplus.
Label it CS.
Draw a shape that shows the producer surplus. Label it PS.
Draw a point to indicate the efficient allocation. At the competitive equilibrium, .
A. consumer surplus is maximized
B. producer surplus is maximized
C. the sum of consumer surplus and producer surplus is minimized
D. the sum of consumer surplus and producer surplus is maximized
15) When new firms enter a perfectly competitive market in which firms are making an economic profit, the market supply curve shifts and the market price .
A. rightward; rises
B. leftward; rises
C. leftward; falls
D. rightward; falls
Each firm's output .
A. increases
B. decreases
C. remains unchanged
16) Joe's Shiny Shoes is a firm that operates in a competitive market. The graph shows Joe's marginal cost curve and average variable cost curve.
Which curve segment describes Joe's supply curve?
Joe's supply curve is described by the curve segment .
a. CD
b. ABCD
c. CE
d. BCD
CHAPTER 11 B
1) Joe's Shiny Shoes is a firm that operates in a competitive market. What action will Joe take if the number of firms in the shoe market increases? If the number of firms in the shoe market increases, Joe will .
A. increase production to maintain market share
B. not be affected by the number of firms
C. wait and see what happens to the price
D. cut back production
2) Complete the sentence.
Consumers get the most value out of their resources at and producers get the most value out of their resources at .
A.
all points on and above the market demand curve; all points on and below the market supply curve B.
all points on and below the market demand curve; all points on and above the market supply curve C.
all points on the market demand curve; all points on the market supply curve D.
only the competitive equilibrium quantity and price; only the competitive equilibrium quantity and price
3) Fuel Costs, Economy Down 3 Airlines
The loss of three airlines in little more than a week is prompting warnings from financial analysts that the worst is not over for the industry or its passengers. Rising fuel prices and a slow economy mean higher expenses but fewer passengers. ATA Airlines, Aloha Airlines and Skybus Airlines all succumbed recently to that fatal combination. The next airline expected to go belly up is Champion Air,
a Bloomington, Minn., charter service that operates 14 Boeing 727 aircraft.
Source: The Washington Times, April 9, 2008.
Why is the market for air travel highly competitive?
The market for air travel is highly competitive because .
A. many airlines provide services to many travelers, it is relatively easy to enter the market, and airlines and travelers are well informed about prices
B. each airline faces a downward-sloping demand curve
C. a relatively high number of airlines are being force to leave the market
D. each airline offers a slightly different experience than its competitors
4) When does perfect competition achieve efficiency? Perfect competition achieves efficiency if .
A. consumer surplus is greater than producer surplus
B. producer surplus equals zero
C. marginal social benefit is greater than marginal social cost
D. price equals marginal social benefit for consumers and price equals marginal social cost for producers
5) Choose the statement that is correct.
A. In a perfectly competitive market, barriers to entry exist.
B. Perfect competition arises if the minimum efficient scale of a single producer is large relative to the demand for the good or service.
C. Perfect competition arises if each firm is perceived to produce a good or service that has no unique characteristics.
D. In a perfectly competitive market, sellers but not buyers are well informed about prices.
6) The smartphone market is in long-run equilibrium. Then the demand for smartphones increases.
Describe what happens in the market for smartphones. In the short run, firms will .
A. make an economic profit
B. incur an economic loss
C. continue to break even
Some firms will the market, and the market supply curve will shift .
A. exit; rightward
B. enter; rightward
C. enter; leftward
D. exit; leftward
7) The graph illustrates the demand for apples from the Apple Orchard.
What information in the graph identifies the Apple Orchard as a perfectly competitive firm? The Apple Orchard is a perfectly competitive firm because .
A. The orchard's profit is the same at each quantity sold
B. the orchard's total revenue is constant
C. the orchard can vary the quantity it sells without affecting the price it receives for its apples
D. the orchard can make no choices
8) Complete the following sentences.
In a market undergoing technological change, firms that adopt the new technology . Firms that stick with the old technology .
A. initially incur huge losses because new technology is costly; remain in the market until the new technology is a sure thing
B. incur economic losses and there is exit by some firms who can't afford the new technology; remain in the market until the new technology is a sure thing
C. make an economic profit and there is entry by new-technology firms; either exit the market or switch to the new technology
D. make an economic profit and because of the expense incurred, no new firms enter the market; eventually exit the market
9) Complete the sentence.
The short-run market supply curve is .
A. the same as a firm's marginal cost curve
B. backward bending
C. the same as the average total cost curve for the entire market
D. horizontal at the shutdown price
10) A firm's minimum average variable cost of $25 a backpack occurs when the firm produces 4 backpacks a day.
Draw the firm's supply curve. Label the supply curve below $25 a backpack S1 and the supply curve above $25 a backpack S2.
A firm's supply curve .
A. is the same as the average total cost curve at all points above the shutdown point
B. is the same as the average variable cost curve at all points above the shutdown point
C. is vertical at the shutdown point
D. is the same as the marginal cost curve at all points above minimum average variable cost
11) Complete the sentence.
In perfect competition, a firm maximizes its economic profit if it produces the output at which .
A. price equals marginal cost
B. price equals marginal revenue
C. total revenue equals total cost
D. total cost equals marginal revenue
12) Complete the following sentences.
When some firms exit a market in which firms incur economic losses, the market supply curve shifts and the market price .
A. leftward; falls
B. rightward; falls
C. leftward; rises
D. rightward; rises
Each remaining firm's economic loss .
A. decreases
B. remains unchanged
C. increases
13) The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical.
Describe each firm in long-run equilibrium.
In long-run equilibrium, each firm is .
A. making positive economic profit
B. making zero economic profit
C. incurring an economic loss
D. just covering total variable cost
14) The table shows a firm's total cost schedule. What is the firm's total cost if it shuts down temporarily? The firm's total cost if it shuts down temporarily is__________________
15) Choose the statement about a perfectly competitive market that is correct.
A. The market supply curve is upward sloping at prices above the shutdown price.
B. The market demand curve is horizontal at the market price.
C. The market supply curve is the vertical sum of all of the individual supply curves in the market.
D. Each firm takes the market price as given and produces as much as possible.
