Microeconomics test 3 CH. 9 – Flashcards
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Competitive price-taker markets are characterized by which of the following?
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firms that produce all the same product
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Which of the following is the best example of a business firm operating in a competitive price-taker market?
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an Indiana hog farmer that raises pigs
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Which of the following is the best example of a business firm operating in a competitive price-taker market?
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a Midwest farmer producing beef cattle
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Which of the following is a reason to study the decisions of price takers?
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The price-taker model enhances our knowledge of competition as a dynamic process
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Which of the following is true about firms that are price takers?
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They are small relative to the whole market
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"Competitive price-taker markets" and "purely competitive markets" are
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merely alternative names for the same concept
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When a law is passed that requires businesses to obtain permission from government officials in order to enter a market, this is an example of
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a barrier to entry
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Several states require cosmetologists to undertake 1,500 hours or more of training in order to obtain a license to provide hair styling or braiding services. This is an example of
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a barrier to entry
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Which of the following results from competition as a dynamic process for the individual firms in an industry?
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Each firm will utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers
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Firms that can choose what price they will charge for their product and can increase the number of units sold by reducing price are called
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price searchers
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In a price taker market
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the firms all produce identical products
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to maximize profits, a firm should always produce the level of output where
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marginal cost equals marginal revenue
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If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you
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could increase your profit by expanding output.
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If a firm in a price-taker market is earning zero economic profit, it
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is doing as well as typical firms in other markets.
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If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is expanded because
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producing and selling an additional unit will add more to total revenue than it adds to total cost.
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Historically, most economists have referred to markets where firms are price takers as
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purely competitive markets.
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which of the following is true?
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When firms in a price-taker market are earning positive economic profits, new firms will enter the industry causing the market price to fall until the firms in the industry are earning only zero economic profit.
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which of the following is true
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When firms in a price-taker market are earning economic losses, some firms will exit the industry causing the market price to rise until the remaining firms are earning zero economic profit.
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If the market price in a price-taking industry was currently above the average total cost of production for firms in the industry,
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new firms would enter the industry, which would drive price down to the average total cost of production in the long run
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A price-taker market tends toward a state of long-run equilibrium in which firms earn only a normal rate of return (zero economic profits) because
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with firms able to enter and leave the industry freely, competition will drive prices down to the level of production costs
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You are the owner of an ice cream shop that earns a profit most of the year except during the cold winter months. During the month of December, your rent and other fixed costs amount to a total of $200. If you remain open, your total variable costs (workers, ice cream cones, etc.) will amount to $300. If you would be able to sell 100 ice cream cones at $4 each during December, then
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to maximize profits, you should remain open in December.
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. FYI Sanitation is currently eight months into a year-long lease contract on a garbage truck at a cost that averages $500 per month. Variable costs (fuel, workers, etc.) for operating the truck amount to $300 per month. If the monthly revenue from operating the truck is $400, and these conditions are expected to continue into the future, to maximize its profit, FYI Sanitation should
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. continue operating the truck until the lease expires, then not renew the lease for next year.
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The schedule of total cost for a firm in a price-taker market is given in the table. If the market price for this product is $50, which of the following output levels should this firm produce if it wants to maximize its profit? Output Total Cost 0 $ 25 1 65 2 95 3 140 4 195 5 255
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3
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Which of the following is not a characteristic of a price taking firm?
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a price taking firm is in a market with a high entry barriers
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Which of the following is true of a price taking firm
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a price taking firm accepts the price set by the market
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A price taking firm will choose to stay open
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only if TR is greater then TVC
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If the company decided to stay open a price taking firm will maximize profit by
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producing at the point where MR=MC
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If MC are greater then MR for a price taking firm, the firm should
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decrease production, we can't know if they need to shut down with out AVC.
