Microeconomics test 3 CH. 9

Competitive price-taker markets are characterized by which of the following?
firms that produce all the same product
Which of the following is the best example of a business firm operating in a competitive price-taker market?
an Indiana hog farmer that raises pigs
Which of the following is the best example of a business firm operating in a competitive price-taker market?
a Midwest farmer producing beef cattle
Which of the following is a reason to study the decisions of price takers?
The price-taker model enhances our knowledge of competition as a dynamic process
Which of the following is true about firms that are price takers?
They are small relative to the whole market
“Competitive price-taker markets” and “purely competitive markets” are
merely alternative names for the same concept
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
a barrier to entry
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
a barrier to entry
Which of the following results from competition as a dynamic process for the individual firms in an industry?
Each firm will utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers
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
price searchers
In a price taker market
the firms all produce identical products
to maximize profits, a firm should always produce the level of output where
marginal cost equals marginal revenue
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
could increase your profit by expanding output.
If a firm in a price-taker market is earning zero economic profit, it
is doing as well as typical firms in other markets.
If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is
expanded because
producing and selling an additional unit will add more to total revenue than it adds to total
cost.
Historically, most economists have referred to markets where firms are price takers as
purely competitive markets.
which of the following is true?
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.
which of the following is true
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.
If the market price in a price-taking industry was currently above the average total cost of production for
firms in the industry,
new firms would enter the industry, which would drive price down to the average total
cost of production in the long run
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
with firms able to enter and leave the industry freely, competition will drive prices down
to the level of production costs
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
to maximize profits, you should remain open in December.
. 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
. continue operating the truck until the lease expires, then not renew the lease for next year.
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
3
Which of the following is not a characteristic of a price taking firm?
a price taking firm is in a market with a high entry barriers
Which of the following is true of a price taking firm
a price taking firm accepts the price set by the market
A price taking firm will choose to stay open
only if TR is greater then TVC
If the company decided to stay open a price taking firm will maximize profit by
producing at the point where MR=MC
If MC are greater then MR for a price taking firm, the firm should
decrease production, we can’t know if they need to shut down with out AVC.