Macroeconomics Answers

QUESTION 23

In a perfectly competitive market, firms produce and sell goods:

1. Only to the wealthiest customers.
2. At the lowest possible average cost.
3. At the highest possible average cost.
4. At the lowest possible marginal cost.
5. At the highest possible marginal cost.

QUESTION 24

When perfectly competitive firms maximize their profits:

1. They harm society.
2. They maximize allocative efficiency.
3. They minimize allocative efficiency.
4. They minimize productive efficiency.
5. All of the above.

QUESTION 25

Perfect competition in the long run:

1. Is a hypothetical benchmark.
2. Should be avoided at all costs.
3. Causes irreparable harm to society.
4. Creates large profits for firms.
5. Makes everybody happy.

QUESTION 19

The combination of many firms entering or exiting a perfectly competitive market:

1. Will affect overall supply in the market.
2. Will not impact the overall supply in the market.
3. Will cause an increase in the demand for their products.
4. Will cause a decrease in demand for their products.
5. Will never cause the overall supply in that market to fall.

QUESTION 20

In the long run, the process of entry into a perfectly competitive market:

1. Is continuous.
2. Is impossible.
3. Will push down prices until they reach the zero-profit level.
4. Will push down prices only until the largest firms begin losing profits.
5. Will push prices up until they reach the zero-profit level.

QUESTION 21

Agricultural markets are generally good examples of:

1. Monopoly.
2. Oligopoly.
3. Variable-cost industries.
4. Constant-cost industries.
5. A decreasing-cost market.

QUESTION 22

High tech industries may be a good example of:

1. Monopoly.
2. Oligopoly.
3. Variable-cost industries.
4. Constant-cost industries.
5. A decreasing-cost market.

QUESTION 16

If a business in a perfectly competitive market is making a profit in the short run:

1. It has an incentive to expand existing factories or to build new ones.
2. It should expect to continue doing so in the long run.
3. It is guaranteed to make a profit in the long run as well.
4. It has an incentive to reduce output, causing prices to rise.
5. All of the above.

QUESTION 17

Profits are the measurement that determines:

1. Whether the firm’s products are necessities.
2. Whether a firm stays operating or not.
3. Weather for the next ten days.
4. The price of the product being sold.
5. The cost to produce the product being sold.

QUESTION 18

Individuals start businesses:

1. Only if they have to.
2. With the purpose of making profits.
3. Only in the interest of aiding society.
4. Only when it is detrimental to society.
5. Whenever the moon is full.

QUESTION 13

Remaining open requires:

1. The firm to satisfy all of its customers.
2. The firm to break the law.
3. The price to exceed the firm’s average variable cost.
4. The price to exceed the firm’s average fixed cost.
5. The price to exceed the firm’s average total cost.

QUESTION 14

If price falls below the price at the shutdown point:

1. The firm will shut down immediately.
2. The firm will begin producing a larger quantity.
3. The firm will decrease its output slightly.
4. The firm will simply begin charging customers a higher price.
5. There is no hope left for the world.

QUESTION 15

Many of the reasons that supply curves shift:

1. Cannot be determined.
2. Are too complex to specifically express.
3. Relate to underlying changes in costs.
4. Relate to underlying changes in demand.
5. Are caused by decreases in demand for the firm’s product.

QUESTION 11

The profit-maximizing choice for a perfectly competitive firm:

1. Is where the total cost is greater than the total revenue.
2. Is where the total cost is less than the marginal revenue.
3. Will occur at the level of output where marginal revenue is greater than total cost.
4. Will occur at the level of output where marginal revenue is equal to total cost.
5. Will occur at the level of output where marginal revenue is equal to marginal cost.

QUESTION 12

When a firm is experiencing losses, it must face a question:

1. Should it continue producing or should it shut down?
2. How much pie does somebody really need?
3. How much weight does one have to lose before it is enough?
4. Who cares about weight loss anyway?
5. All of the above.

QUESTION 9

A firm in perfect competition faces a perfectly elastic demand curve for its product:

1. The firm’s demand curve is a horizontal line at the market price level.
2. The firm’s demand curve is a horizontal line at the variable cost level.
3. The firm’s demand curve no longer exists.
4. All of the above.
5. None of the above. 

QUESTION 10

Because a perfectly competitive firm is a price taker:

1. It takes all of the prices it can get.
2. It takes more than its fair share of prices.
3. It can sell any quantity at the market-determined price.
4. It can sell only the necessary quantity at the market-determined price.
5. It can sell any quantity at any price that it chooses.

QUESTION 1

In a perfectly competitive market, competitors are:

1. A dime a dozen.
2. Nonexistent.
3. Unable to compete.
4. Earning significant profits.
5. All of the above.

QUESTION 2

Other chapters will examine other industry types:

1. Monopoly.
2. Monopolistic Competition.
3. Oligopoly.
4. All of the above.
5. None of the above.  

QUESTION 3

If a firm in a perfectly competitive market raises the price of its product:

1. It will increase its revenues.
2. It will outsell its competitors.
3. It will lose all of its sales to competitors.
4. All of the above.
5. None of the above.

QUESTION 4

A perfectly competitive firm must be:

1. Better than its competitors to survive.
2. A very small player in the overall market.
3. A market leader.
4. The only option in that market.
5. Happy.

QUESTION 5

When economists use the term capital, they:

1. Are referring only to financial capital.
2. Are referring to financial capital and opportunity cost.
3. Do not mean financial capital.
4. Both answers A and B above.
5. Both answers A and C above. 

QUESTION 6

Different products:

1. Cannot exist.
2. Have different production functions.
3. Have identical production functions.
4. All of the above.
5. None of the above.

QUESTION 7

Eventually, additional workers:

1. Will have decreasing marginal product.
2. Will have increasing marginal product.
3. Will not have a marginal product.
4. Will forget their marginal product.
5. All of the above.

QUESTION 8

Profit is:

1. Always positive.
2. What’s left over from revenues after the firm pays all other costs.
3. The residual.
4. Both answers A and B above.
5. Both answers B and C above.

QUESTION 9Mathematically, marginal cost:

1. Cannot exist.
2. Will always be negative.
3. Could never be negative.
4. Is the change in total cost divided by the change in output.
5. Is the change in output compared to the change in total cost.

QUESTION 10

Fixed cost are expenditures that do not change regardless of the level of production:

1. Because fixed inputs do not change in the short run.
2. Because fixed inputs always change in the short run.
3. Only if the firm is experiencing economies of scale.
4. Only if the firm is experiencing diminishing marginal product.
5. Are set on Mars. 

QUESTION 11

The amount of fixed costs varies:

1. In the short run.
2. Whenever pollution occurs.
3. Along with the number of workers hired.
4. According to the specific line of business.
5. In the level of acidity.

QUESTION 12

This pattern of diminishing marginal utility:

1. Is impossible in the real world.
2. Is common in production.
3. Is rare in production.
4. Always exists in any business setting.
5. All of the above.

QUESTION 13

We calculate the average total cost:

1. By dividing total cost by the total quantity produced.
2. By dividing total cost by the marginal quantity produced.
3. By dividing total cost by the fictional quantity produced.
4. By dividing the amount produced by total cost.
5. Only in case of emergencies.

QUESTION 14

We calculate marginal cost:

1. Only in case of emergencies.
2. Only in case of necessities.
3. By taking the change in total cost between two levels of output and dividing it by the change in output.
4. By dividing total cost by the total quantity produced.
5. By inches.

QUESTION 15

The marginal cost curve:

1. Is always a straight line.
2. Is upward sloping.
3. Is downward sloping.
4. Does not really exist.
5. Was illustrated by Kevin Spacey in the movie “Fast Times at Ridgemont High”.