Question 1

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run,

Accepted Answer

In an increasing cost industry, as the demand for a product increases, the price will increase in the short run, but in the long run, as more firms enter the industry, the per-unit costs of the firms will increase. This is because increasing the production of a product will increase the demand for the inputs required for production, leading to higher costs. Therefore, the best choice is B, as the per-unit costs of the firms will increase in the long run.

Question 2

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Accepted Answer

Since the product is manufactured under conditions of constant cost, an increase in demand will lead to an increase in equilibrium quantity as producers will produce more to meet the higher demand. However, since the cost of production remains constant, there is no pressure for producers to raise prices, so equilibrium price will remain unchanged in the long run. Therefore, choice C is the only correct option.

Question 3

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

Accepted Answer

Positive economic profits in an industry signal owners of factors of production to move their resources into that industry, indicating that the industry is profitable and efficient.

Question 4

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

Accepted Answer

In the long-run, firms have more time to adjust their inputs and production processes, which makes it easier for them to enter or exit the industry. This increased flexibility means that the long-run supply curve is more elastic than the short-run supply curve, which is constrained by the fixed inputs and production processes in place. Therefore, option C is correct.

Question 5

If the expansion of output in an industry leads to unchanged resource prices, the industry is most likely to be

Accepted Answer

In a constant cost industry, the expansion of output does not affect resource prices, indicating that the industry's production does not create any external effects that would lead to higher input costs. Therefore, the industry can expand output without facing higher costs, ensuring that firms have no incentive to leave or enter the industry, and keeping prices at a stable level.

Question 6

The owners of a firm are earning economic profit if

Accepted Answer

The answer of The owners of a firm are earning...

Question 7

Which of the following is true for a constant cost industry?

Accepted Answer

The answer of Which of the following is true for...

Question 8

When profits occur in a competitive market, this indicates that

Accepted Answer

If profits occur in a competitive market, it indicates that the revenue earned from selling the goods is greater than the cost of producing them. This means that consumers value the goods more than the resources used to produce them, as they are willing to pay a price that covers the cost of production and leaves a profit for the producer.

Question 9

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

Accepted Answer

Economic profit is the residual reward that accrues to business decision makers who use resources so as to increase their value. It takes into account not only explicit costs (such as wages, rent, and raw materials) but also implicit costs (such as the opportunity cost of foregone alternative uses of resources). Option A (opportunity cost), Option B (earnings of employees), and Option D (interest earnings of corporate bondholders) are not residual rewards earned by business decision makers.

Question 10

When a firm in a competitive market is earning profits, this indicates that the firm is

Accepted Answer

When a firm in a competitive market is earning profits, it indicates that the firm is effectively allocating resources and creating value for consumers. This can attract new competitors to enter the market, leading to a decrease in profits over time. However, in the short run, the firm's ability to earn profits demonstrates its success in meeting consumer demand and creating value.

Question 11

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Accepted Answer

The answer of If a product is manufactured under conditions...

Question 12

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

Accepted Answer

When the period for firms to expand output is lengthened, they have more time to adjust their production processes and increase output. This leads to a higher elasticity of the market supply curve, as the firms can respond more easily to changes in price. Therefore, choice B is the correct answer.

Question 13

In a constant-cost industry, an increase in output that increases the demand for resources used by the industry

Accepted Answer

In a constant-cost industry, there is no change in the prices of the resources used by the industry as the industry expands its output because the input prices are not affected by the industry's expansion. Therefore, an increase in output that increases the demand for resources used by the industry is not likely to result in higher prices for resources.

Question 14

Suppose the development of new drought-resistant hybrid seed corn leads to a 50-percent increase in the average yield per acre without increasing the cost to the farmers who use the new technology. If the conditions in the corn production industry are approximated by the price-taker model, which of the following is most likely to occur?

Accepted Answer

The answer of Suppose the development of new drought-resistant hybrid...

Question 15

A perfectly elastic, long-run market supply curve is most likely to be achieved in

Accepted Answer

The answer of A perfectly elastic, long-run market supply curve...

Question 16

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will

Accepted Answer

As resource prices rise, it becomes more expensive for firms to produce the product. This means that the cost of production for each unit of output will increase. As firms in the industry expand output in response to an increase in demand, the per-unit cost of production will continue to increase due to the higher prices of resources. This will cause the long-run market supply curve to slope upward to the right, indicating that as demand increases, the price of the product will also increase to cover the higher costs of production. A horizontal line (perfectly elastic) would indicate that firms can increase output without any increase in cost, which is unlikely in the real world. A vertical line (perfectly inelastic) would indicate that the quantity supplied does not change at all in response to changes in price, which is also unlikely. The long-run supply curve will be more elastic than the short-run supply curve because in the long run, firms have more flexibility to adjust their production processes and find ways to produce more efficiently, thereby reducing their per-unit cost of production.

Question 17

Suppose antitheft auto alarms are produced in a price-taker market that is initially in long-run equilibrium. It is estimated that only 23 percent of all autos have alarms. Due to rising auto theft, Congress mandates alarms in every vehicle. Assume complete compliance. If the industry is an increasing cost industry, price will

Accepted Answer

The answer of Suppose antitheft auto alarms are produced in...

Question 18

In a price-taker market, profits are

Accepted Answer

In a price-taker market, firms must accept the market price for their product and cannot influence it. Therefore, profits are earned by creating value and being efficient in producing the good or service, rather than by charging arbitrarily high prices.

Question 19

Why will the long-run market supply curve for most products slope upward to the right?

Accepted Answer

The answer of Why will the long-run market supply curve...

Question 20

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?

Accepted Answer

The answer of Suppose the demand curve for aluminum cans...

Quiz 9: Price Takers and the Competitive Process

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run,

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

Suppose a typical firm in a particular industry is making positive economic profits. These economic profits

The long-run supply curve for a product differs from the short-run supply curve in that the long-run supply curve is usually

If the expansion of output in an industry leads to unchanged resource prices, the industry is most likely to be

The owners of a firm are earning economic profit if

Which of the following is true for a constant cost industry?

When profits occur in a competitive market, this indicates that

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

When a firm in a competitive market is earning profits, this indicates that the firm is

If a product is manufactured under conditions of constant cost, an increase in the demand for the product will increase

As the period for firms to expand output is lengthened, the elasticity of the market supply curve will

In a constant-cost industry, an increase in output that increases the demand for resources used by the industry

A perfectly elastic, long-run market supply curve is most likely to be achieved in

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will

In a price-taker market, profits are

Why will the long-run market supply curve for most products slope upward to the right?

Suppose the demand curve for aluminum cans is downward sloping, and the cans are produced in a constant cost industry where the firms are price takers. A $.25-per-can tax is levied on aluminum cans. How much will the price of aluminum cans increase in the short run and the long run?