Question 1

The Invisible Hand Property 2 maintains that:

Accepted Answer

A)   the right mix of resources will be found in each industry, maximizing the total value of production.
B)   entry barriers prevent profit signals from working in competitive markets.
C)   resources are allocated by greatest need for the greatest number.
D)   production costs are minimized.E) C) and D)
F) A) and C)

Question 2

If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its economic profit is:

Accepted Answer

A)   $0.
B)   $50.
C)   $100.
D)   $500.E) B) and D)
F) C) and D)

Question 3

Since a competitive firm sets MR = P to determine all quantities in the short run, we can conclude that:

Accepted Answer

A)   each firm in the industry faces very large fixed costs.
B)   the demand curve faced by each individual competitive firm is perfectly elastic.
C)   the demand curve faced by each individual competitive firm is downward sloping.
D)   the industry demand curve is perfectly elastic.E) All of the above
F) B) and C)

Question 4

Which of the following factors cause markets to be dynamic?
I. changes in tastes
II. changes in technology
III. new idea development

Accepted Answer

A)   I and II only
B)   II only
C)   I, II, and III
D)   I onlyE) A) and B)
F) C) and D)

Question 5

For a competitive firm, which of the following conditions describes the profit maximization condition?
I. P = MC
II. MR = MC
III. TR = TC

Accepted Answer

A)   II only
B)   I and II only
C)   II and III only
D)   I, II, and IIIE) None of the above
F) A) and D)

Question 6

In markets lacking competition, the invisible hand concept works in society's best interest.

Accepted Answer

A) True 
 B)False

Question 7

Competitive firms want to produce the quantity such that:

Accepted Answer

A)   P = MC.
B)   P > MC.
C)   P > AC.
D)   P < AC.E) A) and B)
F) A) and C)

Question 8

Entrepreneurs have the incentive to:

Accepted Answer

A)   follow the orders of the central planner.
B)   move resources into those industries with the lowest marginal costs.
C)   minimize marginal costs.
D)   move resources out of low-value industries and into high-value industries.E) A) and B)
F) A) and C)

Question 9

Which of the following best help entrepreneurs identify low-value industries versus high-value industries?

Accepted Answer

A)   marginal costs
B)   price signals
C)   central planner
D)   total costsE) A) and D)
F) C) and D)

Question 10

Use the following to answer questions:
Figure: Marginal Costs 1 
-Figure: Marginal Costs 2  This figure shows the production costs of two firms that produce bird feeders. If these two firms represent total production in the industry, how should they allocate the production of 200 bird feeders to minimize costs?

Accepted Answer

A)   Firm 2 should produce all 200 bird feeders.
B)   Firm 1 should produce all 200 bird feeders.
C)   Firm 1 should produce 150 bird feeders, and Firm 2 should produce 50 bird feeders.
D)   Firm 1 should produce 100 bird feeders, and Firm 2 should produce 100 bird feeders.E) A) and D)
F) A) and B)

Question 11

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:

Accepted Answer

A)   $0
B)   $50
C)   $100
D)   $500E) None of the above
F) A) and B)

Question 12

Normal profits in a competitive industry refer to positive long-run profits.

Accepted Answer

A) True 
 B)False

Question 13

Perfectly price discriminating monopolists earn ______ profits.

Accepted Answer

A)   normal
B)   above-normal
C)   below-normal
D)   abnormalE) All of the above
F) None of the above

Question 14

In a perfectly competitive market,:

Accepted Answer

A)   marginal costs will be less than average costs.
B)   all firms will produce an equal amount of output.
C)   total industry costs of production are minimized.
D)   market price will equal the total cost of production.E) B) and D)
F) C) and D)

Question 15

There is a tendency for economic profit in all competitive industries to go to zero.

Accepted Answer

A) True 
 B)False

Question 16

The invisible hand works best in:

Accepted Answer

A)   monopoly markets.
B)   oligopoly markets.
C)   cartels.
D)   competitive markets.E) All of the above
F) B) and D)

Question 17

The following are marginal cost curves for selling chicken in a Mom & Pop (MCM)  store and in a Big-Box retailer (MCB) .
MCM = 2 + 2QM
MCB = 4 + QB
If there are 6 total chickens being sold, how many chickens does each firm sell?

Accepted Answer

A)   Mom & Pop: 0; Big-Box: 6
B)   Mom & Pop: 1; Big-Box: 5
C)   Mom & Pop: 2; Big-Box: 4
D)   Mom & Pop: 3; Big-Box: 3E) C) and D)
F) A) and D)

Question 18

In a competitive market, the amount of a good produced is such that social surplus is:

Accepted Answer

A)   minimized.
B)   zero.
C)   hidden.
D)   maximized.E) None of the above
F) All of the above

Question 19

When resources move from a low-profit industry into a high-profit industry,:

Accepted Answer

A)   supply in the low-profit industry decreases, raising the market price.
B)   demand in the low-profit industry decreases, lowering the market price.
C)   supply in the high-profit industry decreases, raising the market price.
D)   supply in the high-profit industry increases, raising the market price.E) All of the above
F) B) and D)

Question 20

The elimination principle, a general feature of competitive markets, tells us that:

Accepted Answer

A)   below-normal profits may be permanent.
B)   above-normal profits may be permanent.
C)   above-normal profits are temporary.
D)   above-normal profits result in firms exiting the industry.E) None of the above
F) B) and D)

Exam 12: Competition and the Invisible Hand

In a competitive market, the amount of a good produced is such that social surplus is:

Correct Answer
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The following are marginal cost curves for selling chicken in a Mom & Pop (MC_M) store and in a Big-Box retailer (MC_B) . MC_M = 2 + 2Q_M MC_B = 4 + Q_B If there are 6 total chickens being sold, how many chickens does each firm sell?

Correct Answer
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Correct Answer
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The Invisible Hand Property 2 maintains that:

Correct Answer
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Since a competitive firm sets MR = P to determine all quantities in the short run, we can conclude that:

Correct Answer
verified

The invisible hand works best in:

Correct Answer
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In markets lacking competition, the invisible hand concept works in society's best interest.

Correct Answer
verified

If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its economic profit is:

Correct Answer
verified

The elimination principle, a general feature of competitive markets, tells us that:

Correct Answer
verified

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:

Correct Answer
verified

Which of the following factors cause markets to be dynamic? I. changes in tastes II. changes in technology III. new idea development

Correct Answer
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Competitive firms want to produce the quantity such that:

Correct Answer
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For a competitive firm, which of the following conditions describes the profit maximization condition? I. P = MC II. MR = MC III. TR = TC

Correct Answer
verified

When resources move from a low-profit industry into a high-profit industry,:

Correct Answer
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In a perfectly competitive market,:

Correct Answer
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Which of the following best help entrepreneurs identify low-value industries versus high-value industries?

Correct Answer
verified

Normal profits in a competitive industry refer to positive long-run profits.

Correct Answer
verified

Perfectly price discriminating monopolists earn ______ profits.

Correct Answer
verified

Entrepreneurs have the incentive to:

Correct Answer
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There is a tendency for economic profit in all competitive industries to go to zero.

Correct Answer
verified

Exam 12: Competition and the Invisible Hand

In a competitive market, the amount of a good produced is such that social surplus is:

Correct AnswerverifiedShow Answer

The following are marginal cost curves for selling chicken in a Mom & Pop (MCM) store and in a Big-Box retailer (MCB) . MCM = 2 + 2QM MCB = 4 + QB If there are 6 total chickens being sold, how many chickens does each firm sell?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Invisible Hand Property 2 maintains that:

Correct AnswerverifiedShow Answer

Since a competitive firm sets MR = P to determine all quantities in the short run, we can conclude that:

Correct AnswerverifiedShow Answer

The invisible hand works best in:

Correct AnswerverifiedShow Answer

In markets lacking competition, the invisible hand concept works in society's best interest.

Correct AnswerverifiedShow Answer

If a firm has revenues of $125, explicit costs of $25, and implicit costs of $50, then its economic profit is:

Correct AnswerverifiedShow Answer

The elimination principle, a general feature of competitive markets, tells us that:

Correct AnswerverifiedShow Answer

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, then its accounting profit is:

Correct AnswerverifiedShow Answer

Which of the following factors cause markets to be dynamic? I. changes in tastes II. changes in technology III. new idea development

Correct AnswerverifiedShow Answer

Competitive firms want to produce the quantity such that:

Correct AnswerverifiedShow Answer

For a competitive firm, which of the following conditions describes the profit maximization condition? I. P = MC II. MR = MC III. TR = TC

Correct AnswerverifiedShow Answer

When resources move from a low-profit industry into a high-profit industry,:

Correct AnswerverifiedShow Answer

In a perfectly competitive market,:

Correct AnswerverifiedShow Answer

Which of the following best help entrepreneurs identify low-value industries versus high-value industries?

Correct AnswerverifiedShow Answer

Normal profits in a competitive industry refer to positive long-run profits.

Correct AnswerverifiedShow Answer

Perfectly price discriminating monopolists earn ______ profits.

Correct AnswerverifiedShow Answer

Entrepreneurs have the incentive to:

Correct AnswerverifiedShow Answer

There is a tendency for economic profit in all competitive industries to go to zero.

Correct AnswerverifiedShow Answer

Correct Answer
verified

The following are marginal cost curves for selling chicken in a Mom & Pop (MC_M) store and in a Big-Box retailer (MC_B) . MC_M = 2 + 2Q_M MC_B = 4 + Q_B If there are 6 total chickens being sold, how many chickens does each firm sell?

Correct Answer
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