Econ 528 Finals | Questions with 100% Verified Answers | Latest
Update 2026/2027
Question:
Answer:
,Question: An increase in input costs in the production of electric
automobiles caused the price of electric automobiles to rise.
Holding everything else constant, how would this affect the
market for gasoline-powered automobiles (a substitute for
electric automobiles)?
a. The demand for gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would increase.
b. The supply of gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would decrease.
c. The demand for gasoline-powered automobiles would
decrease because consumers could afford to buy fewer
gasoline-powered automobiles.
d. The demand for gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would decrease.
Answer:
a. The demand for gasoline-powered automobiles would increase and the equilibrium
price of gasoline-powered automobiles would increase
Question: A perfectly competitive firm produces 3,000 units of a good at
a total cost of $36,000. The fixed cost of production is
$20,000. The price of each good is $10. Should the firm
continue to produce in the short run?
a. No, it should shut down because it is making a loss.
b. Yes, it should continue to produce because it is minimizing
its loss.
c. Yes, it should continue to produce because its price
exceeds its average fixed cost.
d. There is insufficient information to answer the question.
Answer:
b. Yes, it should continue to produce because it is minimizing its loss
,Question: Max Shreck, an accountant, quit his $80,000-a-year job and
bought an existing tattoo parlor from its previous owner,
Sylvia Sidney. The lease has five years remaining and requires
a monthly payment of $4,000. Max's explicit cost amounts to
$3,000 per month more than his revenue. Should Max
continue operating his business?
a. Max's explicit cost exceeds his total revenue. He should shut
down his tattoo parlor.
b. Max should continue to run the tattoo parlor until his lease
runs out.
c. This cannot be determined without information on his
revenue.
d. If Max's marginal revenue is greater than or equal to his
marginal cost, then he should stay in business.
Answer:
b. Max should continue to run the tattoo parlor until his lease runs out
Question: A perfectly competitive firm's short-run supply curve is
a. upward sloping and is the portion of the marginal cost
curve that lies above the average total cost curve.
b. upward sloping and is the portion of the marginal cost
curve that lies above the average variable cost curve.
c. perfectly elastic at the market price.d. horizontal at the
minimum average total cost.
d. horizontal at the minimum average total cost.
Answer:
b. upward sloping and is the portion of the marginal cost curve that lies above the
average variable cost curve
Question: If a typical firm in a perfectly competitive industry is earning
profits, then
a. new firms will enter in the long run causing market supply to
increase, market price to fall and profits to decrease.
b. all firms will continue to earn profits.
c. new firms will enter in the long run causing market supply to
decrease, market price to rise and profits to increase.
d. the number of firms in the industry will remain constant in
the long run.
Answer:
a. new firms will enter in the long run causing market supply to increase, market price to
fall and profits to decrease.
, Question: A perfectly competitive wheat farmer in a constant-cost
industry produces 3,000 bushels of wheat at a total cost of
$36,000. The prevailing market price is $15. What will happen
to the market price of wheat in the long run?
a. The price falls to $12.
b. The price rises above $15.
c. There is insufficient information to answer the question.
d. The price remains constant at $15.
Answer:
a. The price falls to $12
Question: The reason that the coffeehouse market is monopolistically
competitive rather than perfectly competitive is because
a. barriers to entry are very low.
b. entry into the market is blocked.
c. there are many firms in the market.
d. products are differentiated.
Answer:
d. products are differentiated
Question: Economists have long debated whether there is a significant
loss of well-being to society in markets that are
monopolistically competitive rather than perfectly
competitive. Which of the following offers the best reason why
some economists believe that monopolistically competitive
markets benefit consumers despite any loss of well-being?
a. Consumers pay a price equal to the marginal cost of
producing a product, even though it is not produced at the
minimum average total cost.
b. Consumers are better off choosing from a variety of
differentiated products, even though product differentiation
causes barriers that restrict entry into monopolistically
competitive markets.
c. Although consumers may pay a price greater than marginal
cost for a product, the product is produced at the minimum
average total cost.
d. Although consumers may pay a price greater than marginal
cost and the product is not produced at minimum average
total cost, they benefit from being able to buy a differentiated
product more closely suited to their tastes.
Answer:
d. Although consumers may pay a price greater than marginal cost and the product is not
produced at minimum average total cost, they benefit from being able to buy a
differentiated product more closely suited to their tastes
Update 2026/2027
Question:
Answer:
,Question: An increase in input costs in the production of electric
automobiles caused the price of electric automobiles to rise.
Holding everything else constant, how would this affect the
market for gasoline-powered automobiles (a substitute for
electric automobiles)?
a. The demand for gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would increase.
b. The supply of gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would decrease.
c. The demand for gasoline-powered automobiles would
decrease because consumers could afford to buy fewer
gasoline-powered automobiles.
d. The demand for gasoline-powered automobiles would
increase and the equilibrium price of gasoline-powered
automobiles would decrease.
Answer:
a. The demand for gasoline-powered automobiles would increase and the equilibrium
price of gasoline-powered automobiles would increase
Question: A perfectly competitive firm produces 3,000 units of a good at
a total cost of $36,000. The fixed cost of production is
$20,000. The price of each good is $10. Should the firm
continue to produce in the short run?
a. No, it should shut down because it is making a loss.
b. Yes, it should continue to produce because it is minimizing
its loss.
c. Yes, it should continue to produce because its price
exceeds its average fixed cost.
d. There is insufficient information to answer the question.
Answer:
b. Yes, it should continue to produce because it is minimizing its loss
,Question: Max Shreck, an accountant, quit his $80,000-a-year job and
bought an existing tattoo parlor from its previous owner,
Sylvia Sidney. The lease has five years remaining and requires
a monthly payment of $4,000. Max's explicit cost amounts to
$3,000 per month more than his revenue. Should Max
continue operating his business?
a. Max's explicit cost exceeds his total revenue. He should shut
down his tattoo parlor.
b. Max should continue to run the tattoo parlor until his lease
runs out.
c. This cannot be determined without information on his
revenue.
d. If Max's marginal revenue is greater than or equal to his
marginal cost, then he should stay in business.
Answer:
b. Max should continue to run the tattoo parlor until his lease runs out
Question: A perfectly competitive firm's short-run supply curve is
a. upward sloping and is the portion of the marginal cost
curve that lies above the average total cost curve.
b. upward sloping and is the portion of the marginal cost
curve that lies above the average variable cost curve.
c. perfectly elastic at the market price.d. horizontal at the
minimum average total cost.
d. horizontal at the minimum average total cost.
Answer:
b. upward sloping and is the portion of the marginal cost curve that lies above the
average variable cost curve
Question: If a typical firm in a perfectly competitive industry is earning
profits, then
a. new firms will enter in the long run causing market supply to
increase, market price to fall and profits to decrease.
b. all firms will continue to earn profits.
c. new firms will enter in the long run causing market supply to
decrease, market price to rise and profits to increase.
d. the number of firms in the industry will remain constant in
the long run.
Answer:
a. new firms will enter in the long run causing market supply to increase, market price to
fall and profits to decrease.
, Question: A perfectly competitive wheat farmer in a constant-cost
industry produces 3,000 bushels of wheat at a total cost of
$36,000. The prevailing market price is $15. What will happen
to the market price of wheat in the long run?
a. The price falls to $12.
b. The price rises above $15.
c. There is insufficient information to answer the question.
d. The price remains constant at $15.
Answer:
a. The price falls to $12
Question: The reason that the coffeehouse market is monopolistically
competitive rather than perfectly competitive is because
a. barriers to entry are very low.
b. entry into the market is blocked.
c. there are many firms in the market.
d. products are differentiated.
Answer:
d. products are differentiated
Question: Economists have long debated whether there is a significant
loss of well-being to society in markets that are
monopolistically competitive rather than perfectly
competitive. Which of the following offers the best reason why
some economists believe that monopolistically competitive
markets benefit consumers despite any loss of well-being?
a. Consumers pay a price equal to the marginal cost of
producing a product, even though it is not produced at the
minimum average total cost.
b. Consumers are better off choosing from a variety of
differentiated products, even though product differentiation
causes barriers that restrict entry into monopolistically
competitive markets.
c. Although consumers may pay a price greater than marginal
cost for a product, the product is produced at the minimum
average total cost.
d. Although consumers may pay a price greater than marginal
cost and the product is not produced at minimum average
total cost, they benefit from being able to buy a differentiated
product more closely suited to their tastes.
Answer:
d. Although consumers may pay a price greater than marginal cost and the product is not
produced at minimum average total cost, they benefit from being able to buy a
differentiated product more closely suited to their tastes
