ECON 201 WVU FINAL EXAM 65

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ECON 201 WVU FINAL EXAM | 65

QUESTIONS WITH 100% CORRECT

ANSWERS | VERIFIED | 20 PAGES

Question : In a competitive market, no single producer can

influence the market price because

• many other sellers are offering a product that is essentially

identical.

• consumers have more influence over the market price than

producers do.

• government intervention prevents firms from influencing

price.

• producers agree not to change the price.

Correct answer: a. many other sellers are offering a product

that is essentially identical.

Question : 3. The short-run supply curve for a firm in a

perfectly competitive market is

• likely to be horizontal.
• likely to slope downward.
• determined by forces external to the firm.

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• its marginal cost curve (above average variable cost)

Correct answer: d. its marginal cost curve (above average

variable cost)

Question : A price-taking firm produces rubber balls. When

the price of rubber balls is below the firm's minimum average total cost, but above the firm's minimum average variable cost, the firm

• will experience losses but it will continue to produce rubber

balls in the short run.

• will shut down in the short run.
• will be earning both economic and accounting profits.
• should raise the price of its product.

Correct answer: d. should raise the price of its product.

Question : 7. The irrelevance of sunk costs is best described

by which of the following business decisions?

• New airlines enter the market and earn accounting profits.
• Airlines continue to sell tickets even though they are

reporting large losses.

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• Airlines exit the market when they report losses.
• All of the above are correct.

Correct answer: b. Airlines continue to sell tickets even

though they are reporting large losses.

Question : One of the most important determinants of the

success of free-market capitalism is

• enlightened governments selecting firms that should not be

allowed to exit a market.

• free entry and exit in markets.
• government regulation of market participants.
• having a few large firms rather than thousands of small

ones.

Correct answer: b. free entry and exit in markets.

Question : When new firms have an incentive to enter a

competitive market, their entry will

• increase the price of the product.
• drive down profits of existing firms in the market.
• shift the market supply curve to the left.

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• All of the above are correct

Correct answer: b. drive down profits of existing firms in the

market.

Question : Which of the following is an implicit cost of

owning a business?(i) interest expense on existing business loans (ii) forgone savings account interest when personal money is invested in the business (iii) damaged or lost inventory

• (i) only
• (ii) only
• (i) and (ii)
• All of the above are correct.

Correct answer: b. (ii) only

Question : Economists normally assume that the goal of a

firm is to

• maximize its total revenue. b. maximize its profit.