Question 1

The long-run supply curve for a competitive, decreasing-cost industry is downward-sloping.

Accepted Answer

A) True 
 B)False

Question 2

In long-run equilibrium, a competitive firm produces where P = MR = MC = minimum ATC and the firm earns normal economic profits.

Accepted Answer

A) True 
 B)False

Question 3

An increasing-cost industry is associated with

Accepted Answer

A)   a perfectly elastic long-run supply curve.
B)   an upsloping long-run supply curve.
C)   a perfectly inelastic long-run supply curve.
D)   an upsloping long-run demand curve.E) B) and C)
F) B) and D)

Question 4

The term productive efficiency refers to

Accepted Answer

A)   any short-run equilibrium position of a competitive firm.
B)   the production of the product mix most desired by consumers.
C)   the production of a good at the lowest average total cost.
D)   fulfilling the condition P = MC.E) A) and B)
F) A) and C)

Question 5

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant, assuming that the product price stays the same.

Accepted Answer

A) True 
 B)False

Question 6

The reason why the long-run supply curve for a purely competitive industry may be upward-sloping is because of diminishing marginal returns.

Accepted Answer

A) True 
 B)False

Question 7

Which is true of a purely competitive firm in long-run equilibrium?

Accepted Answer

A)   Average fixed cost equals price.
B)   Marginal cost equals marginal product.
C)   Price equals marginal cost.
D)   Average variable cost equals marginal cost.E) B) and D)
F) A) and D)

Question 8

Allocative efficiency is achieved by equalizing consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 9

In purely competitive market, the entry and exit of firms will push price toward equality with marginal revenue.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements about a competitive firm is correct?

Accepted Answer

A)   To maximize profits, a competitive firm should produce the output level at which total revenue is greatest.
B)   In long-run equilibrium, a competitive firm will produce at the point of minimum average costs.
C)   A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs.
D)   A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost.E) B) and C)
F) All of the above

Question 11

In the long run for a purely competitive market, firms will earn only normal profits.

Accepted Answer

A) True 
 B)False

Question 12

Allocative efficiency means that

Accepted Answer

A)   the product is produced at the lowest unit-cost possible.
B)   society's scarce resources are used to produce products that align with consumer preferences.
C)   the product is sold at a price equal to the average cost of producing it.
D)   the marginal benefit of the product exceeds its marginal cost.E) A) and B)
F) B) and D)

Question 13

Creative destruction is most often associated with

Accepted Answer

A)   international trade.
B)   technological advance.
C)   government spending.
D)   private consumption.E) B) and C)
F) A) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
B)   The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
C)   The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run supply curve.
D)   The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping.E) B) and D)
F) B) and C)

Question 15

In the context of analyzing economic efficiency, we can interpret the market demand curve to be showing

Accepted Answer

A)   the average cost of producing the product at each output level.
B)   the marginal revenue from each extra unit of the product.
C)   the marginal benefit that consumers place on each unit of the product.
D)   the average variable cost of producing the product.E) A) and B)
F) None of the above

Question 16

(Last Word)  "Patent trolls"

Accepted Answer

A)   block firms from acquiring patents on intellectual property.
B)   buy up patents in order to collect royalties and sue other companies.
C)   legally challenge new patent applications in an effort to extract rents.
D)   promote innovation by keeping firms from having a stranglehold on intellectual property.E) B) and C)
F) C) and D)

Question 17

If a competitive firm successfully adopts a better production technology ahead of the others, then

Accepted Answer

A)   its product price will become lower than the others'.
B)   its average cost will become higher than the others'.
C)   its profits will become higher than the others'.
D)   its marginal revenue will become higher than the others'.E) C) and D)
F) B) and D)

Question 18

An upward-sloping long-run supply curve indicates a constant-cost industry.

Accepted Answer

A) True 
 B)False

Question 19

The long-run market supply curve would be downward-sloping if the representative firms'

Accepted Answer

A)   demand curves shift up as the industry expands.
B)   ATC curves shift down as the industry expands.
C)   supply curves shift left as the industry expands.
D)   demand curves shift down as the industry expands.E) B) and D)
F) A) and B)

Question 20

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

Accepted Answer

A)   the same as the initial equilibrium price, but the new industry output will be greater than the original output.
B)   greater than the initial price, and the new industry output will be greater than the original output.
C)   less than the initial price, but the new industry output will be greater than the original output.
D)   the same as the initial equilibrium price, and the industry output will remain unchanged.E) A) and B)
F) A) and C)

Exam 11: Pure Competition in the Long Run

In the context of analyzing economic efficiency, we can interpret the market demand curve to be showing

Correct AnswerverifiedShow Answer

In purely competitive market, the entry and exit of firms will push price toward equality with marginal revenue.

Correct AnswerverifiedShow Answer

The long-run market supply curve would be downward-sloping if the representative firms'

Correct AnswerverifiedShow Answer

(Last Word) "Patent trolls"

Correct AnswerverifiedShow Answer

An increasing-cost industry is associated with

Correct AnswerverifiedShow Answer

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant, assuming that the product price stays the same.

Correct AnswerverifiedShow Answer

Creative destruction is most often associated with

Correct AnswerverifiedShow Answer

The reason why the long-run supply curve for a purely competitive industry may be upward-sloping is because of diminishing marginal returns.

Correct AnswerverifiedShow Answer

If a competitive firm successfully adopts a better production technology ahead of the others, then

Correct AnswerverifiedShow Answer

An upward-sloping long-run supply curve indicates a constant-cost industry.

Correct AnswerverifiedShow Answer

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Allocative efficiency means that

Correct AnswerverifiedShow Answer

The long-run supply curve for a competitive, decreasing-cost industry is downward-sloping.

Correct AnswerverifiedShow Answer

Which of the following statements about a competitive firm is correct?

Correct AnswerverifiedShow Answer

The term productive efficiency refers to

Correct AnswerverifiedShow Answer

In the long run for a purely competitive market, firms will earn only normal profits.

Correct AnswerverifiedShow Answer

Allocative efficiency is achieved by equalizing consumer surplus and producer surplus.

Correct AnswerverifiedShow Answer

Which is true of a purely competitive firm in long-run equilibrium?

Correct AnswerverifiedShow Answer

In long-run equilibrium, a competitive firm produces where P = MR = MC = minimum ATC and the firm earns normal economic profits.

Correct AnswerverifiedShow Answer

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