Question 1

Resources are efficiently allocated when production occurs at that output level where price

Accepted Answer

A)  equals marginal cost.
B)  equals marginal revenue.
C)  is greatest over average cost.
D)  is equal to average total cost.

Question 2

The process by which new firms and new products replace existing dominant firms and products is called

Accepted Answer

A)  monopolistic competition.
B)  mergers and acquisitions.
C)  process innovation.
D)  creative destruction.

Question 3

The transformative effects of competition that foster the development of new products or new production methods benefit everyone in society.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true of normal profits?

Accepted Answer

A)  They are necessary to keep a firm in the industry in the long run.
B)  They are zero under pure competition in the long run.
C)  They are excluded from a firm's costs of production.
D)  They are what attract other firms to enter an industry.

Question 5

(Consider This)  Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

Accepted Answer

A)  9.5
B)  10.2
C)  22
D)  53

Question 6

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.

Question 7

Allocative efficiency is achieved when the production of a good occurs where

Accepted Answer

A)  P = minimum ATC.
B)  P = MC.
C)  P = minimum AVC.
D)  total revenue is equal to TFC.

Question 8

Karleeâ€™s Kreations sells handbags in a purely competitive market.Karleeâ€™s is currently breaking even.Based on this information, we can conclude that Karleeâ€™s Kreations

Accepted Answer

A)  must be operating in long-run equilibrium.
B)  will leave this market in the long run because no economic profits are being earned.
C)  will continue operating in this market only if the market price rises.
D)  may be operating in either short-run or long-run equilibrium.

Question 9

In long-run equilibrium under pure competition, all firms will produce at minimum

Accepted Answer

A)  average total cost.
B)  marginal cost.
C)  total cost.
D)  average variable cost.

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.

Question 11

A purely competitive firm is precluded from making economic profits in the long run because

Accepted Answer

A)  it is a "price taker."
B)  its demand curve is perfectly elastic.
C)  of unimpeded entry to the industry.
D)  it produces a differentiated product.

Question 12

A decreasing-cost industry is one in which

Accepted Answer

A)  contraction of the industry will decrease unit costs.
B)  input prices fall or technology improves as the industry expands.
C)  the long-run supply curve is perfectly elastic.
D)  the long-run supply curve is upsloping.

Question 13

Which of the following statements about pure competition in the long run is not true?

Accepted Answer

A)  Entry and exit of firms will push economic profits of firms in the industry toward zero.
B)  Entry and exit of firms will shift the demand curve facing the representative firm in the industry.
C)  The long-run adjustment in pure competition happens through shifts in the industry supply curve.
D)  The long-run adjustment in pure competition happens through shifts in the industry demand curve.

Question 14

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a factor that automatically pushes firms in pure competition to earn only normal profits in the long run?

Accepted Answer

A)  entry of new firms
B)  exit of some firms
C)  changes in the firms' plant size
D)  changes in the market demand

Question 16

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

Accepted Answer

A)  Consumer and producer surplus will be minimized.
B)  P = MC = lowest ATC.
C)  The maximum willingness to pay for the last unit equals the minimum acceptable price for that unit.
D)  We would expect all of these to occur in the long run in a purely competitive market.

Question 17

Which of the following is true concerning purely competitive industries?

Accepted Answer

A)  There will be economic losses in the long run because of cut-throat competition.
B)  Economic profits will persist in the long run if consumer demand is strong and stable.
C)  In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.
D)  There are economic profits in the long run but not in the short run.

Question 18

An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

Accepted Answer

A)  vertical.
B)  horizontal.
C)  upsloping.
D)  downsloping.

Question 19

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.

Question 20

Competitive markets produce equilibrium prices and quantities that minimize the sum of consumer and producer surpluses.

Accepted Answer

A) True 
 B)False

Exam 11: Pure Competition in the Long Run

Resources are efficiently allocated when production occurs at that output level where price

Correct AnswerverifiedShow Answer

(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

Correct AnswerverifiedShow Answer

In long-run equilibrium under pure competition, all firms will produce at minimum

Correct AnswerverifiedShow Answer

The process by which new firms and new products replace existing dominant firms and products is called

Correct AnswerverifiedShow Answer

Which of the following is not a factor that automatically pushes firms in pure competition to earn only normal profits in the long run?

Correct AnswerverifiedShow Answer

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

Correct AnswerverifiedShow Answer

Competitive markets produce equilibrium prices and quantities that minimize the sum of consumer and producer surpluses.

Correct AnswerverifiedShow Answer

Which of the following statements about pure competition in the long run is not true?

Correct AnswerverifiedShow Answer

Which of the following is true of normal profits?

Correct AnswerverifiedShow Answer

A purely competitive firm is precluded from making economic profits in the long run because

Correct AnswerverifiedShow Answer

The transformative effects of competition that foster the development of new products or new production methods benefit everyone in society.

Correct AnswerverifiedShow Answer

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Allocative efficiency is achieved when the production of a good occurs where

Correct AnswerverifiedShow Answer

A decreasing-cost industry is one in which

Correct AnswerverifiedShow Answer

An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

Correct AnswerverifiedShow Answer

An increasing-cost industry is associated with

Correct AnswerverifiedShow Answer

Karleeâ€™s Kreations sells handbags in a purely competitive market.Karleeâ€™s is currently breaking even.Based on this information, we can conclude that Karleeâ€™s Kreations

Correct AnswerverifiedShow Answer

Which of the following is true concerning purely competitive industries?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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