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Exam 7: Efficiency, Exchange, and the Invisible Hand in Action

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Question 71

Multiple Choice

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If all firms in a perfectly competitive industry are earning a normal profit, then:

A) new firms will enter the industry.
B) existing firms will exit the industry.
C) there is no incentive for firms to enter or exit the industry.
D) the market supply curve will shift to the left.

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Question 72

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An example of an implicit cost is:

A) interest paid on a bank loan used to purchases equipment.
B) wages paid to a family member who works at the firm.
C) the value of a spare bedroom turned into a home office.
D) operating costs of a company-owned car.

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Question 73

Multiple Choice

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One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If the market supply curve is given by S3, then what will happen to the market supply curve in the long run?

If all firms in a perfectly competitive industry are experiencing economic losses, then:

In a market with barriers to entry:

Refer to the figure below. If a price ceiling were imposed at $4, producer surplus would be:

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. The long-run market equilibrium quantity in this industry is:

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, what is consumer surplus?

If resources are misallocated in a perfectly competitive market, then, in the long run, profit opportunities will:

The allocative function of price is to:

If the demand curve fails to capture all of the benefits of consumption, then the:

Refer to the figure below. If this market is unregulated, the economic surplus received by consumers is:

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below.   If the government provides a subsidy of $500 per ton, then consumer surplus will be ________ per day.

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Christine's opportunity cost of working as a consultant last year was ________.

Which of the following is NOT necessarily true in a market equilibrium?

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that:

In an industry with free entry and exit, positive economic profit:

The No-Cash-on-the-Table Principle states that there are:

Which of the following is an example of the rationing function of price?