Question 1

One reason old industries die off is that entrepreneurs create new industries that replace the old ones.

Accepted Answer

A) True 
 B)False

Question 2

If price is greater than minimum average total cost in a competitive industry,entry occurs.

Accepted Answer

A) True 
 B)False

Question 3

An industry with an upward-sloping long-run supply curve experiences

Accepted Answer

A)  external diseconomies of scale.
B)  the law of increasing costs.
C)  diminishing returns.
D)  a loss of efficiency.
E)  external economies of scale.F) A) and C)
G) B) and E)

Question 4

Exhibit 9-2 
-Refer to Exhibit 9-2.If the market demand curve is D1,then the firm earns normal profit.

Accepted Answer

A) True 
 B)False

Question 5

When long-run industry supply has a negative slope,

Accepted Answer

A)  firms experience the law of decreasing costs.
B)  short-run industry supply is also negatively sloped.
C)  marginal product is negative.
D)  we have a phenomenon that cannot occur.
E)  industry expansion makes cost savings possible.F) C) and D)
G) C) and E)

Question 6

External economies of scale occur when costs go down as an industry expands.

Accepted Answer

A) True 
 B)False

Question 7

Suppose an industry that experiences external diseconomies is in a long-run equilibrium.A decrease in demand causes a(n)

Accepted Answer

A)  decrease in price in the short run,with price returning to its former level in the long run.
B)  decrease in price in the short run,with price returning to less than its former level in the long run.
C)  decrease in price in the short run,with price rising above its former level in the long run.
D)  decrease in output in the short run,with output returning to its former level in the long run.
E)  increase in output in the short run and even more increase in the long run.F) A) and C)
G) B) and C)

Question 8

Which of the following does not need to be true for long-run equilibrium to be attained?

Accepted Answer

A)  Constant returns to scale are reached.
B)  The latest in technology is utilized.
C)  Profit is being maximized.
D)  There is no incentive to enter or exit the industry.
E)  Economic profits equal zero.F) A) and B)
G) C) and E)

Question 9

Consider developments in movie theaters,which have suffered declining sales because more customers watch movies on videos and DVDs instead of going to the theater to see movies.Explain how this change in people's preferences affects movie theaters in the short run and in the long run.

Accepted Answer

The decline in the demand for movies in ...

Question 10

All else being constant,when firms leave a competitive market,then

Accepted Answer

A)  market supply decreases and market price rises.
B)  both market demand and market supply decrease.
C)  market supply decreases and market price falls.
D)  market demand decreases and market price falls.
E)  market demand increases and market price rises.F) A) and B)
G) A) and C)

Question 11

In the long run,if price is greater than average total cost in an industry,then

Accepted Answer

A)  some firms leave the industry.
B)  some firms are attracted to the industry.
C)  all firms leave the industry.
D)  there is no incentive for any firm to enter or leave the industry.
E)  the industry disappears.F) D) and E)
G) B) and C)

Question 12

Cost saving technologies result in an increase in economic profits in both the short run and the long run.

Accepted Answer

A) True 
 B)False  False

Question 13

Suppose that a competitive market is initially in long-run equilibrium.Which of the following are the most likely results of a decrease in market demand?

Accepted Answer

A)  Some existing firms will produce more while some other firms will exit the market so that the market supply curve will remain the same.
B)  Existing firms will produce less and some firms will exit the market so that the market supply curve will shift to the left.
C)  Existing firms will produce more and new firms will enter the market so that the market supply curve will shift to the right.
D)  Existing firms will produce less while new firms will enter the market so that the effect on the market supply curve is uncertain.
E)  Nothing will change in the market.F) A) and C)
G) B) and C)

Question 14

Which of the following is a condition of long-run competitive equilibrium?

Accepted Answer

A)  There are incentives for firms to enter the industry.
B)  There are incentives for firms to exit the industry.
C)  There is no incentive for firms to enter or exit the industry.
D)  There are incentives for firms to produce more output.
E)  There are incentives for firms to change plant size.F) All of the above
G) C) and D)

Question 15

Exhibit 9-1 3,what happens over time? A) Some existing firms increase capital input. B) Firm exit occurs. C) Some existing firms decrease labor input. D) Market price decreases. E) Most firms do nothing." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 9-1.If the market demand curve is D3,what happens over time?

Accepted Answer

A)  Some existing firms increase capital input.
B)  Firm exit occurs.
C)  Some existing firms decrease labor input.
D)  Market price decreases.
E)  Most firms do nothing.F) B) and D)
G) A) and D)

Question 16

Suppose a market equilibrium occurs at a quantity of 6,500 units.Also suppose that the typical firm's constant returns to scale extend from a production level of 20 units to a production level of 50 units.Calculate the maximum and minimum number of firms that could prevail in this industry.

Accepted Answer

130 to 325
Maximum: (industry ...

Question 17

Explain why diseconomies of scale occur.Do you think diseconomies or economies of scale are more prevalent? Why?

Accepted Answer

Diseconomies of scale occur because when...

Question 18

If losses are incurred in a competitive industry,then over the long run,we can expect a greater quantity supplied because market price will rise.

Accepted Answer

A) True 
 B)False  False

Question 19

Consider a competitive industry with a large number of toy-producing firms.Describe how that industry adjusts to a decline in the demand for toys.Explain your answer graphically,showing both the typical toy firm's marginal cost and average total cost curves,as well as the market supply and demand curves.Distinguish between the short run and the long run.

Accepted Answer

As demand decreases,in the short run,the price falls to P₂ from P₁.Individual toy firms reduce production because of the lower market price.This results in reduced profits,leading to firms exiting the market.In the long run,because of the reduction in the number of firms,the market supply curve shifts leftward from S₁ to S₂.Therefore,the long-run supply curve (LRS)is horizontal.

Question 20

A competitive firm's long-run equilibrium exists where price

Accepted Answer

A)  equals MC at minimum ATC.
B)  equals TR.
C)  exceeds AFC.
D)  equals both AVC and MC.
E)  exceeds ATC.F) B) and C)
G) D) and E)

Exam 9: The Rise and Fall of Industries

One reason old industries die off is that entrepreneurs create new industries that replace the old ones.

Correct Answer
verified

If price is greater than minimum average total cost in a competitive industry,entry occurs.

Correct Answer
verified

An industry with an upward-sloping long-run supply curve experiences

Correct Answer
verified

Exhibit 9-2 -Refer to Exhibit 9-2.If the market demand curve is D₁,then the firm earns normal profit.

Correct Answer
verified

When long-run industry supply has a negative slope,

Correct Answer
verified

External economies of scale occur when costs go down as an industry expands.

Correct Answer
verified

Suppose an industry that experiences external diseconomies is in a long-run equilibrium.A decrease in demand causes a(n)

Correct Answer
verified

Which of the following does not need to be true for long-run equilibrium to be attained?

Correct Answer
verified

Consider developments in movie theaters,which have suffered declining sales because more customers watch movies on videos and DVDs instead of going to the theater to see movies.Explain how this change in people's preferences affects movie theaters in the short run and in the long run.

Correct Answer
verified
The decline in the demand for movies in ...
View Answer

All else being constant,when firms leave a competitive market,then

Correct Answer
verified

In the long run,if price is greater than average total cost in an industry,then

Correct Answer
verified

Cost saving technologies result in an increase in economic profits in both the short run and the long run.

Correct Answer
verified
False

Suppose that a competitive market is initially in long-run equilibrium.Which of the following are the most likely results of a decrease in market demand?

Correct Answer
verified

Which of the following is a condition of long-run competitive equilibrium?

Correct Answer
verified

Exhibit 9-1 -Refer to Exhibit 9-1.If the market demand curve is D₃,what happens over time?

Correct Answer
verified

Suppose a market equilibrium occurs at a quantity of 6,500 units.Also suppose that the typical firm's constant returns to scale extend from a production level of 20 units to a production level of 50 units.Calculate the maximum and minimum number of firms that could prevail in this industry.

Correct Answer
verified
130 to 325
Maximum: (industry ...
View Answer

Explain why diseconomies of scale occur.Do you think diseconomies or economies of scale are more prevalent? Why?

Correct Answer
verified
Diseconomies of scale occur because when...
View Answer

If losses are incurred in a competitive industry,then over the long run,we can expect a greater quantity supplied because market price will rise.

Correct Answer
verified
False

A competitive firm's long-run equilibrium exists where price

Correct Answer
verified

Exam 9: The Rise and Fall of Industries

One reason old industries die off is that entrepreneurs create new industries that replace the old ones.

Correct AnswerverifiedShow Answer

If price is greater than minimum average total cost in a competitive industry,entry occurs.

Correct AnswerverifiedShow Answer

An industry with an upward-sloping long-run supply curve experiences

Correct AnswerverifiedShow Answer

Exhibit 9-2 -Refer to Exhibit 9-2.If the market demand curve is D1,then the firm earns normal profit.

Correct AnswerverifiedShow Answer

When long-run industry supply has a negative slope,

Correct AnswerverifiedShow Answer

External economies of scale occur when costs go down as an industry expands.

Correct AnswerverifiedShow Answer

Suppose an industry that experiences external diseconomies is in a long-run equilibrium.A decrease in demand causes a(n)

Correct AnswerverifiedShow Answer

Which of the following does not need to be true for long-run equilibrium to be attained?

Correct AnswerverifiedShow Answer

Consider developments in movie theaters,which have suffered declining sales because more customers watch movies on videos and DVDs instead of going to the theater to see movies.Explain how this change in people's preferences affects movie theaters in the short run and in the long run.

Correct AnswerverifiedThe decline in the demand for movies in ...View AnswerShow Answer

All else being constant,when firms leave a competitive market,then

Correct AnswerverifiedShow Answer

In the long run,if price is greater than average total cost in an industry,then

Correct AnswerverifiedShow Answer

Cost saving technologies result in an increase in economic profits in both the short run and the long run.

Correct AnswerverifiedFalse

Suppose that a competitive market is initially in long-run equilibrium.Which of the following are the most likely results of a decrease in market demand?

Correct AnswerverifiedShow Answer

Which of the following is a condition of long-run competitive equilibrium?

Correct AnswerverifiedShow Answer

Exhibit 9-1 -Refer to Exhibit 9-1.If the market demand curve is D3,what happens over time?

Correct AnswerverifiedShow Answer

Suppose a market equilibrium occurs at a quantity of 6,500 units.Also suppose that the typical firm's constant returns to scale extend from a production level of 20 units to a production level of 50 units.Calculate the maximum and minimum number of firms that could prevail in this industry.

Correct Answerverified130 to 325Maximum: (industry ...View AnswerShow Answer

Explain why diseconomies of scale occur.Do you think diseconomies or economies of scale are more prevalent? Why?

Correct AnswerverifiedDiseconomies of scale occur because when...View AnswerShow Answer

If losses are incurred in a competitive industry,then over the long run,we can expect a greater quantity supplied because market price will rise.

Correct AnswerverifiedFalse

A competitive firm's long-run equilibrium exists where price

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exhibit 9-2 -Refer to Exhibit 9-2.If the market demand curve is D₁,then the firm earns normal profit.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The decline in the demand for movies in ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Exhibit 9-1 -Refer to Exhibit 9-1.If the market demand curve is D₃,what happens over time?

Correct Answer
verified

Correct Answer
verified
130 to 325
Maximum: (industry ...
View Answer

Correct Answer
verified
Diseconomies of scale occur because when...
View Answer

Correct Answer
verified
False

Correct Answer
verified