Question 1

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.

Question 2

When a purely competitive firm is in long-run equilibrium,

Accepted Answer

A)  marginal revenue exceeds marginal cost.
B)  price equals marginal cost.
C)  total revenue exceeds total cost.
D)  minimum average total cost is less than the product price.

Question 3

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 4

How would a purely competitive industry adjust and restore allocative efficiency when there is a change in the supply for a product?

Accepted Answer

A change in the supply of a product brou...

Question 5

The accompanying graph shows the long-run supply and demand curves in a purely competitive market. The curves suggest that this industry is

Accepted Answer

A)  a constant-cost industry.
B)  an increasing-cost industry.
C)  a decreasing-cost industry.
D)  not possible, because the supply curve always slopes up.

Question 6

If production is occurring where marginal cost exceeds price, the purely competitive firm will

Accepted Answer

A)  maximize profit, but resources will be underallocated to the product.
B)  maximize profit, but resources will be overallocated to the product.
C)  fail to maximize profit and resources will be overallocated to the product.
D)  fail to maximize profit and resources will be underallocated to the product.

Question 7

Long-run competitive equilibrium

Accepted Answer

A)  is realized only in constant-cost industries.
B)  will never change once it is realized.
C)  is not economically efficient.
D)  results in zero economic profits.

Question 8

The "invisible hand" in a competitive market pushes the firms in the market to

Accepted Answer

A)  charge a price that is equal to their marginal revenue.
B)  produce an output level that allows them to earn some positive economic profits.
C)  use resources and produce output that maximize consumer and producer surplus.
D)  operate where their individual demand curve is above their long-run average cost curve.

Question 9

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 10

Refer to the accompanying graphs for a competitive market in the short run. What will happen to the representative firm's economic profits as long-run market adjustments occur?

Accepted Answer

A)  Profits will increase to some positive value.
B)  Profits will decrease to some negative value.
C)  Profits will increase to zero.
D)  Profits will stay the same as they are now.

Question 11

If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is

Accepted Answer

A)  less than marginal benefit.
B)  greater than marginal cost.
C)  equal to the amount of efficiency or deadweight losses.
D)  equal to the minimum price producers are willing to accept.

Question 12

Assume that a decline in consumer demand occurs in a purely competitive industry that is initially in long-run equilibrium. We can

Accepted Answer

A)  predict that the new price will be greater than the original price.
B)  predict that the new price will be less than the original price.
C)  predict that the new price will be the same as the original price.
D)  not compare the original and the new prices without knowing what cost conditions exist in the industry.

Question 13

The long-run supply curve for a decreasing-cost industry is downsloping.

Accepted Answer

A) True 
 B)False

Question 14

So-called creative destruction leads to all of the following except

Accepted Answer

A)  new products and low-cost production techniques.
B)  more efficient use of society's scarce resources.
C)  benefits to everyone in society.
D)  hardship to some producers and workers.

Question 15

A constant-cost industry is one in which

Accepted Answer

A)  resource prices fall as output is increased.
B)  resource prices rise as output is increased.
C)  resource prices remain unchanged as output is increased.
D)  small and large levels of output entail the same total costs.

Question 16

The provided graph represents a(n)

Accepted Answer

A)  decreasing-cost industry: Firms may be paying lower prices for their inputs when the industry expands.
B)  increasing-cost industry: Firms may be paying higher prices for their inputs when the industry expands.
C)  competitive industry with diseconomies of scale: The short-run supply curves are upward sloping.
D)  constant-cost industry: Prices of the inputs stay the same, and other production costs are constant as the industry expands.

Question 17

In long-run equilibrium, purely competitive markets

Accepted Answer

A)  minimize total cost.
B)  maximize the sum of consumer surplus and producer surplus.
C)  yield economic profits to most sellers.
D)  inevitably degenerate into monopoly in increasing-cost industries.

Question 18

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 19

Innovations that lower production costs or create new products

Accepted Answer

A)  are rare in competitive industries.
B)  discourage new firms from entering the industry.
C)  often generate short-run economic profits that do not last into the long run.
D)  usually generate long-run economic profits for the innovator.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 11: Pure Competition in the Long Run

The accompanying graph shows the long-run supply and demand curves in a purely competitive market. The curves suggest that this industry is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Innovations that lower production costs or create new products

Correct AnswerverifiedShow Answer

The provided graph represents a(n)

Correct AnswerverifiedShow Answer

How would a purely competitive industry adjust and restore allocative efficiency when there is a change in the supply for a product?

Correct AnswerverifiedA change in the supply of a product brou...View AnswerShow Answer

If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The long-run supply curve for a decreasing-cost industry is downsloping.

Correct AnswerverifiedShow Answer

The "invisible hand" in a competitive market pushes the firms in the market to

Correct AnswerverifiedShow Answer

If production is occurring where marginal cost exceeds price, the purely competitive firm will

Correct AnswerverifiedShow Answer

Assume that a decline in consumer demand occurs in a purely competitive industry that is initially in long-run equilibrium. We can

Correct AnswerverifiedShow Answer

Long-run competitive equilibrium

Correct AnswerverifiedShow Answer

Refer to the accompanying graphs for a competitive market in the short run. What will happen to the representative firm's economic profits as long-run market adjustments occur?

Correct AnswerverifiedShow Answer

When a purely competitive firm is in long-run equilibrium,

Correct AnswerverifiedShow Answer

A constant-cost industry is one in which

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decreasing-cost industry is one in which

Correct AnswerverifiedShow Answer

In long-run equilibrium, purely competitive markets

Correct AnswerverifiedShow Answer

So-called creative destruction leads to all of the following except

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A change in the supply of a product brou...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified