Question 1

(Consider This) The average life expectancy of a U.S.business is approximately:

Accepted Answer

A)   2 years.
B)   5.5 years.
C)   10.2 years.
D)   22 years.

Question 2

Purely competitive industry X has constant costs and its product is an inferior good.The industry is currently in long-run equilibrium.The economy now goes into a recession and average incomes decline.The result will be:

Accepted Answer

A)   an increase in output and in the price of the product.
B)   an increase in output,but not in the price,of the product.
C)   a decrease in the output,but not in the price,of the product.
D)   a decrease in output and in the price of the product.

Question 3

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit,then:

Accepted Answer

A)   the selling price for this firm is above the market equilibrium price.
B)   new firms will enter this market.
C)   some existing firms in this market will leave.
D)   there must be price fixing by the industry's firms.

Question 4

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 5

Suppose an increase in product demand occurs in a decreasing-cost industry.As a result:

Accepted Answer

A)   the new long-run equilibrium price will be lower than the original long-run equilibrium price.
B)   equilibrium quantity will decline.
C)   firms will eventually leave the industry.
D)   the new long-run equilibrium price will be higher than the original price.

Question 6

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum.Then:

Accepted Answer

A)   the firm is earning an economic profit.
B)   there is no tendency for the firm's industry to expand or contract.
C)   allocative but not productive efficiency is being achieved.
D)   other firms will enter this industry.

Question 7

If for a firm P = minimum ATC = MC,then:

Accepted Answer

A)   neither allocative efficiency nor productive efficiency is being achieved.
B)   productive efficiency is being achieved,but allocative efficiency is not.
C)   both allocative efficiency and productive efficiency are being achieved.
D)   allocative efficiency is being achieved,but productive efficiency is not.

Question 8

If a purely competitive firm is producing where price exceeds marginal cost,then:

Accepted Answer

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

Question 9

Marginal cost is a measure of the alternative goods that society forgoes in using resources to produce an additional unit of some specific product.

Accepted Answer

A) True 
 B)False

Question 10

Entrepreneurs in purely competitive industries:

Accepted Answer

A)   have no incentive to innovate because in the long run they will earn no economic profits.
B)   innovate to lower operating costs and generate short-run economic profits.
C)   utilize pricing strategies to generate short-run economic profits.
D)   rarely try to innovate because of a lack of financial resources.

Question 11

Which of the following statements is correct?

Accepted Answer

A)   Economic profits induce firms to enter an industry;losses encourage firms to leave.
B)   Economic profits induce firms to leave an industry;profits encourage firms to leave.
C)   Economic profits and losses have no significant impact on the growth or decline of an industry.
D)   Normal profits will cause an industry to expand.

Question 12

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

Accepted Answer

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

Question 13

(Consider This) Which of the following statements is true about U.S.firms?

Accepted Answer

A)   Over half are bankrupt within the first two years after starting up.
B)   Over half are bankrupt within the first five years after starting up.
C)   Nearly 65 percent last 10 years or more.
D)   The life expectancy of a U.S.firm is approximately 22 years.

Question 14

When entrepreneurs in competitive industries successfully innovate to lower production costs,it usually results in long-run economic profits for the firm.

Accepted Answer

A) True 
 B)False

Question 15

If a purely competitive constant-cost industry is realizing economic profits,we can expect industry supply to:

Accepted Answer

A)   increase,output to increase,price to decrease,and profits to decrease.
B)   increase,output to increase,price to increase,and profits to decrease.
C)   decrease,output to decrease,price to increase,and profits to increase.
D)   increase,output to decrease,price to decrease,and profits to decrease.

Question 16

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 17

We would expect an industry to expand if firms in that industry are:

Accepted Answer

A)   earning normal profits.
B)   earning economic profits.
C)   breaking even.
D)   earning accounting profits.

Question 18

Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs,competition produces an efficient allocation of economic resources.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Under pure competition in the long run:

Accepted Answer

A)   neither allocative efficiency nor productive efficiency is achieved.
B)   both allocative efficiency and productive efficiency are achieved.
C)   productive efficiency is achieved,but allocative efficiency is not.
D)   allocative efficiency is achieved,but productive efficiency is not.

Exam 11: Pure Competition in the Long Run

If a purely competitive constant-cost industry is realizing economic profits,we can expect industry supply to:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Purely competitive industry X has constant costs and its product is an inferior good.The industry is currently in long-run equilibrium.The economy now goes into a recession and average incomes decline.The result will be:

Correct AnswerverifiedShow Answer

Entrepreneurs in purely competitive industries:

Correct AnswerverifiedShow Answer

If for a firm P = minimum ATC = MC,then:

Correct AnswerverifiedShow Answer

We would expect an industry to expand if firms in that industry are:

Correct AnswerverifiedShow Answer

Under pure competition in the long run:

Correct AnswerverifiedShow Answer

When entrepreneurs in competitive industries successfully innovate to lower production costs,it usually results in long-run economic profits for the firm.

Correct AnswerverifiedShow Answer

Suppose an increase in product demand occurs in a decreasing-cost industry.As a result:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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

(Consider This) The average life expectancy of a U.S.business is approximately:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing where price exceeds marginal cost,then:

Correct AnswerverifiedShow Answer

(Consider This) Which of the following statements is true about U.S.firms?

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit,then:

Correct AnswerverifiedShow Answer

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

Correct AnswerverifiedShow Answer

Marginal cost is a measure of the alternative goods that society forgoes in using resources to produce an additional unit of some specific product.

Correct AnswerverifiedShow Answer

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum.Then:

Correct AnswerverifiedShow Answer

Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs,competition produces an efficient allocation of economic resources.

Correct AnswerverifiedShow 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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified