Question 1

Which of the following is not true in the long-run?

Accepted Answer

A)  There are no variable costs. 
B)  There are no fixed costs. 
C)  Total costs equal variable costs. 
D)  Identical firms will make zero profits. 
A)  There are no variable costs. 
B)  There are no fixed costs. 
C)  Total costs equal variable costs. 
D)  Identical firms will make zero profits. A

Question 2

For prices greater than the minimum value of average variable cost,the firm's short-run supply curve coincides with its short-run marginal cost curve.

Accepted Answer

A) True 
 B)False  True

Question 3

The number of firms in an industry is fixed in the short run.

Accepted Answer

A) True 
 B)False  True

Question 4

In the long run,a firm will exit an industry if the market price is less than its

Accepted Answer

A)  break-even price. 
B)  shutdown price. 
C)  marginal cost. 
D)  fixed cost. 
A)  break-even price. 
B)  shutdown price. 
C)  marginal cost. 
D)  fixed cost.

Question 5

Only variable costs are relevant to a firm's decision to shut down.

Accepted Answer

A) True 
 B)False

Question 6

From this chapter we know that a profit maximizing competitive firm will set its price equal to the market price.Briefly describe why a profit maximizing competitive firm will not set its price above the market price.Also,describe why a profit maximizing competitive firm will not set its price below the market price.

Accepted Answer

If the competitive firm sets its price a

Question 7

Bonzo's success in the Easter Basket business has attracted more characters into the Easter Basket industry.If Easter Basket making is a constant cost industry,Bonzo

Accepted Answer

A)  and the new entrants can all expect to be enjoying his current level of profits. 
B)  can expect his profits to be driven down to zero as new competitors push the price down. 
C)  can expect to have to shutdown his operation in the face of new competition. 
D)  will have to increase his price to make up for the loss of any sales to new competitors. 
A)  and the new entrants can all expect to be enjoying his current level of profits. 
B)  can expect his profits to be driven down to zero as new competitors push the price down. 
C)  can expect to have to shutdown his operation in the face of new competition. 
D)  will have to increase his price to make up for the loss of any sales to new competitors.

Question 8

The marginal revenue curve of a competitive firm is

Accepted Answer

A)  U-shaped. 
B)  a ray from the origin. 
C)  a horizontal line at the market price. 
D)  downward sloping. 
A)  U-shaped. 
B)  a ray from the origin. 
C)  a horizontal line at the market price. 
D)  downward sloping.

Question 9

The elasticity of supply is positive because prices and quantities are always positive.

Accepted Answer

A) True 
 B)False

Question 10

Farmer Jane grows wheat on land that is bought and paid for.She figures her profit per acre is $60 because she puts $30 of purchased inputs onto each acre,$10 worth of her time into working on each acre,and the harvested wheat sells for $100.Farmer Jane

Accepted Answer

A)  has correctly calculated her economic profit. 
B)  has forgotten to include the opportunity cost of the land in her calculation of profit. 
C)  should not have included the value of her time in calculating profits. 
D)  should not have included any costs in calculating her economic profit. 
A)  has correctly calculated her economic profit. 
B)  has forgotten to include the opportunity cost of the land in her calculation of profit. 
C)  should not have included the value of her time in calculating profits. 
D)  should not have included any costs in calculating her economic profit.

Question 11

An industry is likely to be an increasing-cost industry when

Accepted Answer

A)  all firms are identical. 
B)  it represents a negligible fraction of the total demand for inputs. 
C)  industry expansion permits the development of supporting subindustries. 
D)  some firms are more efficient than others. 
A)  all firms are identical. 
B)  it represents a negligible fraction of the total demand for inputs. 
C)  industry expansion permits the development of supporting subindustries. 
D)  some firms are more efficient than others.

Question 12

When can we expect a factor-price effect to occur? How does a factor-price effect alter an industry's short-run and long-run supply curves?

Accepted Answer

A factor-price effect occurs when the in

Question 13

Entry into the information technology industry becomes more attractive the more firms there are because of the increased availability of already trained workers.Given this trend,it appears that information technology is

Accepted Answer

A)  an increasing-cost industry. 
B)  a constant-cost industry. 
C)  a decreasing-cost industry. 
D)  a government subsidized industry. 
A)  an increasing-cost industry. 
B)  a constant-cost industry. 
C)  a decreasing-cost industry. 
D)  a government subsidized industry.

Question 14

A firm will shut down in the short run if its revenues fail to cover its

Accepted Answer

A)  fixed costs. 
B)  variable costs. 
C)  total costs. 
D)  sunk costs. 
A)  fixed costs. 
B)  variable costs. 
C)  total costs. 
D)  sunk costs.

Question 15

When a firm has chosen to shutdown it has exited the industry.

Accepted Answer

A) True 
 B)False

Question 16

A new licensing fee would cause an immediate upward shift in an industry's short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 17

A competitive firm faces a downward-sloping demand for its product.

Accepted Answer

A) True 
 B)False

Question 18

In a competitive equilibrium,the industry's output is produced at the lowest possible cost because each firm has the goal of minimizing its cost.

Accepted Answer

A) True 
 B)False

Question 19

Suppose bicycles are produced by a competitive constant-cost industry,which is initially in a long-run equilibrium.For each of the following situations,design a supply-demand diagram that shows how market price and quantity will be affected in both the short run and the long run.In your diagrams,show the short-run supply,long-run supply,and demand curves,along with any shifts in these curves.Label the initial long-run equilibrium E0,the new short-run equilibrium E1,and the new long-run equilibrium E2.

Accepted Answer

Question 20

When will an industry's long-run supply curve be horizontal at firms' break-even price?

Accepted Answer

A)  When expansion of the industry allows new input markets to develop. 
B)  When some firms are more efficient than others. 
C)  When specialized skills play a significant role in production. 
D)  When firms are identical and there is no factor-price effect. 
A)  When expansion of the industry allows new input markets to develop. 
B)  When some firms are more efficient than others. 
C)  When specialized skills play a significant role in production. 
D)  When firms are identical and there is no factor-price effect.

Which of the following is not true in the long-run?

For prices greater than the minimum value of average variable cost,the firm's short-run supply curve coincides with its short-run marginal cost curve.

The number of firms in an industry is fixed in the short run.

In the long run,a firm will exit an industry if the market price is less than its

Only variable costs are relevant to a firm's decision to shut down.

Bonzo's success in the Easter Basket business has attracted more characters into the Easter Basket industry.If Easter Basket making is a constant cost industry,Bonzo

The marginal revenue curve of a competitive firm is

The elasticity of supply is positive because prices and quantities are always positive.

Farmer Jane grows wheat on land that is bought and paid for.She figures her profit per acre is $60 because she puts $30 of purchased inputs onto each acre,$10 worth of her time into working on each acre,and the harvested wheat sells for $100.Farmer Jane

An industry is likely to be an increasing-cost industry when

When can we expect a factor-price effect to occur? How does a factor-price effect alter an industry's short-run and long-run supply curves?

Entry into the information technology industry becomes more attractive the more firms there are because of the increased availability of already trained workers.Given this trend,it appears that information technology is

A firm will shut down in the short run if its revenues fail to cover its

When a firm has chosen to shutdown it has exited the industry.

A new licensing fee would cause an immediate upward shift in an industry's short-run supply curve.

A competitive firm faces a downward-sloping demand for its product.

In a competitive equilibrium,the industry's output is produced at the lowest possible cost because each firm has the goal of minimizing its cost.

When will an industry's long-run supply curve be horizontal at firms' break-even price?

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

The Behavior of Firms

Production and Costs

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

What Is Economics

Filters

Exam 7: Competition

Which of the following is not true in the long-run?

For prices greater than the minimum value of average variable cost,the firm's short-run supply curve coincides with its short-run marginal cost curve.

The number of firms in an industry is fixed in the short run.

In the long run,a firm will exit an industry if the market price is less than its

Only variable costs are relevant to a firm's decision to shut down.

Bonzo's success in the Easter Basket business has attracted more characters into the Easter Basket industry.If Easter Basket making is a constant cost industry,Bonzo

The marginal revenue curve of a competitive firm is

The elasticity of supply is positive because prices and quantities are always positive.

Farmer Jane grows wheat on land that is bought and paid for.She figures her profit per acre is $60 because she puts $30 of purchased inputs onto each acre,$10 worth of her time into working on each acre,and the harvested wheat sells for $100.Farmer Jane

An industry is likely to be an increasing-cost industry when

When can we expect a factor-price effect to occur? How does a factor-price effect alter an industry's short-run and long-run supply curves?

Entry into the information technology industry becomes more attractive the more firms there are because of the increased availability of already trained workers.Given this trend,it appears that information technology is

A firm will shut down in the short run if its revenues fail to cover its

When a firm has chosen to shutdown it has exited the industry.

A new licensing fee would cause an immediate upward shift in an industry's short-run supply curve.

A competitive firm faces a downward-sloping demand for its product.

In a competitive equilibrium,the industry's output is produced at the lowest possible cost because each firm has the goal of minimizing its cost.

When will an industry's long-run supply curve be horizontal at firms' break-even price?

Supply,demand,and Equilibrium

Prices,costs and Gains From Trade

The Behavior of Consumers

Consumers in the Marketplace

The Behavior of Firms

Production and Costs

Welfare Economics and the Gains From Trade

Knowledge and Information

Monopoly

Market Power,collusion,and Oligopoly

The Theory of Games

External Costs and Benefits

Common Property and Public Goods

The Demand for Factors of Production

The Market for Labor

Allocating Goods Over Time

Risk and Uncertainty

What Is Economics

Filters