Question 1

(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

Accepted Answer

A) 9.5 
B) 10.2 
C) 22 
D) 53 
A) 9.5 
B) 10.2 
C) 22 
D) 53

Question 2

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. 
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 3

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. 
A) average total cost. 
B) marginal cost. 
C) total cost. 
D) average variable cost.

Question 4

Which of the following statements about pure competition in the long run is not true?

Accepted Answer

A) Entry and exit of firms will push economic profits of firms in the industry toward zero. 
B) Entry and exit of firms will shift the demand curve facing the representative firm in the industry. 
C) The long-run adjustment in pure competition happens through shifts in the industry supply curve. 
D) The long-run adjustment in pure competition happens through shifts in the industry demand curve. 
A) Entry and exit of firms will push economic profits of firms in the industry toward zero. 
B) Entry and exit of firms will shift the demand curve facing the representative firm in the industry. 
C) The long-run adjustment in pure competition happens through shifts in the industry supply curve. 
D) The long-run adjustment in pure competition happens through shifts in the industry demand curve.

Question 5

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 6

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. 
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 7

Which of the following statements about a competitive firm is correct?

Accepted Answer

A) To maximize profits, a competitive firm should produce the output level at which total revenue is greatest. 
B) In long-run equilibrium, a competitive firm will produce at the point of minimum average costs. 
C) A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs. 
D) A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost. 
A) To maximize profits, a competitive firm should produce the output level at which total revenue is greatest. 
B) In long-run equilibrium, a competitive firm will produce at the point of minimum average costs. 
C) A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs. 
D) A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost.

Question 8

The process by which new firms and new products replace existing dominant firms and products is called

Accepted Answer

A) monopolistic competition. 
B) mergers and acquisitions. 
C) process innovation. 
D) creative destruction. 
A) monopolistic competition. 
B) mergers and acquisitions. 
C) process innovation. 
D) creative destruction.

Question 9

An increasing-cost industry is associated with

Accepted Answer

A) a perfectly elastic long-run supply curve. 
B) an upsloping long-run supply curve. 
C) a perfectly inelastic long-run supply curve. 
D) an upsloping long-run demand curve. 
A) a perfectly elastic long-run supply curve. 
B) an upsloping long-run supply curve. 
C) a perfectly inelastic long-run supply curve. 
D) an upsloping long-run demand curve.

Question 10

Competitive markets produce equilibrium prices and quantities that minimize the sum of consumer and producer surpluses.

Accepted Answer

A) True 
 B)False

Question 11

Karleeâ€™s Kreations sells handbags in a purely competitive market.Karleeâ€™s is currently breaking even.Based on this information, we can conclude that Karleeâ€™s Kreations

Accepted Answer

A) must be operating in long-run equilibrium. 
B) will leave this market in the long run because no economic profits are being earned. 
C) will continue operating in this market only if the market price rises. 
D) may be operating in either short-run or long-run equilibrium. 
A) must be operating in long-run equilibrium. 
B) will leave this market in the long run because no economic profits are being earned. 
C) will continue operating in this market only if the market price rises. 
D) may be operating in either short-run or long-run equilibrium.

Question 12

Which of the following is true concerning purely competitive industries?

Accepted Answer

A) There will be economic losses in the long run because of cut-throat competition. 
B) Economic profits will persist in the long run if consumer demand is strong and stable. 
C) In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. 
D) There are economic profits in the long run but not in the short run. 
A) There will be economic losses in the long run because of cut-throat competition. 
B) Economic profits will persist in the long run if consumer demand is strong and stable. 
C) In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. 
D) There are economic profits in the long run but not in the short run.

Question 13

Which of the following is not a factor that automatically pushes firms in pure competition to earn only normal profits in the long run?

Accepted Answer

A) entry of new firms 
B) exit of some firms 
C) changes in the firms' plant size 
D) changes in the market demand 
A) entry of new firms 
B) exit of some firms 
C) changes in the firms' plant size 
D) changes in the market demand

Question 14

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. 
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 15

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. 
A) equals marginal cost. 
B) equals marginal revenue. 
C) is greatest over average cost. 
D) is equal to average total cost.

Question 16

Which of the following is true of normal profits?

Accepted Answer

A) They are necessary to keep a firm in the industry in the long run. 
B) They are zero under pure competition in the long run. 
C) They are excluded from a firm's costs of production. 
D) They are what attract other firms to enter an industry. 
A) They are necessary to keep a firm in the industry in the long run. 
B) They are zero under pure competition in the long run. 
C) They are excluded from a firm's costs of production. 
D) They are what attract other firms to enter an industry.

Question 17

The transformative effects of competition that foster the development of new products or new production methods benefit everyone in society.

Accepted Answer

A) True 
 B)False

Question 18

Which is true of a purely competitive firm in long-run equilibrium?

Accepted Answer

A) Average fixed cost equals price. 
B) Marginal cost equals marginal product. 
C) Price equals marginal cost. 
D) Average variable cost equals marginal cost. 
A) Average fixed cost equals price. 
B) Marginal cost equals marginal product. 
C) Price equals marginal cost. 
D) Average variable cost equals marginal cost.

Question 19

An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

Accepted Answer

A) vertical. 
B) horizontal. 
C) upsloping. 
D) downsloping. 
A) vertical. 
B) horizontal. 
C) upsloping. 
D) downsloping.

Question 20

Allocative efficiency is achieved when the production of a good occurs where

Accepted Answer

A) P = minimum ATC. 
B) P = MC. 
C) P = minimum AVC. 
D) total revenue is equal to TFC. 
A) P = minimum ATC. 
B) P = MC. 
C) P = minimum AVC. 
D) total revenue is equal to TFC.

Exam 11: Pure Competition in the Long Run

(Consider This) Approximately what percentage of start-up firms in the United States go bankrupt within the first two years?

A decreasing-cost industry is one in which

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

Which of the following statements about pure competition in the long run is not true?

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

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

Which of the following statements about a competitive firm is correct?

The process by which new firms and new products replace existing dominant firms and products is called

An increasing-cost industry is associated with

Competitive markets produce equilibrium prices and quantities that minimize the sum of consumer and producer surpluses.

Karleeâ€™s Kreations sells handbags in a purely competitive market.Karleeâ€™s is currently breaking even.Based on this information, we can conclude that Karleeâ€™s Kreations

Which of the following is true concerning purely competitive industries?

Which of the following is not a factor that automatically pushes firms in pure competition to earn only normal profits in the long run?

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

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

Which of the following is true of normal profits?

The transformative effects of competition that foster the development of new products or new production methods benefit everyone in society.

Which is true of a purely competitive firm in long-run equilibrium?

An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

Allocative efficiency is achieved when the production of a good occurs where

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters