Question 1

(Last Word) "Patent trolls"

Accepted Answer

A) block firms from acquiring patents on intellectual property. 
B) buy up patents in order to collect royalties and sue other companies. 
C) legally challenge new patent applications in an effort to extract rents. 
D) promote innovation by keeping firms from having a stranglehold on intellectual property. 
A) block firms from acquiring patents on intellectual property. 
B) buy up patents in order to collect royalties and sue other companies. 
C) legally challenge new patent applications in an effort to extract rents. 
D) promote innovation by keeping firms from having a stranglehold on intellectual property.

Question 2

In a decreasing-cost industry,

Accepted Answer

A) there will be no firm entry because the increased supply will reduce the long-run equilibrium price. 
B) the law of demand does not apply. 
C) greater demand leads to higher long-run equilibrium prices. 
D) lower demand leads to higher long-run equilibrium prices. 
A) there will be no firm entry because the increased supply will reduce the long-run equilibrium price. 
B) the law of demand does not apply. 
C) greater demand leads to higher long-run equilibrium prices. 
D) lower demand leads to higher long-run equilibrium prices.

Question 3

Allocative efficiency occurs whenever

Accepted Answer

A) consumer surplus is maximized. 
B) it is impossible to produce a net benefit for society by changing the combination of goods and services produced. 
C) firms have maximized their profits. 
D) it is impossible to make someone in society better off without making someone else worse off. 
A) consumer surplus is maximized. 
B) it is impossible to produce a net benefit for society by changing the combination of goods and services produced. 
C) firms have maximized their profits. 
D) it is impossible to make someone in society better off without making someone else worse off.

Question 4

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium.Now assume that a decrease in consumer demand occurs.After all resulting adjustments have been completed, the new equilibrium price

Accepted Answer

A) and industry output will be less than the initial price and output. 
B) will be greater than the initial price, but the new industry output will be less than the original output. 
C) will be less than the initial price, but the new industry output will be greater than the original output. 
D) and industry output will be greater than the initial price and output. 
A) and industry output will be less than the initial price and output. 
B) will be greater than the initial price, but the new industry output will be less than the original output. 
C) will be less than the initial price, but the new industry output will be greater than the original output. 
D) and industry output will be greater than the initial price and output.

Question 5

Assume the market for ball bearings is purely competitive.Currently, each of the firms in this market is earning positive economic profits.In the long run, as adjustments occur in the industry, we can expect the market price of ball bearings to

Accepted Answer

A) increase and individual firms' profits to decrease. 
B) increase and individual firms' profits to increase. 
C) decrease and individual firms' profits to increase. 
D) decrease and individual firms' profits to decrease. 
A) increase and individual firms' profits to decrease. 
B) increase and individual firms' profits to increase. 
C) decrease and individual firms' profits to increase. 
D) decrease and individual firms' profits to decrease.

Question 6

The theory of creative destruction was advanced many years ago by

Accepted Answer

A) Bill Gates. 
B) Alfred Marshall. 
C) Joseph Schumpeter. 
D) Adam Smith. 
A) Bill Gates. 
B) Alfred Marshall. 
C) Joseph Schumpeter. 
D) Adam Smith.

Question 7

After all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that a competitive firm finds that in its short-run equilibrium situation, its marginal cost is higher than its average total cost.If things are not expected to change and there are constant returns to scale, then the firm will exit the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 9

In a purely competitive market at its long-run equilibrium, which of the following is not true?

Accepted Answer

A) Price equals marginal cost, and they are equal to the lowest attainable average cost of production. 
B) The marginal benefit of the last unit of the product equals the marginal cost of producing that unit. 
C) The maximum willingness of buyers to pay for the last unit of the product equals the minimum acceptable price for the seller of that unit. 
D) The combined amount of consumer and producer surpluses is at its minimum possible. 
A) Price equals marginal cost, and they are equal to the lowest attainable average cost of production. 
B) The marginal benefit of the last unit of the product equals the marginal cost of producing that unit. 
C) The maximum willingness of buyers to pay for the last unit of the product equals the minimum acceptable price for the seller of that unit. 
D) The combined amount of consumer and producer surpluses is at its minimum possible.

Question 10

Allocative efficiency means that

Accepted Answer

A) the product is produced at the lowest unit-cost possible. 
B) societyâ€™s scarce resources are used to produce products that align with consumer preferences. 
C) the product is sold at a price equal to the average cost of producing it. 
D) the marginal benefit of the product exceeds its marginal cost. 
A) the product is produced at the lowest unit-cost possible. 
B) societyâ€™s scarce resources are used to produce products that align with consumer preferences. 
C) the product is sold at a price equal to the average cost of producing it. 
D) the marginal benefit of the product exceeds its marginal cost.

Question 11

Efficiency or deadweight losses occur in purely competitive markets when P = MC = lowest ATC.

Accepted Answer

A) True 
 B)False

Question 12

If a competitive firm successfully adopts a better production technology ahead of the others, then

Accepted Answer

A) its product price will become lower than the others'. 
B) its average cost will become higher than the others'. 
C) its profits will become higher than the others'. 
D) its marginal revenue will become higher than the others'. 
A) its product price will become lower than the others'. 
B) its average cost will become higher than the others'. 
C) its profits will become higher than the others'. 
D) its marginal revenue will become higher than the others'.

Question 13

In the long run, assuming that market demand stays the same, if firms in a competitive industry expand, then the product price will tend to fall as a result.

Accepted Answer

A) True 
 B)False

Question 14

The primary force encouraging the entry of new firms into a purely competitive industry is

Accepted Answer

A) normal profits earned by firms already in the industry. 
B) economic profits earned by firms already in the industry. 
C) government subsidies for start-up firms. 
D) a desire to provide goods for the betterment of society. 
A) normal profits earned by firms already in the industry. 
B) economic profits earned by firms already in the industry. 
C) government subsidies for start-up firms. 
D) a desire to provide goods for the betterment of society.

Question 15

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

Accepted Answer

A) P > MC = minimum ATC. B) P > MC > minimum ATC. C) P = MC = minimum ATC. D) P < MC < minimum ATC. A) P > MC = minimum ATC. B) P > MC > minimum ATC. C) P = MC = minimum ATC. D) P < MC < minimum ATC.

Question 16

In the long run for a purely competitive market, firms may enter or exit the industry, but the firms that stay in the industry will maintain their initial plant sizes.

Accepted Answer

A) True 
 B)False

Question 17

A purely competitive firm that is earning positive profits in its short-run equilibrium situation will continue to earn positive profits at the long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 18

Balinâ€™s Burger Barn operates in a perfectly competitive market.Balinâ€™s is currently earning economic profits of $20,000 per year.Based on this information, we can conclude that

Accepted Answer

A) Balinâ€™s profits will discourage new firms from entering. 
B) Balinâ€™s will increase its market price over the coming months. 
C) Balinâ€™s is operating in the short run, but not the long run. 
D) Balinâ€™s is operating in the long run.Learning Objective: 11-01 Explain how the long run differs from the short run in pure competition. 
A) Balinâ€™s profits will discourage new firms from entering. 
B) Balinâ€™s will increase its market price over the coming months. 
C) Balinâ€™s is operating in the short run, but not the long run. 
D) Balinâ€™s is operating in the long run.Learning Objective: 11-01 Explain how the long run differs from the short run in pure competition.

Question 19

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

Question 20

Which of the following distinguishes the short run from the long run in pure competition?

Accepted Answer

A) Firms can enter and exit the market in the long run but not in the short run. 
B) Firms attempt to maximize profits in the long run but not in the short run. 
C) Firms use the MR = MC rule to maximize profits in the short run but not in the long run. 
D) The quantity of labor hired can vary in the long run but not in the short run. 
A) Firms can enter and exit the market in the long run but not in the short run. 
B) Firms attempt to maximize profits in the long run but not in the short run. 
C) Firms use the MR = MC rule to maximize profits in the short run but not in the long run. 
D) The quantity of labor hired can vary in the long run but not in the short run.

Exam 11: Pure Competition in the Long Run

(Last Word) "Patent trolls"

In a decreasing-cost industry,

Allocative efficiency occurs whenever

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium.Now assume that a decrease in consumer demand occurs.After all resulting adjustments have been completed, the new equilibrium price

Assume the market for ball bearings is purely competitive.Currently, each of the firms in this market is earning positive economic profits.In the long run, as adjustments occur in the industry, we can expect the market price of ball bearings to

The theory of creative destruction was advanced many years ago by

After all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum.

Suppose that a competitive firm finds that in its short-run equilibrium situation, its marginal cost is higher than its average total cost.If things are not expected to change and there are constant returns to scale, then the firm will exit the industry in the long run.

In a purely competitive market at its long-run equilibrium, which of the following is not true?

Allocative efficiency means that

Efficiency or deadweight losses occur in purely competitive markets when P = MC = lowest ATC.

If a competitive firm successfully adopts a better production technology ahead of the others, then

In the long run, assuming that market demand stays the same, if firms in a competitive industry expand, then the product price will tend to fall as a result.

The primary force encouraging the entry of new firms into a purely competitive industry is

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

In the long run for a purely competitive market, firms may enter or exit the industry, but the firms that stay in the industry will maintain their initial plant sizes.

A purely competitive firm that is earning positive profits in its short-run equilibrium situation will continue to earn positive profits at the long-run equilibrium.

Balinâ€™s Burger Barn operates in a perfectly competitive market.Balinâ€™s is currently earning economic profits of $20,000 per year.Based on this information, we can conclude that

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

Which of the following distinguishes the short run from the long run in pure competition?

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

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