Question 1

All of the following statements apply to a purely competitive market in the long run, except

Accepted Answer

A) in the long run, all inputs are variable in quantity. 
B) firms can expand their plant capacities in the long run. 
C) total fixed costs remain constant even when output expands in the long run. 
D) firms may enter or leave the industry in the long run. 
A) in the long run, all inputs are variable in quantity. 
B) firms can expand their plant capacities in the long run. 
C) total fixed costs remain constant even when output expands in the long run. 
D) firms may enter or leave the industry in the long run.

Question 2

When a competitive firm is in long-run equilibrium, its accounting profits are greater than zero.

Accepted Answer

A) True 
 B)False

Question 3

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. 
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 4

If the price in a competitive market falls and goes below the equilibrium price, then consumer surplus might increase, but producer surplus will definitely decrease.

Accepted Answer

A) True 
 B)False

Question 5

When firms in a purely competitive industry are earning profits that are greater than normal, the supply of the product will tend to decrease in the long run.

Accepted Answer

A) True 
 B)False

Question 6

If firms are losing money in a purely competitive industry, then the long-run adjustments in this situation will cause the market supply to

Accepted Answer

A) increase, and consequently the representative firm's profits will increase. 
B) decrease, and consequently the representative firm's profits will increase. 
C) increase, and consequently the representative firm's profits will decrease. 
D) decrease, and consequently the representative firm's profits will decrease. 
A) increase, and consequently the representative firm's profits will increase. 
B) decrease, and consequently the representative firm's profits will increase. 
C) increase, and consequently the representative firm's profits will decrease. 
D) decrease, and consequently the representative firm's profits will decrease.

Question 7

The long-run supply curve for a purely competitive industry would be horizontal when

Accepted Answer

A) an increase in product demand causes an increase in resource prices. 
B) an increase in product demand causes a decrease in resource prices. 
C) a decrease in product demand causes a decrease in the number of firms. 
D) a decrease in product demand causes no effect in resource prices. 
A) an increase in product demand causes an increase in resource prices. 
B) an increase in product demand causes a decrease in resource prices. 
C) a decrease in product demand causes a decrease in the number of firms. 
D) a decrease in product demand causes no effect in resource prices.

Question 8

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is

Accepted Answer

A) allocative efficiency. 
B) productive efficiency. 
C) the consumer surplus. 
D) the producer surplus. 
A) allocative efficiency. 
B) productive efficiency. 
C) the consumer surplus. 
D) the producer surplus.

Question 9

Some economists are now proposing that patents may be detrimental to technological advance in industries with complicated multiple-component products.

Accepted Answer

A) True 
 B)False

Question 10

The operation of the invisible hand means the pursuit of private interests promotes social interests in pure competition.

Accepted Answer

A) True 
 B)False

Question 11

The difference between the actual price that a producer receives and the minimum acceptable price a producer is willing to accept is

Accepted Answer

A) the consumer surplus. 
B) the producer surplus. 
C) allocative efficiency. 
D) productive efficiency. 
A) the consumer surplus. 
B) the producer surplus. 
C) allocative efficiency. 
D) productive efficiency.

Question 12

Which of the following statements is true for a long-run supply curve that slopes upward?

Accepted Answer

A) If total market output is increased, unit costs of production increase. 
B) If total market output is unchanged, unit costs of production increase. 
C) The total cost of producing 15 units is no larger than the cost of producing 10 units. 
D) If total market output is decreased, total costs of production will remain unchanged. 
A) If total market output is increased, unit costs of production increase. 
B) If total market output is unchanged, unit costs of production increase. 
C) The total cost of producing 15 units is no larger than the cost of producing 10 units. 
D) If total market output is decreased, total costs of production will remain unchanged.

Question 13

The long-run supply curve for a competitive, decreasing-cost industry is downward-sloping.

Accepted Answer

A) True 
 B)False

Question 14

Producer surplus is the difference between the market price a producer receives for a product and the minimum price producers are willing to accept for a product.

Accepted Answer

A) True 
 B)False

Question 15

Long-run supply curves for a purely competitive industry can never be downsloping.

Accepted Answer

A) True 
 B)False

Question 16

Allocative efficiency occurs when the

Accepted Answer

A) minimum of average total cost equals average revenue. 
B) minimum of average total cost equals marginal revenue. 
C) marginal cost equals the marginal benefit to society. 
D) marginal revenue equals marginal benefit to society. 
A) minimum of average total cost equals average revenue. 
B) minimum of average total cost equals marginal revenue. 
C) marginal cost equals the marginal benefit to society. 
D) marginal revenue equals marginal benefit to society.

Question 17

When some firms leave a purely competitive industry, the market supply curve will shift in such a way that the remaining firms' profits will increase.

Accepted Answer

A) True 
 B)False

Question 18

A patent is the legal right granted to a firm that allows it to

Accepted Answer

A) make copies of other firm's products. 
B) be the sole buyer of a particular product or resource. 
C) sell its new product exclusively for a set number of years. 
D) be the exclusive distributor of a particular imported product. 
A) make copies of other firm's products. 
B) be the sole buyer of a particular product or resource. 
C) sell its new product exclusively for a set number of years. 
D) be the exclusive distributor of a particular imported product.

Exam 11: Pure Competition in the Long Run

All of the following statements apply to a purely competitive market in the long run, except

When a competitive firm is in long-run equilibrium, its accounting profits are greater than zero.

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

If the price in a competitive market falls and goes below the equilibrium price, then consumer surplus might increase, but producer surplus will definitely decrease.

When firms in a purely competitive industry are earning profits that are greater than normal, the supply of the product will tend to decrease in the long run.

If firms are losing money in a purely competitive industry, then the long-run adjustments in this situation will cause the market supply to

The long-run supply curve for a purely competitive industry would be horizontal when

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is

Some economists are now proposing that patents may be detrimental to technological advance in industries with complicated multiple-component products.

The operation of the invisible hand means the pursuit of private interests promotes social interests in pure competition.

The difference between the actual price that a producer receives and the minimum acceptable price a producer is willing to accept is

Which of the following statements is true for a long-run supply curve that slopes upward?

The long-run supply curve for a competitive, decreasing-cost industry is downward-sloping.

Producer surplus is the difference between the market price a producer receives for a product and the minimum price producers are willing to accept for a product.

Long-run supply curves for a purely competitive industry can never be downsloping.

Allocative efficiency occurs when the

When some firms leave a purely competitive industry, the market supply curve will shift in such a way that the remaining firms' profits will increase.

A patent is the legal right granted to a firm that allows it to

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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