Question 1

​A sudden increase in the market demand in a competitive industry leads to

Accepted Answer

A) ​A market equilibrium profits higher than the original equilibrium in the short-run 
B) A market equilibrium profits equal to the original equilibrium in the long-run 
C) Both a and b 
D) ​None of the above 
A) ​A market equilibrium profits higher than the original equilibrium in the short-run 
B) A market equilibrium profits equal to the original equilibrium in the long-run 
C) Both a and b 
D) ​None of the above

Question 2

​The main reason(s)firms in a competitive market cannot earn positive profits in the long run is(are)

Accepted Answer

A) ​assets can quickly move in and out of the industry when demand fluctuates 
B) an increase in demand leads to entry of firms which absorb the extra demand 
C) a decrease in demand leads to exit of firms from the market such that there is no surplus 
D) ​all of the above 
A) ​assets can quickly move in and out of the industry when demand fluctuates 
B) an increase in demand leads to entry of firms which absorb the extra demand 
C) a decrease in demand leads to exit of firms from the market such that there is no surplus 
D) ​all of the above

Question 3

​A sudden fall in the market demand in a competitive industry leads to

Accepted Answer

A) ​A short run market equilibrium price higher than the original equilibrium 
B) A market equilibrium price lower than the short run price 
C) Some firms exiting the market 
D) ​All of the above 
A) ​A short run market equilibrium price higher than the original equilibrium 
B) A market equilibrium price lower than the short run price 
C) Some firms exiting the market 
D) ​All of the above

Question 4

​According to the indifference principle,in the long run if being a teacher is more desirable than being a garbage collector,

Accepted Answer

A) ​teachers would be paid a relatively higher salary than garbage collectors 
B) teachers would be paid a relatively lower salary than garbage collectors 
C) teachers and garbage collectors would both be paid the same wages 
D) ​none of the above 
A) ​teachers would be paid a relatively higher salary than garbage collectors 
B) teachers would be paid a relatively lower salary than garbage collectors 
C) teachers and garbage collectors would both be paid the same wages 
D) ​none of the above

Question 5

​Monopoly firms manage to earn positive profits,even in the long run because

Accepted Answer

A) ​they have no close substitutes 
B) there are high barriers of entry to the market 
C) they have a cost advantage difficult to duplicate 
D) ​all of the above 
A) ​they have no close substitutes 
B) there are high barriers of entry to the market 
C) they have a cost advantage difficult to duplicate 
D) ​all of the above

Question 6

​All these are characteristics of a monopoly except,

Accepted Answer

A) ​There is one seller of the product 
B) Has few substitutes 
C) Controls a large share of the market 
D) ​Controls a small share of the market 
A) ​There is one seller of the product 
B) Has few substitutes 
C) Controls a large share of the market 
D) ​Controls a small share of the market

Question 7

​A firm in a ______________ faces a __________ demand curve.

Accepted Answer

A) ​perfectly competitive market;perfectly inelastic 
B) perfectly competitive market;perfectly elastic 
C) monopoly market;perfectly elastic 
D) ​monopoly market;horizontal 
A) ​perfectly competitive market;perfectly inelastic 
B) perfectly competitive market;perfectly elastic 
C) monopoly market;perfectly elastic 
D) ​monopoly market;horizontal

Question 8

​In the long run,in a competitive industry

Accepted Answer

A) ​economic profits are zero 
B) firms break even 
C) price equals average cost 
D) ​all of the above 
A) ​economic profits are zero 
B) firms break even 
C) price equals average cost 
D) ​all of the above

Question 9

​In a competitive industry

Accepted Answer

A) ​firms produce a product or service with very close substitutes 
B) the firms products have a very elastic demand 
C) the firms have many rivals 
D) ​all of the above 
A) ​firms produce a product or service with very close substitutes 
B) the firms products have a very elastic demand 
C) the firms have many rivals 
D) ​all of the above

Question 10

​In a perfectly competitive market industry,firm's prices are equal to

Accepted Answer

A) ​Average revenue 
B) Marginal revenue 
C) Both a and b 
D) ​None of the above 
A) ​Average revenue 
B) Marginal revenue 
C) Both a and b 
D) ​None of the above

Question 11

​Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

Accepted Answer

A) ​Asthmatics moving to Cleantown 
B) Poorer families moving to Smogville 
C) Residents in both the cities relocating based on their tolerance for pollution 
D) ​All of the above 
A) ​Asthmatics moving to Cleantown 
B) Poorer families moving to Smogville 
C) Residents in both the cities relocating based on their tolerance for pollution 
D) ​All of the above

Question 12

​Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

Accepted Answer

A) ​Asthmatics moving to Smogville 
B) Poorer families moving to Cleantown 
C) Residents in both the cities relocating based on their tolerance for pollution 
D) ​Residents in both the cities being worse off 
A) ​Asthmatics moving to Smogville 
B) Poorer families moving to Cleantown 
C) Residents in both the cities relocating based on their tolerance for pollution 
D) ​Residents in both the cities being worse off

Question 13

​Once the patent for a drug in the pharmaceutical industry expires,the market for the generic equivalents

Accepted Answer

A) ​Is usually considered competitive 
B) Is a monopolistic market 
C) Has no effect on the profits earned by the original producer 
D) ​Would not exist 
A) ​Is usually considered competitive 
B) Is a monopolistic market 
C) Has no effect on the profits earned by the original producer 
D) ​Would not exist

Question 14

​In a competitive industry

Accepted Answer

A) ​firms have no cost advantages 
B) some firms have cost advantages,while others do not 
C) all the firms have highly differentiated products 
D) ​Consumers have strong preferences across brands 
A) ​firms have no cost advantages 
B) some firms have cost advantages,while others do not 
C) all the firms have highly differentiated products 
D) ​Consumers have strong preferences across brands

Question 15

​Low risk stocks are usually accompanied by

Accepted Answer

A) ​low returns 
B) no returns 
C) high returns 
D) ​no sales-no one would buy low risk stocks 
A) ​low returns 
B) no returns 
C) high returns 
D) ​no sales-no one would buy low risk stocks

Question 16

​Monopolies can earn positive profits

Accepted Answer

A) ​In the long run only 
B) Until they disappear due to new entry 
C) In the short run only 
D) ​None of the above 
A) ​In the long run only 
B) Until they disappear due to new entry 
C) In the short run only 
D) ​None of the above

Question 17

​In the long-run,a perfectly competitive firm will achieve

Accepted Answer

A) ​An average rate of return 
B) Above average profits 
C) Losses 
D) ​Economic Profits 
A) ​An average rate of return 
B) Above average profits 
C) Losses 
D) ​Economic Profits

Question 18

A sudden rise in the market demand in a competitive industry leads to ​

Accepted Answer

A) ​A short run market equilibrium price higher than the original equilibrium 
B) A market equilibrium lower than the short run price 
C) Entry of new firms into the market 
D) ​All of the above 
A) ​A short run market equilibrium price higher than the original equilibrium 
B) A market equilibrium lower than the short run price 
C) Entry of new firms into the market 
D) ​All of the above

Question 19

​A new cure for Toenail fungus is discovered for individuals resistant to the original treatment.At this point the firm producing this drug

Accepted Answer

A) ​Could be considered a monopoly 
B) Would be protected from entry by patents 
C) Would be facing many new entries in the market 
D) ​Only A&B 
A) ​Could be considered a monopoly 
B) Would be protected from entry by patents 
C) Would be facing many new entries in the market 
D) ​Only A&B

Question 20

​The concept of mean reversion is defined by

Accepted Answer

A) ​the tendency of profits to revert to zero 
B) the tendency of costs to revert to zero 
C) the tendency of economic profits to revert to zero 
D) ​the tendency of profits to revert to negative 
A) ​the tendency of profits to revert to zero 
B) the tendency of costs to revert to zero 
C) the tendency of economic profits to revert to zero 
D) ​the tendency of profits to revert to negative

Exam 8: Market Structure and Long Run Equilibrium

​A sudden increase in the market demand in a competitive industry leads to

​The main reason(s)firms in a competitive market cannot earn positive profits in the long run is(are)

​A sudden fall in the market demand in a competitive industry leads to

​According to the indifference principle,in the long run if being a teacher is more desirable than being a garbage collector,

​Monopoly firms manage to earn positive profits,even in the long run because

​All these are characteristics of a monopoly except,

​A firm in a ______________ faces a __________ demand curve.

​In the long run,in a competitive industry

​In a competitive industry

​In a perfectly competitive market industry,firm's prices are equal to

​Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

​Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

​Once the patent for a drug in the pharmaceutical industry expires,the market for the generic equivalents

​In a competitive industry

​Low risk stocks are usually accompanied by

​Monopolies can earn positive profits

​In the long-run,a perfectly competitive firm will achieve

A sudden rise in the market demand in a competitive industry leads to ​

​A new cure for Toenail fungus is discovered for individuals resistant to the original treatment.At this point the firm producing this drug

​The concept of mean reversion is defined by

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

A sudden increase in the market demand in a competitive industry leads to

The main reason(s)firms in a competitive market cannot earn positive profits in the long run is(are)

A sudden fall in the market demand in a competitive industry leads to

According to the indifference principle,in the long run if being a teacher is more desirable than being a garbage collector,

Monopoly firms manage to earn positive profits,even in the long run because

All these are characteristics of a monopoly except,

A firm in a ____ faces a demand curve.

In the long run,in a competitive industry

In a competitive industry

In a perfectly competitive market industry,firm's prices are equal to

Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

Two cities A&B are deciding upon joint pollution laws.Right now they both face identical prices for their housing.If they decide that city A is to be a pollution free city "Clean town" and all the factories would locate in city B "Smogville",in the long run,we expect to see

Once the patent for a drug in the pharmaceutical industry expires,the market for the generic equivalents

In a competitive industry

Low risk stocks are usually accompanied by

Monopolies can earn positive profits

In the long-run,a perfectly competitive firm will achieve

A sudden rise in the market demand in a competitive industry leads to

A new cure for Toenail fungus is discovered for individuals resistant to the original treatment.At this point the firm producing this drug

The concept of mean reversion is defined by