Question 1

The long-run industry supply curve in perfect competition is derived from the

Accepted Answer

A)  short-run industry supply curve which shifts as new firms enter the industry. 
B)  short-run industry supply curve which shifts as old firms exit the industry. 
C)  freedom of firms from sunk costs so that new cost curves become long-run curves. 
D)  All of the above reasons. 
A)  short-run industry supply curve which shifts as new firms enter the industry. 
B)  short-run industry supply curve which shifts as old firms exit the industry. 
C)  freedom of firms from sunk costs so that new cost curves become long-run curves. 
D)  All of the above reasons.

Question 2

The difference between zero accounting profit and zero economic profit is that

Accepted Answer

A)  an economic profit of zero indicates a fair rate of return because it includes opportunity cost.opportunity cost and 
B)  an economic profit of zero indicates an unacceptable rate of return because it does not include opportunity cost. 
C)  an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost.. 
D)  an accounting profit of zero indicates a fair rate of return because it includes opportunity cost. 
A)  an economic profit of zero indicates a fair rate of return because it includes opportunity cost.opportunity cost and 
B)  an economic profit of zero indicates an unacceptable rate of return because it does not include opportunity cost. 
C)  an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost.. 
D)  an accounting profit of zero indicates a fair rate of return because it includes opportunity cost.

Question 3

A firm will shut down in the short run if

Accepted Answer

A)  TR - TC > TFC. 
B)  TR + TC > TFC. 
C)  TC - TR > TFC. 
D)  TFC + TVC > TR. 
A)  TR - TC > TFC. 
B)  TR + TC > TFC. 
C)  TC - TR > TFC. 
D)  TFC + TVC > TR.

Question 4

Zero profit in the economic sense means that firms are earning a normal rate of return.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements concerning equilibrium in the long run is not true?

Accepted Answer

A)  Most firms earn economic profits in the long run. 
B)  The firm can vary its plant size in the long run. 
C)  Economic profits are eliminated as new firms enter the industry in the long run. 
D)  For firms in long-run equilibrium, P = MC = AC. 
A)  Most firms earn economic profits in the long run. 
B)  The firm can vary its plant size in the long run. 
C)  Economic profits are eliminated as new firms enter the industry in the long run. 
D)  For firms in long-run equilibrium, P = MC = AC.

Question 6

Figure 10-7
  
-In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  All of the above is correct. 
A)  A 
B)  B 
C)  C 
D)  All of the above is correct.

Question 7

Draw a graph illustrating a competitive firm in short-run equilibrium that is earning an economic profit.Be sure to label all curves and axes correctly.

Accepted Answer

The diagram should look like F

Question 8

When a firm leaves a perfectly competitive industry,

Accepted Answer

A)  the individual demand curves facing remaining firms shift towards the point of minimum average cost in the long run. 
B)  short-run industry equilibrium is re-established at a new point along the original short-run industry supply curve. 
C)  the short-run industry supply curve shifts to the right. 
D)  at the new long-run equilibrium, the remaining firms in the industry will each receive a higher profit. 
A)  the individual demand curves facing remaining firms shift towards the point of minimum average cost in the long run. 
B)  short-run industry equilibrium is re-established at a new point along the original short-run industry supply curve. 
C)  the short-run industry supply curve shifts to the right. 
D)  at the new long-run equilibrium, the remaining firms in the industry will each receive a higher profit.

Exam 10: The Firm and the Industry under Perfect Competition

The long-run industry supply curve in perfect competition is derived from the

The difference between zero accounting profit and zero economic profit is that

A firm will shut down in the short run if

Zero profit in the economic sense means that firms are earning a normal rate of return.

Which of the following statements concerning equilibrium in the long run is not true?

Figure 10-7 -In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

Draw a graph illustrating a competitive firm in short-run equilibrium that is earning an economic profit.Be sure to label all curves and axes correctly.

When a firm leaves a perfectly competitive industry,

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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