Question 1

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost

Accepted Answer

A) is $10. 
B) is $40. 
C) is $400. 
D) cannot be determined from the information provided. 
A) is $10. 
B) is $40. 
C) is $400. 
D) cannot be determined from the information provided.

Question 2

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 3

Line (1)in the diagram reflects the long-run supply curve for

Accepted Answer

A) a constant-cost industry. 
B) a decreasing-cost industry. 
C) an increasing-cost industry. 
D) a technologically progressive industry. 
A) a constant-cost industry. 
B) a decreasing-cost industry. 
C) an increasing-cost industry. 
D) a technologically progressive industry.

Question 4

An underallocation of resources is occurring in a purely competitive industry whenever the price of the product is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

Accepted Answer

A) Combined consumer and producer surplus will be maximized. 
B) P = MC = lowest AVC. 
C) The minimum willingness to pay equals the maximum acceptable price. 
D) We would expect all of these to occur in the long run in a purely competitive market. 
A) Combined consumer and producer surplus will be maximized. 
B) P = MC = lowest AVC. 
C) The minimum willingness to pay equals the maximum acceptable price. 
D) We would expect all of these to occur in the long run in a purely competitive market.

Question 6

Assume a purely competitive constant-cost industry is initially in long-run equilibrium, producing 9 million units at a market price of $18.00. Suppose that an increase in consumer demand occurs. After all economic adjustments have been completed, which output and price combination is most likely to occur?

Accepted Answer

A) 9.5 units at a price of $19.25. 
B) 10 units at a price of $18.00. 
C) 9 units at a price of $20.00. 
D) 8 units at a price of $18.00. 
A) 9.5 units at a price of $19.25. 
B) 10 units at a price of $18.00. 
C) 9 units at a price of $20.00. 
D) 8 units at a price of $18.00.

Question 7

If the firm shown in this graph is producing at the profit-maximizing level of output in the short run, then it is achieving productive and allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 8

The diagram portrays

Accepted Answer

A) a competitive firm that should shut down in the short run. 
B) the equilibrium position of a competitive firm in the long run. 
C) a competitive firm that is realizing an economic profit. 
D) the loss-minimizing position of a competitive firm in the short run. 
A) a competitive firm that should shut down in the short run. 
B) the equilibrium position of a competitive firm in the long run. 
C) a competitive firm that is realizing an economic profit. 
D) the loss-minimizing position of a competitive firm in the short run.

Question 9

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant, assuming that the product price stays the same.

Accepted Answer

A) True 
 B)False

Question 10

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

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost

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

Line (1)in the diagram reflects the long-run supply curve for

An underallocation of resources is occurring in a purely competitive industry whenever the price of the product is greater than marginal cost.

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

If the firm shown in this graph is producing at the profit-maximizing level of output in the short run, then it is achieving productive and allocative efficiency.

The diagram portrays

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant, assuming that the product price stays the same.

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 11: Pure Competition in the Long Run

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost

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

Line (1)in the diagram reflects the long-run supply curve for

An underallocation of resources is occurring in a purely competitive industry whenever the price of the product is greater than marginal cost.

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

If the firm shown in this graph is producing at the profit-maximizing level of output in the short run, then it is achieving productive and allocative efficiency.

The diagram portrays

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant, assuming that the product price stays the same.

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters