Question 1

If the price of product Y is $14 and its marginal cost is $18,

Accepted Answer

A) Y is being produced with the least-cost combination of resources. 
B) society will realize a net gain if more of Y is produced. 
C) resources are being overallocated to Y. 
D) resources are being underallocated to Y. 
A) Y is being produced with the least-cost combination of resources. 
B) society will realize a net gain if more of Y is produced. 
C) resources are being overallocated to Y. 
D) resources are being underallocated to Y.

Question 2

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the deadweight loss would be

Accepted Answer

A) area a. 
B) area b. 
C) area d. 
D) zero. 
A) area a. 
B) area b. 
C) area d. 
D) zero.

Question 3

The average life expectancy of a U.S. business is approximately

Accepted Answer

A) 2 years. 
B) 9.5 years. 
C) 10.2 years. 
D) 22 years. 
A) 2 years. 
B) 9.5 years. 
C) 10.2 years. 
D) 22 years.

Question 4

Line (2)in the accompanying 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 5

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 6

Productive efficiency refers to

Accepted Answer

A) cost minimization, where P = minimum ATC. 
B) production at a level where P = MC. 
C) maximizing profits by producing where MR = MC. 
D) setting TR = TC. 
A) cost minimization, where P = minimum ATC. 
B) production at a level where P = MC. 
C) maximizing profits by producing where MR = MC. 
D) setting TR = TC.

Question 7

What is the concept of creative destruction?

Accepted Answer

Creative destruction is referring to the

Question 8

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will

Accepted Answer

A) shift up. 
B) shift down. 
C) not shift. 
D) slope downward. 
A) shift up. 
B) shift down. 
C) not shift. 
D) slope downward.

Question 9

The provided graph depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would

Accepted Answer

A) increase. 
B) decrease. 
C) stay constant. 
D) be set by the government. 
A) increase. 
B) decrease. 
C) stay constant. 
D) be set by the government.

Question 10

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

Accepted Answer

A) is zero. 
B) is $400. 
C) is $200. 
D) cannot be determined from the information provided. 
A) is zero. 
B) is $400. 
C) is $200. 
D) cannot be determined from the information provided.

Question 11

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the firm's

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease.

Question 13

Competitive firms will always try to earn more than a normal profit by doing the following except

Accepted Answer

A) adopting better production technology. 
B) improving their business organization and operation. 
C) developing new products. 
D) raising the prices of their existing products. 
A) adopting better production technology. 
B) improving their business organization and operation. 
C) developing new products. 
D) raising the prices of their existing products.

Question 14

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

Accepted Answer

A) It is making economic profits in the long run. 
B) Marginal cost equals average variable cost. 
C) It produces at the minimum average total cost. 
D) Its marginal revenue is less than average revenue. 
A) It is making economic profits in the long run. 
B) Marginal cost equals average variable cost. 
C) It produces at the minimum average total cost. 
D) Its marginal revenue is less than average revenue.

Question 15

From the viewpoint of a firm, competition can come even from other firms that are not in the same industry.

Accepted Answer

A) True 
 B)False

Question 16

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 17

In the context of analyzing economic efficiency, we can interpret the market demand curve to be showing

Accepted Answer

A) the average cost of producing the product at each output level. 
B) the marginal revenue from each extra unit of the product. 
C) the marginal benefit that consumers place on each unit of the product. 
D) the average variable cost of producing the product. 
A) the average cost of producing the product at each output level. 
B) the marginal revenue from each extra unit of the product. 
C) the marginal benefit that consumers place on each unit of the product. 
D) the average variable cost of producing the product.

Question 18

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 19

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 20

Which is true of a purely competitive firm in long-run equilibrium?

Accepted Answer

A) Average fixed cost equals price. 
B) Marginal cost equals marginal product. 
C) Price equals marginal cost. 
D) Average variable cost equals marginal cost. 
A) Average fixed cost equals price. 
B) Marginal cost equals marginal product. 
C) Price equals marginal cost. 
D) Average variable cost equals marginal cost.

Exam 11: Pure Competition in the Long Run

If the price of product Y is $14 and its marginal cost is $18,

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the deadweight loss would be

The average life expectancy of a U.S. business is approximately

Line (2)in the accompanying diagram reflects the long-run supply curve for

In a decreasing-cost industry,

Productive efficiency refers to

What is the concept of creative destruction?

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will

The provided graph depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would

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

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve.

Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the firm's

Competitive firms will always try to earn more than a normal profit by doing the following except

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

From the viewpoint of a firm, competition can come even from other firms that are not in the same industry.

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.

In the context of analyzing economic efficiency, we can interpret the market demand curve to be showing

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.

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.

Which is true of a purely competitive firm in long-run equilibrium?

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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