Question 1

Which of the following is a condition for industry expansion through expansion of existing firms instead of entry of new firms?

Accepted Answer

A)  Firms take advantage of diseconomies of scale.
B)  A firm size is greater than the minimum efficient sale.
C)  A firm's average total cost decreases as a result of technological change.
D)  A firm produces beyond the minimum long-run average total cost.
E)  Firms make normal profits. C

Question 2

When economic profit is equal to zero, we say that

Accepted Answer

A)  implicit costs equal zero.
B)  a normal profit is being earned.
C)  total cost is greater than total revenue.
D)  accounting profit is negative.
E)  the business is not profitable. B

Question 3

In the long run, market supply increases as market demand increases.

Accepted Answer

A) True 
 B)False  True

Question 4

When firms leave an industry,

Accepted Answer

A)  it is due to long-term losses.
B)  other firms immediately enter to take their place.
C)  it is because they anticipate an increase in demand.
D)  other firms enter.
E)  it is always due to a decrease in demand.

Question 5

In the long run, if price is greater than average total cost in an industry, then

Accepted Answer

A)  some firms leave the industry.
B)  some firms are attracted to the industry.
C)  all firms leave the industry.
D)  there is no incentive for any firm to enter or leave the industry.
E)  the industry disappears.

Question 6

In a competitive industry, which of the following cannot be true for a firm in the long run?

Accepted Answer

A)  Price equals marginal cost.
B)  Profits are maximized.
C)  The firm takes market price as given.
D)  Economic profits equal zero.
E)  Price equals average variable cost.

Question 7

If losses are incurred in a competitive industry, then over the long run, we can expect a greater quantity supplied because market price will rise.

Accepted Answer

A) True 
 B)False

Question 8

Explain what is wrong with the following statement: "It's not fair that firms profit so highly in an industry that benefits from new, cost saving technology; they should have to immediately pass cost savings directly on to the consumer."

Accepted Answer

The answer of Explain what is wrong with the following...

Question 9

External diseconomies of scale cause an industry's long-run supply curve to slope upward.

Accepted Answer

A) True 
 B)False

Question 10

When the market price in long-run equilibrium remains unchanged after an industry expands, then the long-run industry supply curve

Accepted Answer

A)  is vertical.
B)  is downward sloping.
C)  is upward sloping.
D)  is horizontal.
E)  does not exist.

Question 11

A group of firms, each of which produces similar products, is called a(n)

Accepted Answer

A)  market.
B)  trust.
C)  conglomerate.
D)  industry.
E)  production group.

Question 12

A moving company has $20 in fixed costs per day and pays an hourly wage of $10 per worker. The moving company is paid $80 for each room of furniture it moves. The daily production function of the firm is as follows:

Accepted Answer

The answer of A moving company has $20 in fixed...

Question 13

When firms enter an industry, market supply

Accepted Answer

A)  and firm demand both decrease.
B)  increases and firm demand does not change.
C)  and firm supply both decrease.
D)  and firm demand both increase.
E)  increases and firm demand shifts down.

Question 14

Suppose a dentist has total revenue of $320,000, and his total costs are $250,000 for the year. Also suppose the dentist left a job paying $112,000 a year to start his own practice. What is the dentist's economic profit?

Accepted Answer

A)  $182,000
B)  -$42,000
C)  -$28,000
D)  $112,000
E)  $70,000

Question 15

A firm earns normal profit if its total revenue is greater than its total cost.

Accepted Answer

A) True 
 B)False

Question 16

An increase in market demand can be shown by shifting a firm's demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 17

If market demand decreases in a market previously in long-run equilibrium,

Accepted Answer

A)  the number of firms increases as each firm downsizes.
B)  it is an indication that the industry has not kept up with new technology.
C)  market price first rises and then falls in the movement to a new long-run equilibrium.
D)  the immediate or short-run effect is a decrease in market price.
E)  the industry ceases to exist.

Question 18

Which of the following is false?

Accepted Answer

A)  As firms exit an industry, market supply decreases.
B)  As firms exit an industry, market price increases as demand increases.
C)  As firms exit an industry, economic losses for the remaining firms decrease.
D)  As firms exit an industry, at least some firm output increases.
E)  As firms exit an industry, industry output is reduced.

Question 19

An increase in market price is likely to result in more firm entry in the long run.

Accepted Answer

A) True 
 B)False

Question 20

Consumers are part of an industry.

Accepted Answer

A) True 
 B)False

Exam 9: The Rise and Fall of Industries

Which of the following is a condition for industry expansion through expansion of existing firms instead of entry of new firms?

When economic profit is equal to zero, we say that

In the long run, market supply increases as market demand increases.

When firms leave an industry,

In the long run, if price is greater than average total cost in an industry, then

In a competitive industry, which of the following cannot be true for a firm in the long run?

If losses are incurred in a competitive industry, then over the long run, we can expect a greater quantity supplied because market price will rise.

Explain what is wrong with the following statement: "It's not fair that firms profit so highly in an industry that benefits from new, cost saving technology; they should have to immediately pass cost savings directly on to the consumer."

External diseconomies of scale cause an industry's long-run supply curve to slope upward.

When the market price in long-run equilibrium remains unchanged after an industry expands, then the long-run industry supply curve

A group of firms, each of which produces similar products, is called a(n)

A moving company has $20 in fixed costs per day and pays an hourly wage of $10 per worker. The moving company is paid $80 for each room of furniture it moves. The daily production function of the firm is as follows:

When firms enter an industry, market supply

Suppose a dentist has total revenue of $320,000, and his total costs are $250,000 for the year. Also suppose the dentist left a job paying $112,000 a year to start his own practice. What is the dentist's economic profit?

A firm earns normal profit if its total revenue is greater than its total cost.

An increase in market demand can be shown by shifting a firm's demand curve to the right.

If market demand decreases in a market previously in long-run equilibrium,

Which of the following is false?

An increase in market price is likely to result in more firm entry in the long run.

Consumers are part of an industry.