Ch. 11 Test Bank - Assignment Essays

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

In a purely competitive industry:

answer

there may be economic profits in the short run, but not in the long run.

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

should continue producing in the short run, but leave the industry in the long run if the situation persists.

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

answer

new firms will enter this market.

question

Long-run competitive equilibrium:

answer

results in zero economic profits.

question

We would expect an industry to expand if firms in that industry are:

answer

earning economic profits.

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave.

question

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price:

answer

and industry output will be less than the initial price and output.

question

Which of the following statements is correct?

answer

The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.

question

A constant-cost industry is one in which:

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

question

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

answer

higher and total output will be larger than originally.

question

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

answer

leave the industry and price and output will both decline.

question

A purely competitive firm:

answer

cannot earn economic profit in the long run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve.

question

An increasing-cost industry is the result of:

answer

higher resource prices which occur as the industry expands.

question

A purely competitive firm is precluded from making economic profit in the long run because:

answer

of unimpeded entry to the industry.

question

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:

answer

increase, output to increase, price to decrease, and profits to decrease.

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands.

question

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:

answer

the LCD television industry is a decreasing-cost industry.

question

Suppose that an industry's long-run supply curve is downsloping. This suggests that:

answer

it is a decreasing-cost industry.

question

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result:

answer

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

question

The MR = MC rule applies:

answer

in both the short run and the long run.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

answer

rise as the industry expands.

1 of 25

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

In a purely competitive industry:

answer

there may be economic profits in the short run, but not in the long run.

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

should continue producing in the short run, but leave the industry in the long run if the situation persists.

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

answer

new firms will enter this market.

question

Long-run competitive equilibrium:

answer

results in zero economic profits.

question

We would expect an industry to expand if firms in that industry are:

answer

earning economic profits.

question

Which of the following statements is correct?

answer

Economic profits induce firms to enter an industry; losses encourage firms to leave.

question

answer

and industry output will be less than the initial price and output.

question

Which of the following statements is correct?

answer

The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.

question

A constant-cost industry is one in which:

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

question

answer

higher and total output will be larger than originally.

question

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

answer

leave the industry and price and output will both decline.

question

A purely competitive firm:

answer

cannot earn economic profit in the long run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve.

question

An increasing-cost industry is the result of:

answer

higher resource prices which occur as the industry expands.

question

A purely competitive firm is precluded from making economic profit in the long run because:

answer

of unimpeded entry to the industry.

question

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:

answer

increase, output to increase, price to decrease, and profits to decrease.

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands.

question

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:

answer

the LCD television industry is a decreasing-cost industry.

question

Suppose that an industry's long-run supply curve is downsloping. This suggests that:

answer

it is a decreasing-cost industry.

question

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result:

answer

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

question

The MR = MC rule applies:

answer

in both the short run and the long run.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

answer

rise as the industry expands.

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