question
The graphs below depict a constant cost perfectly competitive industry in a state of long-run equilibrium.Currently there are N identical firms in the market each making an economic profit of Π dollars, where:
answer
N = 1000 & Π = $0 (Π=𝑞× 𝑃−𝐴𝑇𝐶 =𝑞× $50−$50 =$0) (5000/5)
question
The graphs below depict a constant cost perfectly competitive industry in a state of long-run equilibrium. Market demand for the product permanently increases by 4,000 units. In the short run, there will be N firms in the market each making an economic profit of Π dollars, where:
answer
N = 1000 & Π = $70
question
The graphs below depict an increasing cost perfectly competitive industry in a state of long-run equilibrium. Market demand for the product permanently decreases by 4,000 units. In the long run, new firms enter the industry to take advantage of the positive economic profit. This causes demand for production factors to increase pushing up their prices. The resulting increase in the prices of production factors causes the average cost of production to increase by $10. We can predict that there will be N firms in the industry in the long run each making an economic profit of Π dollars, where:
answer
N = 1600 & Π = $0
question
In which of the following situations the total surplus will be the largest possible, for sure
answer
Allocative efficiency
question
In which of the following situations the deadweight loss will be zero?
answer
Allocative efficiency
question
which graph shows an increasing-cost industry?
answer
figure B
question
which graph shows an decreasing-cost industry?
answer
figure D
question
which graph shows an constant-cost industry?
answer
figure F
question
which graph shows an upward-sloping long-run supply function?
answer
figure A & B
question
A deadweight loss can occur whenever:
answer
-There is unemployment.
-There is productive inefficiency.
-There is allocative inefficiency.
(In all cases there will be allocative inefficiency.)
-There is productive inefficiency.
-There is allocative inefficiency.
(In all cases there will be allocative inefficiency.)
question
The level of production equals 15 and the firms in the market are earning a normal profit. This is an increasing-cost industry. If the demand for the product permanently increases by 10 units, in the long run the equilibrium quantity will be.
answer
Between 20 and 25 units
question
If the demand for the product permanently increases by 10 units, in the long run the equilibrium price will be
answer
Lower than $30.
question
Which of the following statements is most accurate? In the long-run equilibrium, perfectly competitive firms:
answer
Earn normal profit.
question
What is the reason for entry into an industry?
answer
Positive economic profit.
question
What is the reason for exit from an industry?
answer
-Economic loss.
-Accounting profit that is less than normal profit.
-Accounting loss.
-Accounting profit that is less than normal profit.
-Accounting loss.
question
Which economist coined the phrase "invisible hand"?
answer
Adam Smith
question
What does the phrase "invisible hand" mean?
answer
As if led by an invisible hand, people pursuing their own self-interest will create economic efficiency
question
Which of the following statements is true about the concept of "invisible hand"?
answer
The concept is true only in the absence of any market failure.
question
Which of the following would cause market failure?
answer
-Market power
-Externalities
-Public goods
-Asymmetric information
-Externalities
-Public goods
-Asymmetric information
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