question
Which of the following distinguishes the short run from the long run in pure competition?
answer
Firms can enter and exit the market in the long run, but not in the short run.
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
Assume a purely competitive, increasing-cost industry is long-run equilibrium. If a decline in demand occurs, firms will:
answer
Leave the industry and price and output will both decline.
question
When a purely competitive firm is in long-run equilibrium:
answer
Price equals marginal cost
question
Long-run competitive equilibrium:
answer
Results in zero economic profits
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
A decreasing-cost industry is one which:
answer
Input prices fall or technology improves as the industry expands
question
Resources are efficiently allocated when production occurs where:
answer
Price is equal to marginal cost
question
The term productive efficiency refers to:
answer
The production of a good at the lowest average total cost
question
If the price of product Y is $25 and its marginal cost is $18:
answer
Resources are being under allocated to Y
question
The term allocative efficiency refers to:
answer
The production of the product-mix most desired by consumers.
question
Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that:
answer
Price is greater than marginal cost.
question
Allocative efficiency occurs whenever:
answer
It is impossible to produce a net benefit for society by changing the combination of goods and services produced.
question
Entrepreneurs in purely competitive industries:
answer
Innovate to lower operating costs any generate short-run economic profits.
question
Which of the following statements is true about U.S. firms?
answer
Over half are bankrupt within the first five years after starting up.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
