question
True or False?
For a competitive firm, marginal revenue is constant and equal to the market price.
For a competitive firm, marginal revenue is constant and equal to the market price.
answer
True
question
True or False?
A government subsidy would allow all firms in a competitive constant-cost industry to earn a positive profit in the long run.
A government subsidy would allow all firms in a competitive constant-cost industry to earn a positive profit in the long run.
answer
False
question
True or False?
The number of firms in an industry is fixed in the short run.
The number of firms in an industry is fixed in the short run.
answer
True
question
True or False?
A firm earns a positive economic profit when the market price exceeds its marginal cost.
A firm earns a positive economic profit when the market price exceeds its marginal cost.
answer
False
question
True or False?
A competitive firm will exit the industry in the long run if the price of its product falls below its average cost.
A competitive firm will exit the industry in the long run if the price of its product falls below its average cost.
answer
True
question
True or False?
Given two supply curves passing through the same point, the flatter one has the higher elasticity.
Given two supply curves passing through the same point, the flatter one has the higher elasticity.
answer
True
question
True or False?
In a competitive equilibrium, the industry's output is produced at the lowest possible cost because each firm has the goal of minimizing its cost.
In a competitive equilibrium, the industry's output is produced at the lowest possible cost because each firm has the goal of minimizing its cost.
answer
False
question
True or False?
Only variable costs are relevant to a firm's decision to shut down.
Only variable costs are relevant to a firm's decision to shut down.
answer
True
question
True or False?
When a firm has chosen to shutdown it has exited the industry.
When a firm has chosen to shutdown it has exited the industry.
answer
False
question
True or False?
When a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs.
When a competitive firm earns zero profit, the market price is equal to both the firm's average and marginal costs.
answer
True
question
True or False?
As long as profits remain positive, a firm will want to increase the quantity produced.
As long as profits remain positive, a firm will want to increase the quantity produced.
answer
False
question
True or False?
In a long-run competitive equilibrium, both more efficient and less efficient firms earn zero economic profit.
In a long-run competitive equilibrium, both more efficient and less efficient firms earn zero economic profit.
answer
False
question
True or False?
A new licensing fee would cause an immediate upward shift in an industry's short-run supply curve.
A new licensing fee would cause an immediate upward shift in an industry's short-run supply curve.
answer
False
question
True or False?
The elasticity of supply is positive because the law of supply.
The elasticity of supply is positive because the law of supply.
answer
True
question
True or False?
For prices greater than the minimum value of average variable cost, the firm's short-run supply curve coincides with its short-run marginal cost curve.
For prices greater than the minimum value of average variable cost, the firm's short-run supply curve coincides with its short-run marginal cost curve.
answer
True
question
True or False?
There is no reason for a competitive firm to stay in business if it is making zero economic profit.
There is no reason for a competitive firm to stay in business if it is making zero economic profit.
answer
False
question
True or False?
A competitive firm will exit an industry in the long run if the market price falls below the firm's break-even price.
A competitive firm will exit an industry in the long run if the market price falls below the firm's break-even price.
answer
True
question
True or False?
A competitive firm faces a downward-sloping demand for its product.
A competitive firm faces a downward-sloping demand for its product.
answer
False
question
True or False?
For a competitive firm with a downward sloping marginal cost curve, the supply curve and the marginal cost curve look exactly the same
For a competitive firm with a downward sloping marginal cost curve, the supply curve and the marginal cost curve look exactly the same
answer
False
question
True or False?
Higher costs, whether fixed or variable, will cause a leftward shift in the industry's short-run supply curve.
Higher costs, whether fixed or variable, will cause a leftward shift in the industry's short-run supply curve.
answer
False
question
True or False?
If the market price is currently above the shut-down price, the firm will be making positive profits.
If the market price is currently above the shut-down price, the firm will be making positive profits.
answer
False
question
True or False?
A decrease in firms' variable costs will cause the output of the market to decrease.
A decrease in firms' variable costs will cause the output of the market to decrease.
answer
False
question
True or False?
Industry's supply curves tend to be less elastic than the supply curves of individual firms.
Industry's supply curves tend to be less elastic than the supply curves of individual firms.
answer
False
question
True or False?
In a competitive constant-cost industry, all firms have the same break-even price.
In a competitive constant-cost industry, all firms have the same break-even price.
answer
True
question
True or False?
Sunk costs cannot affect a firm's short-run supply, but they can affect its long-run decision to exit the industry.
Sunk costs cannot affect a firm's short-run supply, but they can affect its long-run decision to exit the industry.
answer
False
question
True or False?
A firm that has not shut down in the short run will not shut down in response to a decrease in the marginal costs.
A firm that has not shut down in the short run will not shut down in response to a decrease in the marginal costs.
answer
True
question
True or False?
A perfectly competitive firm is one that can sell any quantity that it wants at any price it wants.
A perfectly competitive firm is one that can sell any quantity that it wants at any price it wants.
answer
False
question
True or False?
A technological advance that reduces firms' variable costs will lead to higher profits in the long run of a perfectly competitive industry.
A technological advance that reduces firms' variable costs will lead to higher profits in the long run of a perfectly competitive industry.
answer
False
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