Econ chapter 11 - Assignment Essays

question

Which of the following occur only in the long-run?

answer

-The entry and exit of firms
-The expansion or contraction of plant capacity

question

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______

answer

total cost where product price is equal to marginal revenue

question

______ profits in a competitive industry will attract new firms into the industry.

answer

economic

question

Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors?

answer

Minimum average total cost
Marginal cost

question

The entry and the exit of firms in an industry are considered to be______- run adjustments

answer

long

question

If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.

answer

decrease; rise

question

The long run, every purely competitive firm tends to operate at its ______.

answer

minimum average total cost

question

If there are losses in the long run, what adjustments will take place?

answer

Firms will exit the industry until losses are eliminated.

question

Economists maintain that new firms are attracted into an industry due to:

answer

economic profits

question

An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.

answer

constant-cost industry

question

There is no incentive for firms to enter or exit the industry in the long run when ______.

answer

-price equals minimum average total cost
-MR = MC
-firms earn a normal profit

question

Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic?

answer

The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC

question

Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal?

answer

Existing firms are earning only normal profits

question

An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry

answer

increasing cost

question

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.

answer

decrease, losses

question

Higher resource prices will result in ______ total costs.
Multiple choice question.

answer

higher average

question

As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?
Multiple choice question.

answer

there are no economic losses

question

New firms entering an increasing-cost industry will usually __________(increase/decrease) resource prices.

answer

increase

question

A constant-cost industry is one where ______ will not affect resource prices and production costs.

answer

expansion or contraction

question

In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry?

answer

Increased resource demand drives up resource prices.
Each firm's ATC curve shifts upward.

question

The shape of the long-run supply curve for a constant-cost industry can best be described as:

answer

horizontal

question

Which of the following does a decreasing-cost industry experience?

answer

Lower costs as industry output expands.

question

Which of the following does an increasing-cost industry experience?

answer

-An upward shifting average total cost (ATC) curve as the industry expands.
-A downward shifting average total cost (ATC) curve as the industry contracts.

question

Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?

answer

In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost.Price or marginal revenue will settle where it is equal to minimum average total cost.In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost.

question

True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.

answer

false

question

In the long run, a purely competitive firm will only earn a ______ profit.

answer

normal

question

The entry of new firms entering an increasing-cost industry increase resource prices particularly:

answer

in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand

question

A competitive market generates ____efficiency and _____ efficiency.

answer

productive; allocative

question

In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______.

answer

increases in product demand resulting in economic profits and industry expansion

question

Which type of market produces the most efficient use of society's resources?

answer

pure competition

question

A decreasing-cost industry is one in which firms experience ______ costs as their industry ______. (Check all that apply.)

answer

higher; contracts
lower; expands

question

Productive efficiency requires that goods be produced:

answer

in the least costly way

question

All firms in a(n) ______ industry share the same basic efficiency characteristics.

answer

purely competetive

question

A competitive firm may realize an economic profit or loss in the ____run but will earn only a normal profit in the ______run.

answer

short
long or longer

question

Which of the following statements are true about allocative efficiency?

answer

-It is impossible to produce net gains for society by altering the mix of goods and services produced.
-The goods and services produced are those that society most wants to consume.
-The marginal cost and marginal benefit of producing each unit of output is equal.

question

Competitive market economies generate ______.

answer

-productive efficiency
-allocative efficiency

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____.

answer

consumer surplus

question

A purely competitive market leads to the efficient use of:

answer

society's scarce resources

question

True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.

answer

true

question

_______(Allocative/Productive) efficiency means that goods are produced in the least costly way.

answer

productive

question

What are the effects of the "invisible hand" in a purely competitive economy?

answer

-Resource allocation that maximizes consumer satisfaction
-Maximum profits for individual producers

question

Strategies attempted by firms for increasing their profits include:

answer

-lowering production costs through improved business organization.
-developing a new product that is popular with consumers.
-lowering production costs through better technology.

question

________efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

answer

allocative

question

The transformative effects of competition are often referred to as:

answer

creative distruction

question

Which of the following describes consumer surplus?

answer

It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.

question

In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:

answer

-technological changes.
-consumer tastes.
-resource supplies.

question

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?

answer

externalities

question

What will happen to a firm that finds a way to lower production costs through better technology or improved organization?

answer

Its profits will increase.

question

Creative _______ captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business.

answer

destruction

question

In the long run in a purely competitive industry,

answer

entry and exit of firms can occur.

question

Profits encourage entry into purely competitive industries and losses encourage exit from purely competitive industries because

answer

when profits are zero, the firm is earning sufficient revenue to cover the opportunity cost.

question

The entry and exit of firms in a purely competitive industry help to improve resource allocation because

answer

losses result in firms exiting an industry, causing resources to flow to markets where there are profits.

question

The equality of MR and MC is essential for profit maximization in all market structures because if

answer

MR and MC are equal, any other output level will result in reduced profits.

question

Price can be substituted for marginal revenue in the MR = MC rule when an industry is purely competitive because

answer

price is constant regardless of the quantity demanded.

question

In long-run equilibrium, P = minimum ATC = MC. The equality of P and minimum ATC means the firm is achieving

answer

productive efficiency

question

The equality of P and MC means the firm is achieving

answer

allocative efficiency, since the industry is producing the amount of product that equates society's valuation of that product and the price of the product.

question

According to the basic model of pure competition, in the long run all firms in a purely competitive industry will earn normal profits. If all firms earn only a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods?

answer

To innovate and possibly earn an economic profit in the short run.

1 of 57

question

Which of the following occur only in the long-run?

answer

-The entry and exit of firms
-The expansion or contraction of plant capacity

question

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______

answer

total cost where product price is equal to marginal revenue

question

______ profits in a competitive industry will attract new firms into the industry.

answer

economic

question

Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors?

answer

Minimum average total cost
Marginal cost

question

The entry and the exit of firms in an industry are considered to be______- run adjustments

answer

long

question

If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will ______.

answer

decrease; rise

question

The long run, every purely competitive firm tends to operate at its ______.

answer

minimum average total cost

question

If there are losses in the long run, what adjustments will take place?

answer

Firms will exit the industry until losses are eliminated.

question

Economists maintain that new firms are attracted into an industry due to:

answer

economic profits

question

An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.

answer

constant-cost industry

question

There is no incentive for firms to enter or exit the industry in the long run when ______.

answer

-price equals minimum average total cost
-MR = MC
-firms earn a normal profit

question

Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic?

answer

The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC

question

Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal?

answer

Existing firms are earning only normal profits

question

An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry

answer

increasing cost

question

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.

answer

decrease, losses

question

Higher resource prices will result in ______ total costs.
Multiple choice question.

answer

higher average

question

answer

there are no economic losses

question

New firms entering an increasing-cost industry will usually __________(increase/decrease) resource prices.

answer

increase

question

A constant-cost industry is one where ______ will not affect resource prices and production costs.

answer

expansion or contraction

question

In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry?

answer

Increased resource demand drives up resource prices.
Each firm's ATC curve shifts upward.

question

The shape of the long-run supply curve for a constant-cost industry can best be described as:

answer

horizontal

question

Which of the following does a decreasing-cost industry experience?

answer

Lower costs as industry output expands.

question

Which of the following does an increasing-cost industry experience?

answer

-An upward shifting average total cost (ATC) curve as the industry expands.
-A downward shifting average total cost (ATC) curve as the industry contracts.

question

answer

question

True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.

answer

false

question

In the long run, a purely competitive firm will only earn a ______ profit.

answer

normal

question

The entry of new firms entering an increasing-cost industry increase resource prices particularly:

answer

in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand

question

A competitive market generates ____efficiency and _____ efficiency.

answer

productive; allocative

question

In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______.

answer

increases in product demand resulting in economic profits and industry expansion

question

Which type of market produces the most efficient use of society's resources?

answer

pure competition

question

A decreasing-cost industry is one in which firms experience ______ costs as their industry ______. (Check all that apply.)

answer

higher; contracts
lower; expands

question

Productive efficiency requires that goods be produced:

answer

in the least costly way

question

All firms in a(n) ______ industry share the same basic efficiency characteristics.

answer

purely competetive

question

A competitive firm may realize an economic profit or loss in the ____run but will earn only a normal profit in the ______run.

answer

short
long or longer

question

Which of the following statements are true about allocative efficiency?

answer

question

Competitive market economies generate ______.

answer

-productive efficiency
-allocative efficiency

question

The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____.

answer

consumer surplus

question

A purely competitive market leads to the efficient use of:

answer

society's scarce resources

question

True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.

answer

true

question

_______(Allocative/Productive) efficiency means that goods are produced in the least costly way.

answer

productive

question

What are the effects of the "invisible hand" in a purely competitive economy?

answer

-Resource allocation that maximizes consumer satisfaction
-Maximum profits for individual producers

question

Strategies attempted by firms for increasing their profits include:

answer

-lowering production costs through improved business organization.
-developing a new product that is popular with consumers.
-lowering production costs through better technology.

question

________efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

answer

allocative

question

The transformative effects of competition are often referred to as:

answer

creative distruction

question

Which of the following describes consumer surplus?

answer

It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.

question

In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:

answer

-technological changes.
-consumer tastes.
-resource supplies.

question

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?

answer

externalities

question

What will happen to a firm that finds a way to lower production costs through better technology or improved organization?

answer

Its profits will increase.

question

Creative _______ captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business.

answer

destruction

question

In the long run in a purely competitive industry,

answer

entry and exit of firms can occur.

question

Profits encourage entry into purely competitive industries and losses encourage exit from purely competitive industries because

answer

when profits are zero, the firm is earning sufficient revenue to cover the opportunity cost.

question

The entry and exit of firms in a purely competitive industry help to improve resource allocation because

answer

losses result in firms exiting an industry, causing resources to flow to markets where there are profits.

question

The equality of MR and MC is essential for profit maximization in all market structures because if

answer

MR and MC are equal, any other output level will result in reduced profits.

question

Price can be substituted for marginal revenue in the MR = MC rule when an industry is purely competitive because

answer

price is constant regardless of the quantity demanded.

question

In long-run equilibrium, P = minimum ATC = MC. The equality of P and minimum ATC means the firm is achieving

answer

productive efficiency

question

The equality of P and MC means the firm is achieving

answer

allocative efficiency, since the industry is producing the amount of product that equates society's valuation of that product and the price of the product.

question

answer

To innovate and possibly earn an economic profit in the short run.

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