Long Run Perfect Competition - Assignment Essays

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC.

question

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

answer

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

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands

question

In long-run equilibrium, perfectly competitive markets:

answer

maximize the sum of consumer surplus and producer surplus.

question

An increasing-cost industry is associated with

answer

an upsloping long-run supply curve.

question

The term productive efficiency refers to:

answer

the production of a good at the lowest average total cost.

question

Refer to the diagram showing the average total cost curve for a perfectly competitive firm. At the long-run equilibrium level of output, this firm's economic profit:

answer

is zero.

question

Refer to the diagram. Line (1) reflects the long-run supply curve for:

answer

an increasing-cost industry.

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

Refer to the diagram. At output level Q1:

answer

neither productive nor allocative efficiency is achieved.

question

Which of the following would not be expected to occur in a perfectly competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

Which of the following conditions is true for a perfectly competitive firm in long-run equilibrium?

answer

P = MC = minimum ATC.

question

Which of the following distinguishes the short run from the long run in perfect competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

Which of the following is an example of creative destruction?

answer

Automobile production causes the wagon industry to shut down.

question

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

answer

earning economic profits.

question

Refer to the diagram. If this competitive firm produces output Q, it will:

answer

Correct
earn a normal profit.

question

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

answer

new firms will enter this market.

question

Which of the following statements is correct?

answer

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

question

Refer to the diagram. By producing at output level Q:

answer

both productive and allocative efficiency are achieved.

question

An increasing-cost industry is the result of:

answer

higher resource prices that occur as the industry expands.

question

Refer to the diagram. Line (1) reflects a situation where resource prices:

answer

increase as industry output expands.

question

Refer to the diagram. Line (2) reflects the long-run supply curve for:

answer

a constant-cost industry.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve.

question

A perfectly competitive firm:

answer

cannot earn economic profit in the long run.

question

Creative destruction is:

answer

the process by which new firms and new products replace existing dominant firms and products.

question

If production is occurring where marginal cost exceeds price, the perfectly competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

Allocative efficiency occurs whenever:

answer

Correct
it is impossible to produce a net benefit for society by changing the combination of goods and services produced.

question

Which of the following would not be expected to occur in a perfectly competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

Which of the following is true concerning perfectly 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

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

Refer to the diagrams, which pertain to a perfectly competitive firm producing output q and the industry in which it operates. Which of the following is correct?

answer

The diagrams portray short-run equilibrium but not long-run equilibrium.

question

Allocative efficiency is achieved when the production of a good occurs where:

answer

Correct
P = MC

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

answer

producing less output than allocative efficiency requires.

question

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

answer

economic profits earned by firms already in the industry

question

Suppose a firm in a perfectly 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

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

answer

rise as the industry expands

question

If a perfectly competitive firm is producing where price exceeds marginal cost, then:

answer

the firm will fail to maximize profit and resources will be underallocated to the product.

question

Which of the following outcomes is consistent with a perfectly competitive market in long-run equilibrium?

answer

Correct
Consumer and producer surplus will be maximized

question

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

answer

The firms in the market are part of a decreasing-cost industry.

question

Resources are efficiently allocated when production occurs where:

answer

price is equal to marginal cost.

question

Refer to the diagram. If this competitive firm produces output Q, it will:

answer

earn a normal profit.

question

Refer to the diagram. Line (2) reflects a situation where resource prices:

answer

remain constant as industry output expands.

question

The diagram portrays:

answer

the equilibrium position of a competitive firm in the long run.

question

Creative destruction is least beneficial to:

answer

workers in the "destroyed" industries.

question

In a decreasing-cost industry:

answer

lower demand leads to higher long-run equilibrium prices.

question

Assume a perfectly 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 perfectly competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

Correct
there is no tendency for the firm's industry to expand or contract.

question

Assume a perfectly competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

...

1 of 48

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC.

question

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

answer

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

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands

question

In long-run equilibrium, perfectly competitive markets:

answer

maximize the sum of consumer surplus and producer surplus.

question

An increasing-cost industry is associated with

answer

an upsloping long-run supply curve.

question

The term productive efficiency refers to:

answer

the production of a good at the lowest average total cost.

question

Refer to the diagram showing the average total cost curve for a perfectly competitive firm. At the long-run equilibrium level of output, this firm's economic profit:

answer

is zero.

question

Refer to the diagram. Line (1) reflects the long-run supply curve for:

answer

an increasing-cost industry.

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

Refer to the diagram. At output level Q1:

answer

neither productive nor allocative efficiency is achieved.

question

Which of the following would not be expected to occur in a perfectly competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

Which of the following conditions is true for a perfectly competitive firm in long-run equilibrium?

answer

P = MC = minimum ATC.

question

Which of the following distinguishes the short run from the long run in perfect competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

Which of the following is an example of creative destruction?

answer

Automobile production causes the wagon industry to shut down.

question

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

answer

earning economic profits.

question

Refer to the diagram. If this competitive firm produces output Q, it will:

answer

Correct
earn a normal profit.

question

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

answer

new firms will enter this market.

question

Which of the following statements is correct?

answer

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

question

Refer to the diagram. By producing at output level Q:

answer

both productive and allocative efficiency are achieved.

question

An increasing-cost industry is the result of:

answer

higher resource prices that occur as the industry expands.

question

Refer to the diagram. Line (1) reflects a situation where resource prices:

answer

increase as industry output expands.

question

Refer to the diagram. Line (2) reflects the long-run supply curve for:

answer

a constant-cost industry.

question

An increasing-cost industry is associated with:

answer

an upsloping long-run supply curve.

question

A perfectly competitive firm:

answer

cannot earn economic profit in the long run.

question

Creative destruction is:

answer

the process by which new firms and new products replace existing dominant firms and products.

question

If production is occurring where marginal cost exceeds price, the perfectly competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

Allocative efficiency occurs whenever:

answer

Correct
it is impossible to produce a net benefit for society by changing the combination of goods and services produced.

question

Which of the following would not be expected to occur in a perfectly competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

Which of the following is true concerning perfectly 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

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

Refer to the diagrams, which pertain to a perfectly competitive firm producing output q and the industry in which it operates. Which of the following is correct?

answer

The diagrams portray short-run equilibrium but not long-run equilibrium.

question

Allocative efficiency is achieved when the production of a good occurs where:

answer

Correct
P = MC

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

answer

producing less output than allocative efficiency requires.

question

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

answer

economic profits earned by firms already in the industry

question

Suppose a firm in a perfectly 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

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

answer

rise as the industry expands

question

If a perfectly competitive firm is producing where price exceeds marginal cost, then:

answer

the firm will fail to maximize profit and resources will be underallocated to the product.

question

Which of the following outcomes is consistent with a perfectly competitive market in long-run equilibrium?

answer

Correct
Consumer and producer surplus will be maximized

question

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

answer

The firms in the market are part of a decreasing-cost industry.

question

Resources are efficiently allocated when production occurs where:

answer

price is equal to marginal cost.

question

Refer to the diagram. If this competitive firm produces output Q, it will:

answer

earn a normal profit.

question

Refer to the diagram. Line (2) reflects a situation where resource prices:

answer

remain constant as industry output expands.

question

The diagram portrays:

answer

the equilibrium position of a competitive firm in the long run.

question

Creative destruction is least beneficial to:

answer

workers in the "destroyed" industries.

question

In a decreasing-cost industry:

answer

lower demand leads to higher long-run equilibrium prices.

question

answer

higher and total output will be larger than originally.

question

Assume a perfectly competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

Correct
there is no tendency for the firm's industry to expand or contract.

question

Assume a perfectly competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

...

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