Micro Economics Ch. 10-11 HW & Quiz

question

a. very large number of firms
no control over price
non price competition
b. one firm
unique product
much control over price
c. differentiated products
many firms
some price control
d. few firms
standardized products
many obstacles to entry

answer

Select the basic characteristics of the following:
Pure Competition:
Pure Monopoly:
Monopolistic Competition:
Oligopoly:

question

a. Oligopoly
b. Oligopoly
c. Pure Competition
d. Monopolistic Competition
e. Oligopoly

answer

Under which of these market classifications does each of the following most accurately fit?
a. A supermarket in your hometown
b. The steel industry
c. A Kansas wheat farm
d. The commercial bank in which you or your family has an account
e. The automobile industry

question

produces ideal results in terms of low-cost production and allocative efficiency, and can be used as a basis of comparison.

answer

We study pure competition because it

question

true if the loss is less than the fixed cost.

answer

Consider the statement: "Even if a firm is losing money, it may be better to stay in business in the short run." This statement is

question

exceeds the average variable cost.

answer

The firm should produce in the short run so long as the price

question

No, the firm will want to shut down.

answer

Consider a firm that has no fixed costs and which is currently losing money. Are there any situations in which it would want to stay open for business in the short run?

question

is really in the long run.

answer

A firm with no fixed cost

question

last unit produced adds more to revenue than to costs, and its production must necessarily increase profits or reduce losses.

answer

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because when this is true the

question

the demand curve is perfectly elastic and the price is constant regardless of the quantity demanded, so the MR is constant and equal to the price.

answer

When an industry is purely competitive, price can be substituted for marginal revenue in the MR = MC rule because

question

immediately.

answer

If a firm's current revenues are less than its current variable costs, it should shut down

question

may be temporary until the price of the product increases.

answer

If a firm's current revenues are less than its current variable costs and it decides to shut down, this decision

question

can sell as much output as it chooses at the existing price.

answer

A perfectly elastic demand curve implies that the firm:

question

marginal revenue and marginal cost.

answer

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

question

total revenue and total cost are equal.

answer

A firm reaches a break-even point (normal profit position) where:

question

to firms in all types of industries.

answer

The MR = MC rule applies:

question

total variable costs.

answer

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

question

entry and exit of firms can occur.

answer

In the long run in a purely competitive industry,

question

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

answer

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

question

losses result in exit and release resources to flow to markets where there are profits.

answer

Entry and exit help to improve resource allocation because

question

short run, until short-run economic profits are zero.

answer

Entry and exit in a purely competitive industry occur in the

question

marginal revenue and marginal cost are equal, any other output level will result in reduced profit.

answer

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because if

question

is constant regardless of the quantity demanded.

answer

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

question

productive efficiency.

answer

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

question

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.

answer

The equality of P and MC means the firm is achieving

question

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

answer

The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits.
If all firms only earn a normal profit in the long run, firms will develop new products or lower-cost production methods because they can

question

false because a firm could capture enough expected economic profit in the short run to cover the initial investment.

answer

Consider the following statement: "Ninety percent of new products fail within two years—so you shouldn't be so eager to innovate."
This statement is

question

Demand changes, and all consequent long-run adjustments have occurred.

answer

The long-run supply curve under pure competition is derived by observing what happens to market price and quantity when market:

question

Price and average total cost are equal

answer

When a purely competitive industry is in long-run equilibrium, which statement is true?

question

Equal to its marginal cost

answer

If there is a decrease in demand for a product in a purely competitive industry, it results in an industry contraction that will end when the product price is:

question

earning economic profits.

answer

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

question

Economic profits induce firms to enter an industry; losses encourage firms to leave.

answer

Which of the following statements is correct?

question

workers in the "destroyed" industries.

answer

Creative destruction is least beneficial to:

1 of 32

question

answer

Select the basic characteristics of the following:
Pure Competition:
Pure Monopoly:
Monopolistic Competition:
Oligopoly:

question

a. Oligopoly
b. Oligopoly
c. Pure Competition
d. Monopolistic Competition
e. Oligopoly

answer

question

produces ideal results in terms of low-cost production and allocative efficiency, and can be used as a basis of comparison.

answer

We study pure competition because it

question

true if the loss is less than the fixed cost.

answer

Consider the statement: "Even if a firm is losing money, it may be better to stay in business in the short run." This statement is

question

exceeds the average variable cost.

answer

The firm should produce in the short run so long as the price

question

No, the firm will want to shut down.

answer

Consider a firm that has no fixed costs and which is currently losing money. Are there any situations in which it would want to stay open for business in the short run?

question

is really in the long run.

answer

A firm with no fixed cost

question

last unit produced adds more to revenue than to costs, and its production must necessarily increase profits or reduce losses.

answer

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because when this is true the

question

the demand curve is perfectly elastic and the price is constant regardless of the quantity demanded, so the MR is constant and equal to the price.

answer

When an industry is purely competitive, price can be substituted for marginal revenue in the MR = MC rule because

question

immediately.

answer

If a firm's current revenues are less than its current variable costs, it should shut down

question

may be temporary until the price of the product increases.

answer

If a firm's current revenues are less than its current variable costs and it decides to shut down, this decision

question

can sell as much output as it chooses at the existing price.

answer

A perfectly elastic demand curve implies that the firm:

question

marginal revenue and marginal cost.

answer

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

question

total revenue and total cost are equal.

answer

A firm reaches a break-even point (normal profit position) where:

question

to firms in all types of industries.

answer

The MR = MC rule applies:

question

total variable costs.

answer

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

question

entry and exit of firms can occur.

answer

In the long run in a purely competitive industry,

question

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

answer

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

question

losses result in exit and release resources to flow to markets where there are profits.

answer

Entry and exit help to improve resource allocation because

question

short run, until short-run economic profits are zero.

answer

Entry and exit in a purely competitive industry occur in the

question

marginal revenue and marginal cost are equal, any other output level will result in reduced profit.

answer

The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because if

question

is constant regardless of the quantity demanded.

answer

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

question

productive efficiency.

answer

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

question

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.

answer

The equality of P and MC means the firm is achieving

question

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

answer

question

false because a firm could capture enough expected economic profit in the short run to cover the initial investment.

answer

Consider the following statement: "Ninety percent of new products fail within two years—so you shouldn't be so eager to innovate."
This statement is

question

Demand changes, and all consequent long-run adjustments have occurred.

answer

The long-run supply curve under pure competition is derived by observing what happens to market price and quantity when market:

question

Price and average total cost are equal

answer

When a purely competitive industry is in long-run equilibrium, which statement is true?

question

Equal to its marginal cost

answer

If there is a decrease in demand for a product in a purely competitive industry, it results in an industry contraction that will end when the product price is:

question

earning economic profits.

answer

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

question

Economic profits induce firms to enter an industry; losses encourage firms to leave.

answer

Which of the following statements is correct?

question

workers in the "destroyed" industries.

answer

Creative destruction is least beneficial to:

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