question
The entry and the exit of firms in an industry are considered to be (BLANK) -run adjustments.
answer
long
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
BLANK profits in a competitive industry will attract new firms into the industry.
answer
Economic
question
In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.
answer
zero; normal
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
Which of the following occur only in the long-run?
answer
The expansion or contraction of plant capacity
The entry and exit of firms
The entry and exit of firms
question
he long run, every purely competitive firm tends to operate at its ______.
answer
minimum ATC
question
An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.
answer
decrease; losses
question
Economists maintain that new firms are attracted into an industry due to:
answer
economic profits
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
firms earn a normal profit
MR = MC
firms earn a normal profit
MR = MC
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
Marginal cost
Minimum average total cost
Minimum average total cost
question
The entry and the exit of firms in an industry are considered to be (BLANK) run adjustment
answer
run 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
(BLANK) profits in a competitive industry will attract new firms into the industry.
answer
economic
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
In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.
answer
...
question
A constant-cost industry is one where ______ will not affect resource prices and production costs.
answer
expansion or contraction
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?
answer
There are no economic losses.
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 an increasing-cost industry experience?
answer
A downward shifting average total cost (ATC) curve as the industry contracts.
An upward shifting average total cost (ATC) curve as the industry expands.
An upward shifting average total cost (ATC) curve as the industry expands.
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
...
question
True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve.
answer
false
question
An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.
answer
constant ..
question
New firms entering an increasing-cost industry will usually (BLANK) (increase/decrease) resource prices.
answer
increase
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
Each firm's ATC curve shifts upward.
Increased resource demand drives up resource prices.
Increased resource demand drives up resource prices.
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
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
Higher resource prices will result in ______ total costs.
answer
higher average
question
A decreasing-cost industry is one in which firms experience ______ costs as their industry ______.
answer
higher; contracts
lower; expands
lower; expands
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
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
The shape of the long-run supply curve for a constant-cost industry can best be described as:
answer
horizontal
question
All firms in a(n) ______ industry share the same basic efficiency characteristics.
answer
purely competitive
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.
A downward shifting average total cost (ATC) curve as the industry contracts.
question
Which of the following does a decreasing-cost industry experience?
answer
Lower costs as industry output expands.
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
...
question
A competitive firm may realize an economic profit or loss in the (BLANK) run but will earn only a normal profit in the ATC
answer
Blank 1: short
Blank 2: long or longer
Blank 2: long or longer
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
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.
In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost.
In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost.
In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost.
question
In the long run, a purely competitive firm will only earn a ______ profit.
answer
normal
question
A competitive market generates (BLANK) efficiency and (BLANK) efficiency.
answer
Blank 1: productive
Blank 2: allocative
Blank 2: allocative
question
A purely competitive market leads to the efficient use of:
answer
society's scarce resources
question
Which of the following does a decreasing-cost industry experience?
answer
...
question
Productive efficiency requires that goods be produced ___.
answer
in the least costly way
question
(one word) 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
A competitive firm may realize an economic profit or loss in the (BLANK) run but will earn only a normal profit in the (BLANK) run
answer
Blank 1: short
Blank 2: long or longer
Blank 2: long or longer
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
Competitive market economies generate ______.
answer
Allocative efficiency; Productive efficiency
question
In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:
answer
consumer tastes.
technological changes.
resource supplies.
technological changes.
resource supplies.
question
Which type of market produces the most efficient use of society's resources?
answer
Pure competition
question
Allocative/Productive) efficiency means that goods are produced in the least costly way.
answer
Blank 1: Productive
question
Which of the following statements are true about allocative efficiency?
answer
The goods and services produced are those that society most wants to consume.
It is impossible to produce net gains for society by altering the mix of goods and services produced.
The marginal cost and marginal benefit of producing each unit of output is equal.
It is impossible to produce net gains for society by altering the mix of goods and services produced.
The marginal cost and marginal benefit of producing each unit of output is equal.
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
What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?
answer
Externalities
question
True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes.
answer
true
question
A purely competitive market leads to the efficient use of:
answer
...
question
Strategies attempted by firms for increasing their profits include:
answer
...
question
Productive efficiency requires that goods be produced ___.
answer
...
question
The transformative effects of competition are often referred to as:
answer
creative destruction
question
(one word) 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
...
question
What are the effects of the "invisible hand" in a purely competitive economy?
answer
Maximum profits for individual producers
Resource allocation that maximizes consumer satisfaction
Resource allocation that maximizes consumer satisfaction
question
In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:
answer
...
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
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