Question 1

If the representative firm in a purely competitive industry is in short-run equilibrium and, at its current output level, its marginal cost exceeds its average total cost, then we can conclude that

Accepted Answer

When marginal cost exceeds average total cost, the firm is making an economic profit, which attracts new firms to enter the industry in the long run.

Question 2

A constant-cost industry is one in which

Accepted Answer

A constant-cost industry is characterized by the feature that the cost per unit of output remains the same regardless of the scale of production. This means if 100 units can be produced for $100, then producing 150 units would cost $150, 200 units would cost $200, and so on, indicating a direct proportionality between the number of units produced and the total production cost.

Question 3

Suppose the table above represents the long-run cost structure for a firm in a perfectly competitive industry. Based on this information we can conclude that this firm operates in

Accepted Answer

The answer of  Suppose the table above represents the...

Question 4

Which of the following statements is correct?

Accepted Answer

The long-run supply curve for a purely competitive increasing-cost industry is upsloping because, as industry output increases, the prices of input resources rise, leading to higher production costs and thus higher prices for the final goods.

Question 5

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

Accepted Answer

The answer of  Refer to the diagrams, which pertain...

Question 6

Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the market

Accepted Answer

In a purely competitive market, negative economic profits signal that some firms are not covering their total costs, leading to an exit of firms from the market. This reduction in the number of firms decreases the overall market supply.

Question 7

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium, producing 10 million units at a market price of $5.00. Suppose that an increase in consumer demand occurs. After all economic adjustments have been completed, which output and price combination is most likely to occur?

Accepted Answer

In an increasing-cost industry, when demand increases, both the output and the price are likely to increase in the long run. This is because the costs of production for firms in the industry will rise as they expand output, leading to a higher equilibrium price. Option B reflects an increase in both output and price, consistent with the characteristics of an increasing-cost industry responding to an increase in demand.

Question 8

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that as long run adjustments consequently occur, the firms in the industry will find that

Accepted Answer

The answer of  The accompanying graphs are for a...

Question 9

An increasing-cost industry is associated with

Accepted Answer

An increasing-cost industry is one where, as output expands, the costs of production for firms also increase. This leads to an upsloping long-run supply curve because firms will only supply more at higher prices to cover the increased costs.

Question 10

The graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information,

Accepted Answer

The answer of  The graphs are for a purely...

Question 11

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

Accepted Answer

In a purely competitive, constant-cost industry, an increase in demand leads to a temporary rise in price, which attracts new firms due to the profit incentive. As new firms enter, supply increases, pushing the price back down to the original equilibrium price. However, the total output of the industry increases due to the higher number of firms.

Question 12

Assume a purely competitive increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will

Accepted Answer

In a purely competitive increasing-cost industry, a decline in demand leads to firms leaving the industry because it becomes less profitable. As firms exit, the supply decreases, leading to a fall in quantity produced. The price also falls due to the initial decline in demand.

Question 13

A constant-cost industry is one in which

Accepted Answer

In a constant-cost industry, resource prices remain unchanged as output is increased, meaning the cost of producing additional units does not change as the scale of production changes.

Question 14

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will

Accepted Answer

The answer of  The accompanying graphs are for a...

Question 15

When a purely competitive firm is in long-run equilibrium,

Accepted Answer

In long-run equilibrium for a purely competitive firm, price equals marginal cost, ensuring that the firm is producing at the most efficient point.

Question 16

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

Accepted Answer

In long-run equilibrium for a competitive firm, price (P) equals marginal cost (MC) and equals the minimum average total cost (ATC), but it does not necessarily equal average fixed cost (AFC) since AFC can approach zero as output increases.

Question 17

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information, the market

Accepted Answer

The answer of  The accompanying graphs are for a...

Question 18

A purely competitive firm

Accepted Answer

In a purely competitive market, firms can earn economic profits in the short run due to varying market conditions. However, in the long run, the entry of new firms into the market eliminates these economic profits, leading to a situation where firms only earn a normal profit. This is because the ease of entry and exit in purely competitive markets ensures that any economic profit is competed away over time.

Question 19

Assume a purely 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

Accepted Answer

In a purely competitive increasing-cost industry, an increase in consumer demand leads to higher prices and larger total output in the long run. This is because the industry's supply curve slopes upward; as firms expand production to meet the higher demand, their costs increase, leading to higher prices.

Question 20

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price

Accepted Answer

In a purely competitive, increasing-cost industry, a decrease in consumer demand leads to a lower equilibrium price and industry output as firms reduce production in response to lower demand, eventually reaching a new equilibrium with both lower price and output.

Quiz 11: Pure Competition in the Long Run

If the representative firm in a purely competitive industry is in short-run equilibrium and, at its current output level, its marginal cost exceeds its average total cost, then we can conclude that

A constant-cost industry is one in which

Suppose the table above represents the long-run cost structure for a firm in a perfectly competitive industry. Based on this information we can conclude that this firm operates in

Which of the following statements is correct?

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

Suppose that the corn market is purely competitive. If the corn farmers are currently earning negative economic profits, then we would expect that in the long run the market

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that as long run adjustments consequently occur, the firms in the industry will find that

An increasing-cost industry is associated with

The graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information,

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

Assume a purely competitive increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will

A constant-cost industry is one in which

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, as automatic market adjustments occur, the demand curve facing the individual firm will

When a purely competitive firm is in long-run equilibrium,

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

The accompanying graphs are for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information, the market

A purely competitive firm

Assume a purely 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

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price