Question 1

In the long run, new firms enter a perfectly competitive market when

Accepted Answer

In a perfectly competitive market, new firms are attracted to enter when they observe existing firms earning economic profits greater than zero. This indicates the potential for profit beyond the normal return on investment, making entry appealing.

Question 2

Technological change

Accepted Answer

Technological change often requires investment in new technology or equipment, which may involve building a new plant or upgrading an existing one. This investment can increase fixed costs in the short run, but it may lead to lower costs and higher profits in the long run.

Question 3

In the long run, a firm in a perfectly competitive market will

Accepted Answer

In the long run, firms in a perfectly competitive market will make zero economic profit. This is because in the long run, there is free entry and exit of firms, meaning that if a firm is earning positive economic profit, new firms will enter the market, increasing supply and driving down prices until the profit is eliminated. Likewise, if a firm is incurring an economic normal loss, some firms will exit the market, decreasing supply and driving up prices until the loss is eliminated. Therefore, in the long run, a firm in a perfectly competitive market will make zero economic profit, so that its owners earn a normal profit.

Question 4

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms ________ and the market ________.

Accepted Answer

When firms in a perfectly competitive market are incurring economic losses, over time, some firms will exit the market. This reduces the total supply of the product in the market, which is represented by a leftward shift in the supply curve.

Question 5

If perfectly firms are making an economic profit, then

Accepted Answer

If perfectly competitive firms are making an economic profit, this indicates that there are more buyers in the market than there are sellers, causing the price to rise above the minimum average total cost of production. This attracts new firms to enter the market, increasing the supply and causing the price to decrease. As the price decreases, the economic profit of the existing firms decreases until it reaches zero in the long-run equilibrium. Therefore, option B is the correct answer.

Question 6

If perfectly firms are making an economic profit, the economic profit

Accepted Answer

Economic profit is a signal for more firms to enter the market, as they see the opportunity to make profit. This increase in the number of firms results in an increase in supply, and subsequently, a decrease in price. The process of entry and exit of firms continues until all firms are earning only a normal profit. Therefore, answer choice A is the correct answer.

Question 7

Technological change brings a ________ to firms that adopt the new technology.

Accepted Answer

Technological change can lead to temporary economic profit for firms because they may be able to increase productivity, reduce costs, or create new products and services that attract customers. However, these benefits may not be permanent as other firms may adopt the same technology and competition may increase, leading to a return to normal profit levels.

Question 8

In a market undergoing technological change, firms that

Accepted Answer

In a market undergoing technological change, firms that adopt the new technology temporarily make an economic profit. This is because they are able to increase their efficiency and productivity through the use of the new technology, which allows them to reduce costs and increase output. However, this is only temporary as eventually, other firms in the market also adopt the new technology, leading to increased competition and potentially lower profits.

Question 9

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

Accepted Answer

In the short run, an increase in demand leads to higher prices due to the fixed number of firms. In the long run, the higher profits attract more firms into the market, increasing supply, which lowers the price back towards the long-run equilibrium, but with more firms in the market.

Question 10

If perfectly competitive firms are maximizing their profit and are making an economic profit, the market ________ in a short-run equilibrium and ________ in a long-run equilibrium.

Accepted Answer

In the short run, perfectly competitive firms can make an economic profit if the market price is above their average total cost. This attracts new firms to enter the market, which increases industry supply and lowers price. In the long run, the market price will decrease to the point where firms only earn a normal profit (zero economic profit), as new firms enter until the price is driven back down to the minimum of the average total cost curve. Therefore, in the long-run equilibrium, firms will not be making an economic profit.

Question 11

If the technology associated with producing fiber-optic cable continues to advance, over time the cost of producing fiber-optic cable will

Accepted Answer

If the technology associated with producing fiber-optic cable continues to advance, it will become less expensive to produce fiber-optic cable. This will lead to decreased production costs for firms that use the new technology, allowing them to charge lower prices to consumers and make an economic profit. As a result, in the long run, new firms will enter the market and the industry will become more competitive.

Question 12

Technology reduces the average cost of production, so in the long run
I∙perfectly competitive firms produce at a lower average cost.
Ii∙the market price of the good falls.
Iii∙firms with older plants either exit the market or adopt the new technology.

Accepted Answer

Technology advancements lead to lower production costs, causing competitive firms to produce more efficiently (i). This efficiency drives down the market price (ii), and firms with outdated technology must adapt or exit the market to remain competitive (iii).

Question 13

The figure above shows a firm's total revenue and total cost curves.
-When the firm maximizes its profit, it produces ________ cans per day.

Accepted Answer

The answer of  
The figure above shows a firm's...

Question 14

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

Accepted Answer

When firms leave the market, the supply curve shifts leftward due to a decrease in the quantity supplied. In this case, the frozen yogurt market became less competitive, leading to some firms exiting the market. This would cause a leftward shift in the supply curve, as there would be less yogurt available at any given price.

Question 15

The figure above shows a firm's total revenue and total cost curves.
-To maximize its profit, the firm in the figure above produces ________ cans per day and ________.

Accepted Answer

The profit-maximizing output is where marginal revenue equals marginal cost, which is at 10 cans per day. At this level of output, the firm is earning a total revenue of $70 and incurring a total cost of $40, resulting in an economic profit of $30. Therefore, the correct answer is D.

Question 16

A market is initially in a long-run equilibrium and there is a permanent increase in demand.After the new long-run equilibrium is reached, there

Accepted Answer

In response to a permanent increase in demand, the market adjusts by attracting more firms to enter due to higher profit opportunities. This leads to a new long-run equilibrium with more firms in the market to meet the increased demand.

Question 17

The rutabaga market is perfectly competitive.Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases.The permanent decrease in demand results in a

Accepted Answer

With the decrease in demand for rutabagas, the market is expected to have a lower equilibrium price due to excess supply. This leads to economic losses for rutabaga farmers as they receive less revenue from selling their crops. In the long run, some farmers may decide to exit the market in response to the losses. Therefore, option B is the most appropriate answer.

Question 18

Firms exit a competitive market when they incur an economic loss.In the long run, this exit means that the economic losses of the surviving firms

Accepted Answer

When firms exit a competitive market due to economic losses, the supply curve shifts to the left, and the market price increases. As a result, the economic losses of the surviving firms decrease until they equal zero in the long run, meaning that they are earning normal profits.

Question 19

When a firm adopts new technology, generally its

Accepted Answer

When a firm adopts new technology, it generally leads to an increase in productivity and efficiency, resulting in a shift downward of the cost curves. This means that the firm can produce the same output at a lower cost, which can potentially increase profits.

Question 20

A permanent decrease in demand definitely

Accepted Answer

The answer of A permanent decrease in demand definitely
...

Quiz 15: Perfect Competition

In the long run, new firms enter a perfectly competitive market when

Technological change

In the long run, a firm in a perfectly competitive market will

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms and the market .

If perfectly firms are making an economic profit, then

If perfectly firms are making an economic profit, the economic profit

Technological change brings a ________ to firms that adopt the new technology.

In a market undergoing technological change, firms that

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price and in the long run the number of firms and the price is the price was in the short run.

If perfectly competitive firms are maximizing their profit and are making an economic profit, the market in a short-run equilibrium and in a long-run equilibrium.

If the technology associated with producing fiber-optic cable continues to advance, over time the cost of producing fiber-optic cable will

Technology reduces the average cost of production, so in the long run I∙perfectly competitive firms produce at a lower average cost. Ii∙the market price of the good falls. Iii∙firms with older plants either exit the market or adopt the new technology.

The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit, it produces ________ cans per day.

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit, the firm in the figure above produces cans per day and .

A market is initially in a long-run equilibrium and there is a permanent increase in demand.After the new long-run equilibrium is reached, there

The rutabaga market is perfectly competitive.Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases.The permanent decrease in demand results in a

Firms exit a competitive market when they incur an economic loss.In the long run, this exit means that the economic losses of the surviving firms

When a firm adopts new technology, generally its

A permanent decrease in demand definitely

Quiz 15: Perfect Competition

In the long run, new firms enter a perfectly competitive market when

Technological change

In the long run, a firm in a perfectly competitive market will

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms ________ and the market ________.

If perfectly firms are making an economic profit, then

If perfectly firms are making an economic profit, the economic profit

Technological change brings a ________ to firms that adopt the new technology.

In a market undergoing technological change, firms that

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

If perfectly competitive firms are maximizing their profit and are making an economic profit, the market ________ in a short-run equilibrium and ________ in a long-run equilibrium.

If the technology associated with producing fiber-optic cable continues to advance, over time the cost of producing fiber-optic cable will

Technology reduces the average cost of production, so in the long run I∙perfectly competitive firms produce at a lower average cost. Ii∙the market price of the good falls. Iii∙firms with older plants either exit the market or adopt the new technology.

The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit, it produces ________ cans per day.

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit, the firm in the figure above produces ________ cans per day and ________.

A market is initially in a long-run equilibrium and there is a permanent increase in demand.After the new long-run equilibrium is reached, there

The rutabaga market is perfectly competitive.Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases.The permanent decrease in demand results in a

Firms exit a competitive market when they incur an economic loss.In the long run, this exit means that the economic losses of the surviving firms

When a firm adopts new technology, generally its

A permanent decrease in demand definitely

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms and the market .

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price and in the long run the number of firms and the price is the price was in the short run.

If perfectly competitive firms are maximizing their profit and are making an economic profit, the market in a short-run equilibrium and in a long-run equilibrium.

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit, the firm in the figure above produces cans per day and .