Question 1

If the long-run industry supply curve in a perfectly competitive market slopes upward, then very likely input prices will ____ as industry output expands.

Accepted Answer

A long-run industry supply curve that slopes upward indicates increasing costs of production as industry output expands. Therefore, input prices are likely to increase.

Question 2

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

Accepted Answer

In a perfectly competitive industry that uses a large proportion of available inputs, the increased demand for these inputs can drive up their prices, leading to higher production costs. This results in an upward-sloping long-run supply curve as firms require higher prices to cover the increased costs and supply more output.

Question 3

If the typical firm in a perfectly competitive market was depicted in the graph below, what would be most likely to occur?

Accepted Answer

The answer of If the typical firm in a perfectly...

Question 4

In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:

Accepted Answer

In the short run, firms in a perfectly competitive industry earning economic profits have no incentive to leave the industry because they are making more than the normal profit.

Question 5

If a perfectly competitive industry uses only a small share of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

Accepted Answer

In a perfectly competitive industry that uses only a small share of available inputs, the long-run market supply curve is horizontal because the industry can expand without affecting input prices.

Question 6

Which of the following statements is not characteristic of a perfectly competitive industry in long-run equilibrium?

Accepted Answer

In long-run equilibrium, firms in a perfectly competitive industry will be earning zero economic profit, which means that they will be producing at the minimum of their long-run average total cost (LRATC) curve. Therefore, it is not possible for a profit-maximizing firm to produce any output level at which P < LRATC.

Question 7

If the typical firm in a perfectly competitive market was depicted in the graph below, what would be most likely to occur?

Accepted Answer

The answer of If the typical firm in a perfectly...

Question 8

When would you expect economic profits in an industry to be zero?

Accepted Answer

When economic profits in an industry are zero, it implies that firms are earning normal profits which is the minimum amount needed to keep them in business. In such a scenario, firms have no incentives to enter or exit the industry since they cannot earn more than normal profits in the long run.

Question 9

In long run equilibrium, a perfectly competitive firm:

Accepted Answer

In long run equilibrium, a perfectly competitive firm earns zero economic profits. This is because in the long run, new firms can enter the market if there are profits, driving down prices and reducing profits. Similarly, if there are losses, firms will exit the market, reducing supply and driving up prices until profits are zero. Therefore, in the long run, a perfectly competitive firm will earn enough to cover its costs, but will not earn any economic profits.

Question 10

In long-run equilibrium, a perfectly competitive firms produces at the output level at which:

Accepted Answer

In long-run equilibrium, a perfectly competitive firm produces at the output level where the average total cost is minimized. This is because in the long run, all costs become variable, and the firm has the ability to adjust its inputs to minimize its costs. At the output level where average total cost is minimized, the firm is operating at maximum efficiency and is able to earn normal profits.

Question 11

Economic losses caused several firms to leave the car wash business in Portland, Oregon.Though prices have risen, firms are still leaving the industry.Apparently:

Accepted Answer

The answer of Economic losses caused several firms to leave...

Question 12

The shape of the long-run industry supply curve in a perfectly competitive industry is largely determined by:

Accepted Answer

The answer of The shape of the long-run industry supply...

Question 13

Which of the following is not true in the long run under perfect competition?

Accepted Answer

The answer of Which of the following is not true...

Question 14

In long-run equilibrium under perfect competition:

Accepted Answer

In long-run equilibrium under perfect competition, firms will produce at the level of output where marginal revenue equals marginal cost, which will also be equal to the minimum average total cost. This is because in a perfectly competitive market, there are no barriers to entry or exit, and all firms are producing homogeneous products, so they cannot charge higher prices than their competitors. As a result, economic profits are driven to zero in the long-run, and firms will only earn enough to cover their costs (including normal profits). Therefore, the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve.

Question 15

When perfectly competitive firms are earning zero accounting profits,

Accepted Answer

The answer of When perfectly competitive firms are earning zero...

Question 16

When economic profits are negative in a perfectly competitive industry,

Accepted Answer

Negative economic profits indicate that firms in the industry are not covering their opportunity costs and are likely to exit the industry in the long run. This will lead to a decrease in the number of firms and a decrease in industry output, causing the market supply curve to shift to the left.

Question 17

In long-run equilibrium, the perfectly competitive firm produces:

Accepted Answer

In long-run equilibrium, the perfectly competitive firm produces where P = MC to maximize profits, where it produces at the lowest point on its long-run average cost curve to minimize costs, and where its long-run average cost curve is tangent to its horizontal demand curve to ensure maximum efficiency. Therefore, the firm produces at a level of output that satisfies all three conditions, which is option D.

Question 18

As exit from a perfectly competitive industry that is currently unprofitable pushes up the market price, producers will move from a situation where price ____ average total cost to one where price ____ average total cost.

Accepted Answer

In a perfectly competitive market, if the industry is unprofitable, firms will exit, reducing supply and increasing the market price until it equals the average total cost, eliminating losses.

Question 19

In long-run perfectly competitive equilibrium:

Accepted Answer

In the long-run perfectly competitive equilibrium, all firms earn zero economic profits. This is because in a perfectly competitive market, there are no barriers to entry, so new firms can easily enter the market and drive down prices until firms are only earning normal profits (i.e. covering their explicit and implicit costs). This ensures that the market is efficiently allocating resources and producing goods at the lowest possible cost.

Question 20

If the perfectly competitive wiffle ball industry is bearing economic losses, we would expect that:

Accepted Answer

The answer of If the perfectly competitive wiffle ball industry...

Quiz 7: Firms in Competitive Markets

If the long-run industry supply curve in a perfectly competitive market slopes upward, then very likely input prices will ____ as industry output expands.

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

If the typical firm in a perfectly competitive market was depicted in the graph below, what would be most likely to occur?

In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:

If a perfectly competitive industry uses only a small share of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

Which of the following statements is not characteristic of a perfectly competitive industry in long-run equilibrium?

If the typical firm in a perfectly competitive market was depicted in the graph below, what would be most likely to occur?

When would you expect economic profits in an industry to be zero?

In long run equilibrium, a perfectly competitive firm:

In long-run equilibrium, a perfectly competitive firms produces at the output level at which:

Economic losses caused several firms to leave the car wash business in Portland, Oregon.Though prices have risen, firms are still leaving the industry.Apparently:

The shape of the long-run industry supply curve in a perfectly competitive industry is largely determined by:

Which of the following is not true in the long run under perfect competition?

In long-run equilibrium under perfect competition:

When perfectly competitive firms are earning zero accounting profits,

When economic profits are negative in a perfectly competitive industry,

In long-run equilibrium, the perfectly competitive firm produces:

As exit from a perfectly competitive industry that is currently unprofitable pushes up the market price, producers will move from a situation where price average total cost to one where price average total cost.

In long-run perfectly competitive equilibrium:

If the perfectly competitive wiffle ball industry is bearing economic losses, we would expect that: