Question 1

Long-run adjustments in purely competitive markets primarily take the form of&#10;A)variations in the cost curves of different firms in the market.&#10;B)entry or exit of firms in the market.&#10;C)evolution of the market from a constant-cost to an increasing-cost industry.&#10;D)product differentiation.

Accepted Answer

In purely competitive markets, the long-run adjustments primarily take the form of entry or exit of firms in the market. In the long run, if firms in the market are earning profits, it will attract new firms to enter the market. This will increase the supply of the product and drive down the market price, reducing profits for all firms in the market. Similarly, if firms are incurring losses, some firms will exit the market, reducing the supply and driving up the market price, potentially restoring profitability for the remaining firms. This process of entry and exit will continue until all firms earn only normal profits (i.e., economic profits equal to zero). Therefore, choice B is the best answer.

Question 2

We would expect an industry to expand if firms in that industry are&#10;A)earning normal profits.&#10;B)earning economic profits.&#10;C)breaking even.&#10;D)earning accounting profits.

Accepted Answer

If firms in an industry are earning economic profits, it means they are earning revenue that exceeds their total costs (including opportunity cost of capital). This incentivizes new firms to enter the industry in search of profits, causing the industry to expand. On the other hand, if firms are earning normal profits or breaking even, there is no incentive for new firms to enter the industry and the existing firms may not have the financial resources to expand. Earning accounting profits does not take into account the opportunity cost of capital and may not accurately reflect the true profitability of the firm.

Question 3

Long-run competitive equilibrium&#10;A)is realized only in constant-cost industries.&#10;B)will never change once it is realized.&#10;C)is not economically efficient.&#10;D)results in zero economic profits.

Accepted Answer

In the long-run competitive equilibrium, all firms earn zero economic profits, which means they are producing at the minimum efficient scale and using all resources efficiently. This outcome is economically efficient as it maximizes social welfare. However, this equilibrium may not always be realized in practice and may shift due to changes in costs or demand.

Question 4

Assume a purely competitive, increasing-cost industry is in long-run equilibrium.If a decline in demand occurs, firms will&#10;A)leave the industry, price will decrease, and quantity produced will increase.&#10;B)enter the industry and price and quantity will both increase.&#10;C)leave the industry and price and output will both increase.&#10;D)leave the industry and price and output will both decline.

Accepted Answer

In a purely competitive, increasing-cost industry, the long-run supply curve is upward sloping. When there is a decline in demand, there is excess supply which puts downward pressure on prices, leading to a decrease in both price and output. In the long run, firms will exit the industry because they are unable to cover their variable and fixed costs at the lower price level. This decrease in the number of firms will cause the industry supply curve to shift to the left, and the market price will eventually settle at a level where the remaining firms are earning a normal profit. The end result is a decrease in both price and output. Therefore, choice D is the correct answer.

Question 5

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

A)and industry output will be less than the initial price and output.
B)will be greater than the initial price, but the new industry output will be less than the original output.
C)will be less than the initial price, but the new industry output will be greater than the original output.
D)and industry output will be greater than the initial price and output.

Accepted Answer

A decrease in consumer demand will lead to a decrease in price and output in the short run, as firms try to adjust to the lower demand. In the long run, firms will exit the market, causing a decrease in industry output and an increase in price until a new equilibrium is reached. Since the industry is increasing-cost, the new equilibrium price will be lower than the initial price, and the new industry output will also be less than the original output. Therefore, choice A is the best answer.

Question 6

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC.Given this, the firm&#10;A)minimizes losses by producing at the minimum point of its AVC curve.&#10;B)maximizes profits by producing where MR = ATC.&#10;C)should close down immediately.&#10;D)should continue producing in the short run but leave the industry in the long run if the situation persists.

Accepted Answer

If the price of the product is above the minimum AVC point but below ATC, the firm is making losses but can still cover some of its variable costs. In the short run, the firm should continue production as long as it is able to cover its variable costs, which it can do in this scenario. However, in the long run, the firm should leave the industry if the situation persists, since it is not covering its total costs and is making losses. Therefore, the best choice is to continue producing in the short run but leave the industry in the long run if the situation persists.

Question 7

Which of the following statements is correct?&#10;A)The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.&#10;B)The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.&#10;C)The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run supply curve.&#10;D)The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping.

Accepted Answer

In a purely competitive increasing-cost industry, as more firms enter the industry in the long run, the cost of production increases due to limited resources. As a result, the long-run supply curve for the industry will be upsloping. Option B is incorrect because perfect elasticity implies an infinite supply at a constant price, which is not possible in a competitive increasing-cost industry. Option C is incorrect because the long-run supply curve can be more elastic than the short-run supply curve in some cases, such as in a decreasing-cost industry. Option D is incorrect because the long-run supply curve for a decreasing-cost industry will be downsloping due to economies of scale.

Question 8

Which of the following distinguishes the short run from the long run in pure competition?&#10;A)Firms can enter and exit the market in the long run but not in the short run.&#10;B)Firms attempt to maximize profits in the long run but not in the short run.&#10;C)Firms use the MR = MC rule to maximize profits in the short run but not in the long run.&#10;D)The quantity of labor hired can vary in the long run but not in the short run.

Accepted Answer

In pure competition, firms can enter and exit the market freely in the long run, but not in the short run. This is because in the short run, firms are constrained by fixed factors of production, such as plant size and equipment, and cannot easily adjust their output levels. In contrast, in the long run, firms can adjust their plant size or exit the market entirely based on their profitability, which helps to ensure that profits are driven down to zero in the long run equilibrium.

Question 9

Which of the following is true concerning purely competitive industries?&#10;A)There will be economic losses in the long run because of cut-throat competition.&#10;B)Economic profits will persist in the long run if consumer demand is strong and stable.&#10;C)In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.&#10;D)There are economic profits in the long run but not in the short run.

Accepted Answer

In the short run, firms may incur economic losses or earn economic profits due to fluctuation in market demand or supply. However, in the long run, the industry will adjust to these changes and firms will earn only normal profits, which is equal to the opportunity cost of production. Therefore, option C is the correct answer. Option A is incorrect as cut-throat competition will only force firms to exit the industry and will not result in economic losses in the long run. Option B is incorrect as economic profits cannot persist in the long run due to free entry of firms in the industry. Option D is incorrect as economic profits cannot exist in the long run in purely competitive industries.

Question 10

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then&#10;A)the selling price for this firm is above the market equilibrium price.&#10;B)new firms will enter this market.&#10;C)some existing firms in this market will leave.&#10;D)there must be price fixing by the industry's firms.

Accepted Answer

If a purely competitive firm is earning an economic profit, it indicates that the selling price is above the firm's average total cost (ATC) at the MR = MC output level. This attracts new firms to enter the market in search of similar profits. As a result, market supply increases, which causes the market equilibrium price to decrease. This process continues until the economic profit of all firms reduces to zero, and the long-run equilibrium is achieved. Therefore, option B is the correct choice. Option A is incorrect because the selling price for a purely competitive firm is determined by the market forces of supply and demand and cannot be above the market equilibrium price in the long run. Option C is incorrect because firms leaving the market would happen if they were making losses, not profits. Option D is incorrect because price fixing is not possible in a perfectly competitive market due to the large number of small firms with no market power.

Question 11

Karlee&#226;&#8364;&#8482;s Kreations sells handbags in a purely competitive market.Karlee&#226;&#8364;&#8482;s is currently breaking even.Based on this information, we can conclude that Karlee&#226;&#8364;&#8482;s Kreations&#10;A)must be operating in long-run equilibrium.&#10;B)will leave this market in the long run because no economic profits are being earned.&#10;C)will continue operating in this market only if the market price rises.&#10;D)may be operating in either short-run or long-run equilibrium.

Accepted Answer

The answer of Karlee&#226;&#8364;&#8482;s Kreations sells handbags in a purely...

Question 12

In a purely competitive industry,&#10;A)there will be no economic profits in either the short run or the long run.&#10;B)economic profits may persist in the long run if consumer demand is strong and stable.&#10;C)there may be economic profits in the short run but not in the long run.&#10;D)there may be economic profits in the long run but not in the short run.

Accepted Answer

The answer of In a purely competitive industry,&#10;A)there will be...

Question 13

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

A)the same as the initial equilibrium price, but the new industry output will be greater than the original output.
B)greater than the initial price, and the new industry output will be greater than the original output.
C)less than the initial price, but the new industry output will be greater than the original output.
D)the same as the initial equilibrium price, and the industry output will remain unchanged.

Accepted Answer

The answer of Suppose the market for corn is a...

Question 14

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

A)lower, but total output will be larger than originally.
B)higher, and total output will be larger than originally.
C)lower, and total output will be smaller than originally.
D)higher, but total output will be smaller than originally.

Accepted Answer

The answer of Assume a purely competitive increasing-cost industry is...

Question 15

The primary force encouraging the entry of new firms into a purely competitive industry is&#10;A)normal profits earned by firms already in the industry.&#10;B)economic profits earned by firms already in the industry.&#10;C)government subsidies for start-up firms.&#10;D)a desire to provide goods for the betterment of society.

Accepted Answer

The answer of The primary force encouraging the entry of...

Question 16

Which of the following statements is correct? Test Bank: I Topic: The Long-Run Adjustment Process in Pure Competition&#10;A)Economic profits induce firms to enter an industry; losses encourage firms to leave.&#10;B)Economic profits induce firms to leave an industry; profits encourage firms to leave.&#10;C)Economic profits and losses have no significant impact on the growth or decline of an industry.&#10;D)Normal profits will cause an industry to expand.

Accepted Answer

The answer of Which of the following statements is correct?...

Question 17

A constant-cost industry is one in which&#10;A)a higher price per unit will not result in an increased output.&#10;B)if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.&#10;C)the demand curve and therefore the unit price and quantity sold seldom change.&#10;D)the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units.

Accepted Answer

The answer of A constant-cost industry is one in which&#10;A)a...

Question 18

Balin&#226;&#8364;&#8482;s Burger Barn operates in a perfectly competitive market.Balin&#226;&#8364;&#8482;s is currently earning economic profits of $20,000 per year.Based on this information, we can conclude that&#10;A)Balin&#226;&#8364;&#8482;s profits will discourage new firms from entering.&#10;B)Balin&#226;&#8364;&#8482;s will increase its market price over the coming months.&#10;C)Balin&#226;&#8364;&#8482;s is operating in the short run, but not the long run.&#10;D)Balin&#226;&#8364;&#8482;s is operating in the long run.Learning Objective: 11-01 Explain how the long run differs from the short run in pure competition.

Accepted Answer

The answer of Balin&#226;&#8364;&#8482;s Burger Barn operates in a perfectly...

Question 19

Suppose that Betty's Beads is a typical firm operating in a perfectly competitive market.Currently Betty's MR = $15, MC = $12, ATC = $10, and AVC = $8.Based on this information, we can conclude that&#10;A)Betty's is in long-run equilibrium.&#10;B)potential new firms will be encouraged by Betty's success to enter the market.&#10;C)some existing firms in this market will leave.&#10;D)potential new firms will be discouraged by Betty's struggles and not enter the market.

Accepted Answer

The answer of Suppose that Betty's Beads is a typical...

Question 20

Which of the following will not hold true for a competitive firm in long-run equilibrium?&#10;A)P equals AFC.&#10;B)P equals minimum ATC.&#10;C)MC equals minimum ATC.&#10;D)P equals MC.

Accepted Answer

The answer of Which of the following will not hold...

Question 21

A purely competitive firm&#10;A)must earn a normal profit in the short run.&#10;B)cannot earn economic profit in the long run.&#10;C)may realize either economic profit or losses in the long run.&#10;D)cannot earn economic profit in the short run.

Accepted Answer

The answer of A purely competitive firm&#10;A)must earn a normal...

Question 22

Assume that a decline in consumer demand occurs in a purely competitive industry that is initially in long-run equilibrium.We can&#10;A)predict that the new price will be greater than the original price.&#10;B)predict that the new price will be less than the original price.&#10;C)predict that the new price will be the same as the original price.&#10;D)not compare the original and the new prices without knowing what cost conditions exist in the industry.

Accepted Answer

The answer of Assume that a decline in consumer demand...

Question 23

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum.Then&#10;A)the firm is earning an economic profit.&#10;B)there is no tendency for the firm's industry to expand or contract.&#10;C)allocative but not productive efficiency is being achieved.&#10;D)other firms will enter this industry.

Accepted Answer

The answer of Assume a purely competitive firm is maximizing...

Question 24

Purely competitive industry X has constant costs and its product is an inferior good.The industry is currently in long-run equilibrium.The economy now goes into a recession and average incomes decline.The result will be

A)an increase in output and in the price of the product.
B)an increase in output, but not in the price, of the product.
C)a decrease in the output, but not in the price, of the product.
D)a decrease in output and in the price of the product.

Accepted Answer

The answer of Purely competitive industry X has constant costs...

Question 25

Resources are efficiently allocated when production occurs where&#10;A)marginal cost equals average variable cost.&#10;B)price is equal to average revenue.&#10;C)price is equal to marginal cost.&#10;D)price is equal to average variable cost.

Accepted Answer

The answer of Resources are efficiently allocated when production occurs...

Question 26

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more.Now many units can be purchased for under $400.These facts imply that&#10;A)the LCD television industry was once competitive but is now monopolistic.&#10;B)fewer firms produce LCD televisions than was the case five or ten years ago.&#10;C)the demand curve for LCD televisions has shifted leftward.&#10;D)the LCD television industry is a decreasing-cost industry.Difficulty: 02 Medium

Accepted Answer

The answer of When LCD televisions first came on the...

Question 27

In a decreasing-cost industry,&#10;A)there will be no firm entry because the increased supply will reduce the long-run equilibrium price.&#10;B)the law of demand does not apply.&#10;C)greater demand leads to higher long-run equilibrium prices.&#10;D)lower demand leads to higher long-run equilibrium prices.

Accepted Answer

The answer of In a decreasing-cost industry,&#10;A)there will be no...

Question 28

Suppose an increase in product demand occurs in a decreasing-cost industry.As a result,&#10;A)the new long-run equilibrium price will be lower than the original long-run equilibrium price.&#10;B)equilibrium quantity will decline.&#10;C)firms will eventually leave the industry.&#10;D)the new long-run equilibrium price will be higher than the original price.

Accepted Answer

The answer of Suppose an increase in product demand occurs...

Question 29

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline.Industry X is&#10;A)a constant-cost industry.&#10;B)a decreasing-cost industry.&#10;C)an increasing-cost industry.&#10;D)encountering X-inefficiency.

Accepted Answer

The answer of Suppose losses cause industry X to contract...

Question 30

Suppose that an industry's long-run supply curve is downsloping.This suggests that&#10;A)it is an increasing-cost industry.&#10;B)relevant inputs have become more expensive as the industry has expanded.&#10;C)technology has become less efficient as a result of the industry's expansion.&#10;D)it is a decreasing-cost industry.

Accepted Answer

The answer of Suppose that an industry's long-run supply curve...

Question 31

A purely competitive firm is precluded from making economic profits in the long run because&#10;A)it is a &#34;price taker.&#34;&#10;B)its demand curve is perfectly elastic.&#10;C)of unimpeded entry to the industry.&#10;D)it produces a differentiated product.

Accepted Answer

The answer of A purely competitive firm is precluded from...

Question 32

When a purely competitive firm is in long-run equilibrium,&#10;A)marginal revenue exceeds marginal cost.&#10;B)price equals marginal cost.&#10;C)total revenue exceeds total cost.&#10;D)minimum average total cost is less than the product price.

Accepted Answer

The answer of When a purely competitive firm is in...

Question 33

Allocative efficiency is achieved when the production of a good occurs where&#10;A)P = minimum ATC.&#10;B)P = MC.&#10;C)P = minimum AVC.&#10;D)total revenue is equal to TFC.

Accepted Answer

The answer of Allocative efficiency is achieved when the production...

Question 34

An increasing-cost industry is the result of&#10;A)higher resource prices that occur as the industry expands.&#10;B)a change in the industry's minimum efficient scale.&#10;C)X-inefficiency.&#10;D)the law of diminishing returns.

Accepted Answer

The answer of An increasing-cost industry is the result of&#10;A)higher...

Question 35

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to&#10;A)increase, output to increase, price to decrease, and profits to decrease.&#10;B)increase, output to increase, price to increase, and profits to decrease.&#10;C)decrease, output to decrease, price to increase, and profits to increase.&#10;D)increase, output to decrease, price to decrease, and profits to decrease.

Accepted Answer

The answer of If a purely competitive constant-cost industry is...

Question 36

An increasing-cost industry is associated with&#10;A)a perfectly elastic long-run supply curve.&#10;B)an upsloping long-run supply curve.&#10;C)a perfectly inelastic long-run supply curve.&#10;D)an upsloping long-run demand curve.

Accepted Answer

The answer of An increasing-cost industry is associated with&#10;A)a perfectly...

Question 37

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?&#10;A)The firms in the market are part of a decreasing-cost industry.&#10;B)The firms in the market produce an inferior good.&#10;C)Potential new firms in the market are not attracted by economic profits.&#10;D)Increases in demand cannot lead to lower long-run equilibrium prices.

Accepted Answer

The answer of Under what conditions would an increase in...

Question 38

A decreasing-cost industry is one in which&#10;A)contraction of the industry will decrease unit costs.&#10;B)input prices fall or technology improves as the industry expands.&#10;C)the long-run supply curve is perfectly elastic.&#10;D)the long-run supply curve is upsloping.

Accepted Answer

The answer of A decreasing-cost industry is one in which&#10;A)contraction...

Question 39

A constant-cost industry is one in which&#10;A)resource prices fall as output is increased.&#10;B)resource prices rise as output is increased.&#10;C)resource prices remain unchanged as output is increased.&#10;D)small and large levels of output entail the same total costs.

Accepted Answer

The answer of A constant-cost industry is one in which&#10;A)resource...

Question 40

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit.This means the firm is&#10;A)producing more output than allocative efficiency requires.&#10;B)producing less output than allocative efficiency requires.&#10;C)achieving productive efficiency.&#10;D)producing an inefficient output, but we cannot say whether output should be increased or decreased.

Accepted Answer

The answer of A firm is producing an output such...

Question 41

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?&#10;A)Consumer and producer surplus will be minimized.&#10;B)P = MC = lowest ATC.&#10;C)The maximum willingness to pay for the last unit equals the minimum acceptable price for that unit.&#10;D)We would expect all of these to occur in the long run in a purely competitive market.

Accepted Answer

The answer of Which of the following would not be...

Question 42

If the price of product Y is $25 and its marginal cost is $18,&#10;A)Y is being produced with the least-cost combination of resources.&#10;B)society will realize a net gain if less of Y is produced.&#10;C)resources are being underallocated to Y.&#10;D)resources are being overallocated to Y.

Accepted Answer

The answer of If the price of product Y is...

Question 43

Creative destruction is least beneficial to&#10;A)workers in the &#34;destroyed&#34; industries.&#10;B)workers in the &#34;created&#34; industries.&#10;C)consumers.&#10;D)society as a whole.Blooms: Understand

Accepted Answer

The answer of Creative destruction is least beneficial to&#10;A)workers in...

Question 44

If a purely competitive firm is producing where price exceeds marginal cost, then&#10;A)the firm will fail to maximize profit, but resources will be efficiently allocated.&#10;B)the firm will fail to maximize profit and resources will be overallocated to the product.&#10;C)the firm will fail to maximize profit and resources will be underallocated to the product.&#10;D)resources will be underallocated to the product, but the firm will maximize profit.

Accepted Answer

The answer of If a purely competitive firm is producing...

Question 45

Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A)P > MC = minimum ATC. B)P > MC > minimum ATC. C)P = MC = minimum ATC. D)P < MC < minimum ATC.

Accepted Answer

The answer of Which of the following conditions is true...

Question 46

Under pure competition, in the long run&#10;A)neither allocative efficiency nor productive efficiency is achieved.&#10;B)both allocative efficiency and productive efficiency are achieved.&#10;C)productive efficiency is achieved, but allocative efficiency is not.&#10;D)allocative efficiency is achieved, but productive efficiency is not.

Accepted Answer

The answer of Under pure competition, in the long run&#10;A)neither...

Question 47

The term allocative efficiency refers to&#10;A)the level of output that coincides with the intersection of the MC and AVC curves.&#10;B)minimization of the AFC in the production of any good.&#10;C)the production of the product mix most desired by consumers.&#10;D)the production of a good at the lowest average total cost.

Accepted Answer

The answer of The term allocative efficiency refers to&#10;A)the level...

Question 48

If the price of bottled water is $2 and the marginal cost of producing it is $2.50,&#10;A)bottled water is being produced in an increasing-cost industry.&#10;B)society will realize a net gain if more bottled water is produced.&#10;C)resources are being overallocated to bottled water.&#10;D)resources are being underallocated to all other goods.

Accepted Answer

The answer of If the price of bottled water is...

Question 49

Creative destruction is&#10;A)the process by which large firms buy up small firms.&#10;B)the process by which new firms and new products replace existing dominant firms and products.&#10;C)a term coined many years ago by Adam Smith.&#10;D)applicable to planned economies but not to market economies.

Accepted Answer

The answer of Creative destruction is&#10;A)the process by which large...

Question 50

Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit.With no spillovers, this information means that&#10;A)total cost is greater than total revenue.&#10;B)price is greater than marginal cost.&#10;C)marginal cost is greater than price.&#10;D)resources are being overallocated to X.

Accepted Answer

The answer of Assume that society places a higher value...

Question 51

If production is occurring where marginal cost exceeds price, the purely competitive firm will&#10;A)maximize profit, but resources will be underallocated to the product.&#10;B)maximize profit, but resources will be overallocated to the product.&#10;C)fail to maximize profit and resources will be overallocated to the product.&#10;D)fail to maximize profit and resources will be underallocated to the product.

Accepted Answer

The answer of If production is occurring where marginal cost...

Question 52

Allocative efficiency occurs whenever&#10;A)consumer surplus is maximized.&#10;B)it is impossible to produce a net benefit for society by changing the combination of goods and services produced.&#10;C)firms have maximized their profits.&#10;D)it is impossible to make someone in society better off without making someone else worse off.

Accepted Answer

The answer of Allocative efficiency occurs whenever&#10;A)consumer surplus is maximized.&#10;B)it...

Question 53

The term productive efficiency refers to&#10;A)any short-run equilibrium position of a competitive firm.&#10;B)the production of the product mix most desired by consumers.&#10;C)the production of a good at the lowest average total cost.&#10;D)fulfilling the condition P = MC.

Accepted Answer

The answer of The term productive efficiency refers to&#10;A)any short-run...

Question 54

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?&#10;A)Combined consumer and producer surplus will be maximized.&#10;B)P = MC = lowest AVC.&#10;C)The minimum willingness to pay equals the maximum acceptable price.&#10;D)We would expect all of these to occur in the long run in a purely competitive market.

Accepted Answer

The answer of Which of the following outcomes is consistent...

Question 55

Entrepreneurs in purely competitive industries&#10;A)have no incentive to innovate because in the long run they will earn no economic profits.&#10;B)innovate to lower operating costs and generate short-run economic profits.&#10;C)utilize pricing strategies to generate short-run economic profits.&#10;D)rarely try to innovate because of a lack of financial resources.

Accepted Answer

The answer of Entrepreneurs in purely competitive industries&#10;A)have no incentive...

Question 56

The theory of creative destruction was advanced many years ago by&#10;A)Bill Gates.&#10;B)Alfred Marshall.&#10;C)Joseph Schumpeter.&#10;D)Adam Smith.

Accepted Answer

The answer of The theory of creative destruction was advanced...

Question 57

If for a firm P = minimum ATC = MC, then&#10;A)neither allocative efficiency nor productive efficiency is being achieved.&#10;B)productive efficiency is being achieved, but allocative efficiency is not.&#10;C)both allocative efficiency and productive efficiency are being achieved.&#10;D)allocative efficiency is being achieved, but productive efficiency is not.

Accepted Answer

The answer of If for a firm P = minimum...

Question 58

In long-run equilibrium, purely competitive markets&#10;A)minimize total cost.&#10;B)maximize the sum of consumer surplus and producer surplus.&#10;C)yield economic profits to most sellers.&#10;D)inevitably degenerate into monopoly in increasing-cost industries.

Accepted Answer

The answer of In long-run equilibrium, purely competitive markets&#10;A)minimize total...

Question 59

The process by which new firms and new products replace existing dominant firms and products is called&#10;A)monopolistic competition.&#10;B)mergers and acquisitions.&#10;C)process innovation.&#10;D)creative destruction.

Accepted Answer

The answer of The process by which new firms and...

Question 60

Innovations that lower production costs or create new products&#10;A)are rare in competitive industries.&#10;B)discourage new firms from entering the industry.&#10;C)often generate short-run economic profits that do not last into the long run.&#10;D)usually generate long-run economic profits for the innovator.

Accepted Answer

The answer of Innovations that lower production costs or create...

Question 61

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.Test Bank: I Topic: Technological Advance and Competition

Accepted Answer

The answer of The process by which new firms and...

Question 62

(Last Word) Eliminating patents would tend to&#10;A)stimulate innovation in all industries.&#10;B)discourage innovation in all industries.&#10;C)encourage innovation in products made up of many different technologies but discourage innovation of easy-to-copy products requiring large R&D costs to create.&#10;D)discourage innovation in products made up of many different technologies but encourage innovation of easy-to-copy products

Accepted Answer

The answer of (Last Word) Eliminating patents would tend to&#10;A)stimulate...

Question 63

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a&#10;A)fixed-price industry.&#10;B)price-controlled industry.&#10;C)constant-cost industry.&#10;D)price-taking industry.

Accepted Answer

The answer of If the entry or exit of firms...

Question 64

After all long-run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum.

Accepted Answer

The answer of After all long-run adjustments have been completed,...

Deck 11: Pure Competition in the Long Run