econ final

Refer to the diagram . The equilibrium price and quantity in this market

1.00 & 2.00

Which of the following is true concerning purely competitive industries?

2. In the short run, firms may incur economic losses or economic profits, but in the long run they earn normal profits

Refer to the short-run data in the accompanying graph. The profit-maximizing output for this firm is

320 units

Assume that the demand curve for product C is downward-sloping the price of C falls from $2.00 to $1.75

a larger quantity of C will be demanded.

The primary force encouraging the exit of firms from a purely competitive industry is

economic losses incurred by firms already in the industry

A purely competitive firm by definition can only earn economic profits in the long-run

false

Accounting profits are identical to economic profits

false

Microeconomics is the study of large economic aggregates such as unemployment, inflation, and the supply of money

false

When new firms enter a purely competitive industry, the market supply curve will shift to the left

false

The demand curve faced by a purely competitive firm

same as marginal revenue

The production possibilities curve shows

the various combinations of two goods that can be produced when society employs all of its scarce resources.

Firms seek to maximize

total profit

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

true

If demand increases and supply simultaneously decreases , equilibrium price will

true

Which of the following best expresses the law of diminishing marginal utility?

The more of a good people consume, the less satisfaction they derive from consuming an additional unit

The rationing function of prices refers to

capacity of a comp. market to equalize demanded and quantity supplied

Which of the following will not cause the demand for product K to change?

change in the price of product K

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

new firms will be attracted

In a purely competitive industry, an optimal allocation of scarce resources occurs when

p = mc

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

p=mc=minimum ATC

The demand schedule or curve confronted by the individual, purely competitive firm is

perfectly horizontal

The demand curve shows the relationship between

price and quantity demanded

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 market supply will

supply will decrease

Other things equal, if the price of a key resource used to produce product X falls, the

supply will increase, or the supply curve of product x will shift to the right

Opportunity costs exist because

the decision to engage in one activity means forgoing some other activity.

In the accompanying diagram, at output C, production will result in an economic profit

true

Long-run adjustments in purely competitive markets primarily take the form of entry or exit of firms in the market

true

The law of demand states that at the price of a good goes up, consumers will demand a lower quantity

true

When average costs are increasing, marginal costs are greater than average costs

true

Increasing marginal costs of production explain

why the supply curve is upward sloping

Refer to the diagram. An improvement in technology will

PP1 to. PP2

Which of the following is characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output

In the provided diagram, the profit-maximizing level of output

is N

Refer to the diagram. A surplus of 160 units would be encountered if the price was

$1.60

refer to the diagram. The vertical distance between ATC and AVC reflects

AVERAGE FIXED COST

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

also 5

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?

decrease in demand

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than low

Graphically, the market demand curve is

steeper than any individual demand curve that is part of it