Chapter 11

If for a firm P = minimum ATC = MC then:

Both allocative efficiency and productive efficiency and being achieved.

By producing at output level Q:

Both productive and allocative efficiency are achieved.

A purely competitive firm:

Cannot earn economic profit in the long run

If this competitive firm produces output Q, it will:

Earn a normal profit

The primary force encouraging the entry of the new firms into a purely competitive industry is:

Economic profits earned by firms already in the industry.

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

Fail to maximize profit and resources will be over overallocated to the product.

Which of the following distinguishes the short run from the long run in the pure competition?

Firms can enter and exit the market in the long run but not in the short run.

A constant cost industry is one in which:

If 100 units can be produced for $100, then $150 can be produced for $150, $200 for $200 and so forth.

The MR = MC rule applies:

In both the short and the long run.

Which of the following is true concerning purely competitive industries?

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

At the long run equilibrium level of output, this firm's total revenue:

Is $40

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit then:

New firms will enter this market.

Allocative efficiency is achieved when the production of a good occurs where:

P = MC

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

P = MC = minimum ATC

Which of the following will not holf trrue for a competitive firm in long-run equilbrium?

P equals AFC

Long run competitive equilibrium:

Results in zero economic profits.

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 firm:

Should continue producing in the short run but leave the industry in the long run if the situation persists.

The diagram above portarys

The equilibrium position of a competitive firm in the long run.

The term productive efficiency refers to:

The production of a good at the lowest average total cost.