Micro Econ (dr. Yaber) module 10, 11

The long-run equilibrium of a purely competitive industry ensures: a. Consumer and producer surplus is maximized. b. Only producer surplus is maximized. c. Only consumer surplus is maximized. d. Consumer and producer surplus is minimized.

a. Consumer and producer surplus is maximized

Productive efficiency refers to: a. Cost minimization, where P = minimum ATC b. Setting TR = TC c. Maximizing profits by producing where MR = MC d. Production, where P = MC

a. Cost minimization, where P = minimum ATC

When a purely competitive industry is in long-run equilibrium, which statement is true? a. Price and average total cost are equal b. Marginal revenue is greater than price c. Average total cost is less than marginal cost d. Marginal cost is at its maximum level

a. Price and average total cost are equal

For a purely competitive firm total revenue: a. has all of these characteristics. b. graphs as a straight upsloping line from the origin. c. is price times quantity sold. d. increases by a constant absolute amount as output expands.

a. has all of these characteristics

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then: a. new firms will enter this market. b. there must be price fixing by the industry's firms. c. the selling price for this firm is above the market equilibrium price. d. some existing firms in this market will leave.

a. new firms will enter this market

In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: a. A point of minimum economic loss b. A break-even point c. A point of maximum economic profit d. A point where MR = MC

b. A break-even point

The long-run supply curve in a constant-cost industry would be: a. Vertical b. Horizontal c. Upsloping d. Downsloping

b. Horizontal

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

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

In the short run the individual competitive firm's supply curve is that segment of the: a. marginal revenue curve lying below the demand curve. b. marginal cost curve lying above the average variable cost curve. c. average variable cost curve lying below the marginal cost curve. d. marginal cost curve lying between the average total cost and average variable cost curves.

b. marginal cost curve lying above the average variable cost curve

In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: a. Marginal cost is greater than average revenue b. Average fixed cost is greater than average revenue c. Total revenue is less than total variable costs d. Average cost is greater than average revenue

c. Total revenue is less than total variable costs

For a purely competitive seller, price equals: a. total revenue divided by output. b. average revenue. c. all of these. d. marginal revenue.

c. all of these

Creative destruction a. contributes to the production of new goods. b. stimulates growth. c. does all of the above. d. forces firms to be innovative.

c. does all of the above

When a purely competitive firm is in long-run equilibrium: a. marginal revenue exceeds marginal cost. b. minimum average total cost is less than the product price. c. price equals marginal cost. d. total revenue exceeds total cost.

c. price equals marginal cost.

In the short-run purely competitive firms earn ________ in equilibrium while in the long-run firms earn ________ in equilibrium, respectively. a. normal profits; economic profits b. profits; normal profit c. profits or losses; profits or losses

c. profits or losses; profits or losses

Resource costs increase in a purely competitive industry. This change will result in a(n): a. Decrease in average variable cost for a firm in the industry b. Increase in average fixed cost for a firm in the industry c. Decrease in the marginal cost curve for a firm in the industry d. Decrease in the short-run supply curve for a firm in the industry

d. Decrease in the short-run supply curve for a firm in the industry

The wage rate increases in a purely competitive industry. This change will result in a(n): a. Decrease in average variable cost for a firm in the industry b. Decrease in average total cost for a firm in the industry c. Increase in short-run supply curve for a firm in the industry d. Increase in the marginal cost curve for a firm in the industry

d. Increase in the marginal cost curve for a firm in the industry

An economy is producing at the least-cost rate of production when: a. Marginal cost is greater than average total cost b. Marginal revenue is greater than price c. Price and marginal revenue are equal d. Price and the minimum average total cost are equal

d. Price and the minimum average total cost are equal

A firm reaches a break-even point (normal profit position) where: a. marginal cost intersects the average variable cost curve. b. total revenue equals total variable cost. c. marginal revenue cuts the horizontal axis. d. total revenue and total cost are equal.

d. total revenue and total cost are equal.

A purely competitive firm's short-run supply curve is: a. upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve. b. perfectly elastic at the minimum average total cost. c. upsloping only when the industry has constant costs. d. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

d. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

In the short run a purely competitive firm that seeks to maximize profit will produce: a. where the demand and the ATC curves intersect. b. that output where economic profits are zero. c. at any point where the total revenue and total cost curves intersect. d. where total revenue exceeds total cost by the maximum amount.

d. where total revenue exceeds total cost by the maximum amount