Ch 11 smart book and homework
In this graph, the equilibrium price is $50 and is equal to a firm's average total cost. Therefore, the firm is earning ______ economic profits, or a(n) ______ profit.
zero; normal
Which of the following does an increasing-cost industry experience?
An upward shifting average total cost (ATC) curve as the industry expands. A downward shifting average total cost (ATC) curve as the industry contracts.
? profits in a competitive industry will attract new firms to enter the industry.
Economic
Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?
In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost. In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost. Price or marginal revenue will settle where it is equal to minimum average total cost.
Which of the following describes consumer surplus?
It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product.
What will happen to a firm that finds a way to lower production costs through better technology or improved organization?
Its profits will increase.
Which of the following does a decreasing-cost industry experience?
Lower costs as industry output expands.
What are the effects of the "invisible hand" in a purely competitive economy?
Maximum profits for individual producers Resource allocation that maximizes consumer satisfaction
Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?
Price or marginal revenue will settle where it is equal to minimum average total cost. In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost. In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost.
Which of the following occur only in the long-run?
The entry and exit of firms The expansion or contraction of plant capacity
Which of the following statements are true about allocative efficiency?
The goods and services produced are those that society most wants to consume. The marginal cost and marginal benefit of producing each unit of output is equal. It is impossible to produce net gains for society by altering the mix of goods and services produced.
As firms exit the industry in the long run, market price rises and the losses for the remaining firms begin to subside. Firms will continue to exit until which of the following happens?
There are no economic losses.
An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______.
constant-cost industry
An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______.
decrease; losses
If demand for the good decreases creating economic losses, firms will exit the industry in the long run. As firms exit in the long run, industry supply will ______ and market price will _____
decrease; rise
Economists maintain that new firms are attracted into an industry due to:
economic profits
Higher resource prices will result in ______ total costs.
higher average
The entry of new firms entering an increasing-cost industry increase resource prices particularly:
in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand
Productive efficiency requires that goods be produced
in the least costly way.
Productive efficiency requires that goods be produced:
in the least costly way.
New firms entering an increasing-cost industry will usually (increase/decrease) resource prices.
increase
An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry
increasing-cost
Strategies attempted by firms for increasing their profits include:
owering production costs through better technology. developing a new product that is popular with consumers. lowering production costs through improved business organization.
There is no incentive for firms to enter or exit the industry in the long run when ______.
price equals minimum average total cost MR = MC firms earn a normal profit
All firms in a(n) ______ industry share the same basic efficiency characteristics.
purely competitive
A competitive firm may realize an economic profit or loss in the run but will earn only a normal profit in the run.
short;long
After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______.
total cost where product price is equal to marginal revenue
A decreasing-cost industry is one in which firms experience ______ costs as their industry ______.
lower; expands higher; contracts
If there are losses in the long run, what adjustments will take place?
Firms will exit the industry until losses are eliminated.
In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in:
resource supplies. technological changes. consumer tastes.
What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets?
Externalities
The entry and the exit of firms in an industry are considered to be -run adjustments.
long
A constant-cost industry is one where ______ will not affect resource prices and production costs.
expansion or contraction
An industry whose average total cost curve shifts upward as the industry expands and shifts downward as the industry contracts is known as a(n) ______ industry.
increasing-cost
The long run, every purely competitive firm tends to operate at its ______.
minimum ATC
In the long run, a purely competitive firm will only earn a ______ profit.
normal
