Chapter 11

Refer to the graph above, showing the long-run supply and demand curves in a purely competitive market. We know that when this market reaches equilibrium, the marginal: A. Cost equals marginal benefit B. Benefit exceeds marginal cost C. Cost exceeds marginal benefit D. Cost equals zero

A

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 long run the market's: A. Supply curve will shift to the left B. Supply curve will shift to the right C. Demand curve will shift to the left D. Demand curve will shift to the right

A

The graph above depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would: A. Increase B. Decrease C. Stay constant D. Be set by the government

A

What happens in a decreasing-cost industry when some firms leave and the industry's output contracts? A. The average cost will increase B. The average cost will decrease C. The total cost will decrease D. The product price will decrease

A

Which of the following is true of normal profits? A. They are necessary to keep a firm in the industry in the long run B. They are zero under pure competition in the long run C. They are excluded from a firm's costs of production D. They are what attract other firms to enter an industry

A

he long-run supply curve would be perfectly elastic when: A. An increase in demand does not cause a change in product price B. An increase in demand causes an increase in product price C. A decrease in demand causes an increase in short-run supply D. A decrease in demand causes an increase in product price

A

Which of the following statements about a competitive firm is correct? A. To maximize profits a competitive firm should produce at that output at which total revenue is greatest B. In long-run equilibrium a competitive firm will produce at the point of minimum average costs C. A competitive firm will produce in the short run so long as total receipts are sufficient to cover total fixed costs D. A competitive firm will close down in the short run whenever price is less than the minimum attainable average total cost

B

A patent is the legal right granted to a firm that allows it to: A Make copies of other firm's products B. Be the sole buyer of a particular product or resource C. Sell its new product exclusively for a set number of years D. Be the exclusive distributor of a particular imported product

C

All of the following statements apply to a purely competitive market in the long run, except: A. In the long run, all inputs are variable in quantity B. Firms can expand their plant capacities in the long run C. Total fixed costs remain constant even when output expands in the long run D. Firms may enter or leave the industry in the long run

C

When there is allocative efficiency in a purely competitive market for a product, the minimum price producers are willing to accept is: A. Less than marginal benefit B. Greater than marginal cost C. Equal to the amount of efficiency or deadweight losses D. Equal to the maximum price consumers are willing to pay

D