ECON exam 2

In the short run, a perfectly competitive firm will shut down if:

total revenue is less than total variable cost

In a perfectly competitive market, a firm operating in the long run is forced by competition to adjust its scale of operation:

until average cost is minimized

The long-run supply curve of firms in an increasing cost industry is:

upward sloping

The short run supply curve of a firm is ____ sloping

upward sloping

Allocative efficiency occurs when firms produce the output corresponding to the point:

where marginal benefit equals marginal cost.

Which of the following is a similarity between a monopoly firm and a perfectly competitive firm?

The demand curve is the average revenue curve for both firms.

Which of the following best describes a production function?

The relationship between the amount of resources employed and the total output produced by a firm.

If average variable cost is falling, we know that:

marginal cost is definitely less than average variable cost.

For a monopolist, _____.

marginal revenue is less than average revenue

The demand curve faced by a monopolist is the same as the:

market demand curve

If a perfectly competitive firm experiences a permanent increase in demand, ____.

market supply increases but the equilibrium price remains the same in the long run

If a typical perfectly competitive firm earns an economic profit in the short run, _____.

new firms enter in the long run

_____ efficiency occurs when a firm produces at the minimum point on its long-run average cost curve.

productive

_____ is maximized when the marginal cost of production equals the marginal benefit to consumers.

social wellfare

The perfectly competitive firm's supply curve is:

that portion of the marginal cost curve that intersects and rises above the average variable cost curve.

The cost curve that shows the lowest per-unit cost of producing any given level of output is called:

the average cost curve

_____ will ensure that each firm produces at the minimum point of its long-run average cost curve in a perfectly competitive market.

the entry and exit of firms

When a firm experiences decreasing marginal returns, _____.

the marginal cost of output increases

The rising marginal cost curve intersects:

the minimum points of both the average variable cost and average total cost curves.

Which of the following is true of a constant cost industry?

Each firm's long-run average cost curve does not shift as industry output changes

Once decreasing marginal returns set in a production process, _____ declines.

Marginal Product

Which of the following is true of a perfectly competitive market

Marginal revenue equals market price

Identify a statement that is true of the short run.

Output can be changed in the short run only by adjusting variable resources.

If firms under perfect competition earn positive economic profits in the short run, which of the following will occur in the long run?

Some firms will enter the industry, increasing the market supply and driving down market price until economic profits are eliminated, and there is no additional motive for entry.

Which of the following industry types features a horizontal long-run supply curve?

a constant-cost industry

A perfectly competitive firm should produce in the short run:

as long as price exceeds average variable cost

Economists define the short run as a time period in which:

at least one input is fixed.

In a constant-cost industry, _____.

each firm's per-unit costs are independent of the number of firms in an industry

The short-run industry supply curve is the:

horizontal sum of all the firms' short-run supply curves.

If marginal revenue exceeds marginal cost, then a profit-maximizing perfectly competitive firm should:

increase output

Which of the following is a way in which firms can achieve economies of scale?

increasing the scale of operation

In order to increase total revenue, a profit-maximizing monopolist should never expand output to the:

inelastic portion of the demand curve for a good.

For a monopolist, marginal revenue is:

less than price

The _____ curve shows the relationship between price and quantity supplied once firms fully adjust to any short-term economic profit or loss resulting from a change in demand.

long run industry supply curve