mirco chapter 11

Why will firms choose not to enter an industry when marginal revenue, marginal cost, price, and average total cost are equal? Multiple choice question. Existing firms are earning economic profits. Existing firms are earning only normal profits. Firms are losing money. Any increase in production will shift the demand curve left.

Existing firms are earning only normal profits.

The transformative effects of competition are often referred to as: Multiple choice question. creative destruction creative threat innovation transformative innovation technological advance

creative destruction

Select all that apply A decreasing-cost industry is one in which firms experience ______ costs as their industry ______. (Check all that apply.) Multiple select question. lower; expands higher; contracts higher; expands lower; contracts

lower; expands higher; contract

In the long run, a purely competitive firm will only earn a ______ profit. Multiple choice question. economic negative zero normal constant

normal

A purely competitive market leads to the efficient use of: Multiple choice question. money as a medium of exchange supply and demand society's unlimited resources society's scarce resources

society's scarce resources

Which of the following does a decreasing-cost industry experience? Multiple choice question. Higher costs as industry output remains constant. Higher costs as industry output expands. Lower costs as industry output contracts. Lower costs as industry output expands.

Lower costs as industry output expands.

Which type of market produces the most efficient use of society's resources? Multiple choice question. Oligopoly Monopolistic competition Monopoly Pure competition

Pure competition

A constant-cost industry is one where ______ will not affect resource prices and production costs. Multiple choice question. inflation or interest rates supply or demand expansion or contraction investment or capital

expansion or contraction

Select all that apply There is no incentive for firms to enter or exit the industry in the long run when ______. Multiple select question. firms earn a normal profit price equals minimum average total cost MR = MC firms earn a loss

firms earn a normal profit price equals minimum average total cost MR = MC

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

Select all that apply Economic profit will fall to zero and firms will choose not to enter an industry when price is equal to which of the following factors? Multiple select question. Marginal cost Marginal utility Minimum average total cost

Marginal cost Minimum average total cost

A decreasing-cost industry is one in which firms experience ______ costs as their industry ______. (Check all that apply.) Multiple select question. lower; expands lower; contracts higher; expands higher; contracts

lower; expands higher; contracts

Select all that apply Strategies attempted by firms for increasing their profits include: Multiple select question. lowering production costs through better technology. developing a new product that is popular with consumers. increasing product prices to increase revenues. lowering production costs through improved business organization.

lowering production costs through better technology. developing a new product that is popular with consumers. lowering production costs through improved business organization.

Select all that apply Which of the following does an increasing-cost industry experience? Multiple select question. A downward shifting average total cost (ATC) curve as the industry expands. An upward shifting average total cost (ATC) curve as the industry contracts. A downward shifting average total cost (ATC) curve as the industry contracts. An upward shifting average total cost (ATC) curve as the industry expands.

A downward shifting average total cost (ATC) curve as the industry contracts. An upward shifting average total cost (ATC) curve as the industry expands.

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets? Multiple choice question. Allocative efficiency Economic surplus Externalities Normal profits

Externalities

What must be eliminated or avoided if the "invisible hand" is to produce socially optimal outcomes in purely competitive markets? Multiple choice question. Economic surplus Externalities Normal profits Allocative efficiency

Externalities

True or false: Higher resource prices create lower ATC and cause an upward shift of the long-run ATC curve. True false question. True False

False

________ (one word) efficiency means that resources are distributed among firms and industries to yield a mix of goods and services that is most wanted by society.

allocative

Select all that apply Competitive market economies generate ______. Multiple select question. allocative efficiency productive efficiency quality efficiency capital efficiency time efficiency

allocative efficiency productive efficiency

An industry where expansion or contraction will not affect resource prices and production costs is known as a(n) ______. Multiple choice question. constant-cost industry decreasing-cost industry economies-of-scale industry increasing-cost industry

constant-cost industry

The difference between the maximum price a consumer is willing to pay for a product and the actual price that they do pay is known as _____. Multiple choice question. consumer surplus deadweight loss producer surplus economic surplus

consumer surplus

An unfavorable shift or ______ in demand will upset the original industry equilibrium and produce ______. Multiple choice question. increase; profits increase; losses decrease; profits decrease; losses

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 ______. Multiple choice question. decrease; rise increase; fall increase; rise decrease; fall

decrease; rise

Creative _______ captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business.

destruction

Higher resource prices will result in ______ total costs. Multiple choice question. higher marginal lower marginal higher average lower average

higher average

The shape of the long-run supply curve for a constant-cost industry can best be described as: Multiple choice question. horizontal downward-sloping vertical upward-sloping

horizontal

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. Multiple choice question. increasing-cost sunk-cost constant-cost decreasing-cost

increasing-cost

The entry and the exit of firms in an industry are considered to be _____-run adjustments.

long

If there are losses in the long run, what adjustments will take place? Multiple choice question. Firms will exit the industry until losses are eliminated. Firms will enter the industry until profits are earned. Firms will exit the industry until marginal cost is minimized. Firms will not make any adjustments and the market price will rise.

Firms will exit the industry until losses are eliminated.

Select all that apply 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? Multiple select question. In the long run, an equality occurs where price equals marginal revenue, which equals minimum average total cost. Price or marginal revenue will settle where it is equal to minimum average variable 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.

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.

Select all that apply In an increasing-cost industry, which of the following occur when an increase in product demand results in economic profits and attracts new firms to the industry? Multiple select question. Resource demand decreases, resulting in a leftward shift in each firm's ATC. Market supply decreases, driving up prices. Increased resource demand drives up resource prices. Each firm's ATC curve shifts upward.

Increased resource demand drives up resource prices. Each firm's ATC curve shifts upward.

Which of the following describes consumer surplus? Multiple choice question. It is the difference between the maximum price that consumers are willing to pay for a product and the market price for that product. By replacing "consumers" in the sentence with "producers", this would define producer surplus. It is the difference between the minimum price that consumers are willing to pay for a product and the market price for that product. It is the difference between the maximum price that producers are willing to receive for a product and the market price for that product.

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? Multiple choice question. Its demand curve will shift left. Its profits will increase. It will fail to compete and will be forced out of the industry. It will experience economic losses.

Its profits will increase.

What will happen to a firm that finds a way to lower production costs through better technology or improved organization? Multiple choice question. Its profits will increase. Its demand curve will shift left. It will fail to compete and will be forced out of the industry. It will experience economic losses.

Its profits will increase.

_____ (Allocative/Productive) efficiency means that goods are produced in the least costly way.

Productive

Select all that apply What are the effects of the "invisible hand" in a purely competitive economy? Multiple select question. Resource allocation that maximizes consumer satisfaction A lack of incentive for innovation or product improvement Maximum profits for individual producers Inefficient depletion of scarce resources

Resource allocation that maximizes consumer satisfaction Maximum profits for individual producers

Select all that apply Which of the following occur only in the long-run? Multiple select question. Price changes in response to demand The entry and exit of firms The reduction of output to zero The expansion or contraction of plant capacity

The entry and exit of firms The expansion or contraction of plant capacity

Which of the following best explains why the long-run supply curve of a constant-cost industry is perfectly elastic? Multiple choice question. The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum AVC The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum TC The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum AFC

The entry and exit of firms changes industry output bringing the price back to its original level, where it is equal to the constant minimum ATC

Select all that apply Which of the following statements are true about allocative efficiency? Multiple select question. Producer surplus is maximized and consumer surplus is minimized. The goods and services produced are those that society most wants to consume. It is impossible to produce net gains for society by altering the mix of goods and services produced. The marginal cost and marginal benefit of producing each unit of output is equal.

The goods and services produced are those that society most wants to consume. It is impossible to produce net gains for society by altering the mix of goods and services produced. The marginal cost and marginal benefit of producing each unit of output is equal.

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? Multiple choice question. Economic losses increase. There are no economic losses. Price falls to zero. There is an economic profit.

There are no economic losses.

________ profits in a competitive industry will attract new firms into the industry.

economic

Economists maintain that new firms are attracted into an industry due to: Multiple choice question. economic profits total revenues normal profits accounting profits

economic profits

The entry of new firms entering an increasing-cost industry increase resource prices particularly: Multiple choice question. in industries using specialized resources whose short-run supplies do not readily increase in response to increases in resource demand in industries using specialized resources whose long-run supplies do not readily decrease in response to increases in resource demand in industries using specialized resources whose long-run supplies do not readily increase in response to decreases in resource demand in industries using specialized resources whose long-run supplies do not readily increase in response to increases in resource demand

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 ___. Multiple choice question. using the least amount of resources in the least amount of time only with nonscarce resources in the least costly way in the most costly way

in the least costly way

Productive efficiency requires that goods be produced ___. Multiple choice question. using the least amount of resources in the least costly way in the most costly way in the least amount of time only with nonscarce resources

in the least costly way

New firms entering an increasing-cost industry will usually ________ (increase/decrease) resource prices.

increase

New firms entering an increasing-cost industry will usually ______________ (increase/decrease) resource prices.

increase

In an increasing-cost industry, increases in resource prices and the minimum average total cost (ATC) are a result of ______. Multiple choice question. increases in product demand resulting in economic profits and industry expansion decreases in product demand resulting in economic losses and industry contraction increases in product supply resulting in economic losses and industry contraction decreases in product supply resulting in economic profit and industry expansion

increases in product demand resulting in economic profits and industry expansion

The long run, every purely competitive firm tends to operate at its ______. Multiple choice question. minimum ATC maximum ATC minimum AFC minimum AVC

minimum ATC

A competitive market generates _____ efficiency and ______ efficiency.

productive allocative

All firms in a(n) ______ industry share the same basic efficiency characteristics. Multiple choice question. monopolistically competitive oligopolistic monopoly purely competitive

purely competitive

All firms in a(n) ______ industry share the same basic efficiency characteristics. Multiple choice question. monopoly oligopolistic monopolistically competitive purely competitive

purely competitive

Select all that apply In purely competitive markets, efficiency can be temporarily disrupted and then restored by changes in: Multiple select question. technological changes. consumer tastes. resource supplies. consumer and producer surplus

technological changes. consumer tastes. resource supplies.

After all long-run adjustments are completed in a perfectly competitive market, output will occur at each firm's minimum average ______. Multiple choice question. variable cost where product price is equal to marginal revenue total cost where product price is equal to marginal revenue total cost where product price is less than marginal revenue total cost where product price is greater than marginal revenue

total cost where product price is equal to marginal revenue

True or false: Efficiency within pure competition can be temporarily disrupted by a change in consumer tastes. True false question.TrueFalse

true