econ chapter 11

average cost

When a purely competitive firm is in long-run equilibrium, price is equal to: Minimum ____ ____ , and also to marginal cost

average total

When a purely competitive industry is in long-run equilibrium, which statement is true? Price and ____ ____ cost are equal

Sell

A patent is the legal right granted to a firm that allows it to: _____ its new product exclusively for a set number of years

Downward-sloping

An industry that has increasing returns to scale and fixed factor prices will have a long-run supply curve that is: _______ slopping

initial price output

Assume a purely competitive constant-cost industry is initially at long-run equilibrium. Now suppose that a decrease in consumer demand occurs. After all the long-run adjustments have been completed, the new equilibrium price: Will be the same as the ____ , and the ____ will be less

total

Assume a purely competitive decreasing-cost industry is initially in long-run equilibrium but then there is a decrease in consumer demand. After all economic adjustments to this new situation have taken place, product price will be: Higher, but ____ output will be lower

fall

Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are experiencing economic profits. In the long run, we can expect: New firms to enter causing the market price of soybeans to ____

decrease profits

Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is earning negative economic profits. In the long run, we can expect the market: Supply to _____ and firms' to increase

true

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the market price of the product. true or false

false

Efficiency or deadweight losses occur in purely competitive markets when P = MC = lowest ATC. true or false

true

From the viewpoint of a firm, competition can come even from other firms that are not in the same industry. true or false

higher

If a competitive firm successfully adopts a better production technology ahead of the others, then: Its profits will become _____ than the others'

shut down stay

If a purely competitive firm is currently facing a situation where the price of its product is lower than the average variable cost, but it believes that the market demand for its product will increase soon, then: The firm will ___ ___ in the short run, but ____ in the industry in the long run if it expects the product price to rise high enough soon

Constant

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a: ______ -cost industry

decreases

If the long-run supply curve is upward-sloping, it indicates that resource prices fall when: Production in the industry _____ in the long run

Marginal Revenue Average total Cost

In long-run equilibrium a purely competitive firm will operate where price is: Equal to ___ ____ , Marginal cost , and minimum ____ ___ ___

true

In pure competition, resources are optimally allocated when production occurs at the output level where P = MC. true or false

false

In the long run for a purely competitive market, firms may enter or exit the industry but the firms that stay in the industry will maintain their initial plant sizes. true or false

false

In the long run, pure competition forces firms to produce at the minimum possible average total cost and the firms will charge a product price equal to that cost. true or false

true

It is possible for a competitive firm that is maximizing profits in the short run to make its profits even bigger in the long run by expanding its plant. true or false

demand

Not a factor that automatically pushes firms in pure competition to earn only normal profits in the long run? Changes in the market ____

true

Producer surplus is the difference between the market price a producer receives for a product and the minimum price producers are willing to accept for a product. true or false

equals

Pure competition produces a socially optimal allocation of resources in the long run because: Marginal cost ______ price

decrease increase

Refer to the above graphs for a competitive market in the short run. What will happen in the long run to industry supply and the equilibrium price P of the product? S will ________ P will _______

zero

Refer to the above graphs for a competitive market in the short run. What will happen to the firm's economic profits as long-run market adjustments occur? Profits will increase to ______

b

Refer to the graph above representing the purely competitive market for a product. When the market is at equilibrium, the producer surplus would be represented by the area:

c

Refer to the graph above representing the purely competitive market for a product. When the market is at equilibrium, the total opportunity cost of producing the equilibrium output level would be represented by the area:

abc

Refer to the graph above representing the purely competitive market for a product. When the market is at equilibrium, the value of the total benefits derived by consumers from this product would be represented by the area: ___ + ___ + ____

Benefit Q2

Refer to the graph above, showing the long-run supply and demand curves in a purely competitive market. We know that in this market, the marginal: ____ exceeds marginal cost at the output level of ____

marginal benefit

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: Cost equals ____ ____

Constant

Refer to the graph showing the long-run supply and demand curves in a purely competitive market. The curves suggest that in this industry, the dollars' worth of other products that have to be sacrificed in order to produce each unit of the output of this industry is:

decrease

Refer to the graphs above for a purely competitive market in the short run. The graphs suggest that as long run adjustments consequently occur, the firms in the industry will find that: Profits will _____

marginal cost

Resources are efficiently allocated when production occurs at that output level where price: Equals _____ _____

left

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: Supply curve will shift to the _____

false

The costs of competition's creative destruction are often widespread, while the benefits often accrue to only a few. true or false

true

When a competitive firm is in long-run equilibrium, its accounting profits are greater than zero. true or false

false

When a profit-maximizing competitive firm decides to produce at a loss because its price is below average cost but above average variable cost, that is a long-run decision. true or false

marginal revenue

When a purely competitive firm is in long-run equilibrium, it is said to achieve allocative efficiency because: Marginal cost equals ____ _____

Decreasing

The industry indicated by the graphs above would be a(n): ________ -cost industry

rise contracts

The industry represented by the graph above must be one where: Resource prices ____ when the industry _______

contracts

The industry represented by the graph above must be one where: Resource prices fall when the industry ______

ATC down

The long-run market supply curve would be downward-sloping if the representative firms': ____ curves shift ______ as the industry expands

Increasing-cost upward

The long-run supply curve for a purely competitive: ______-____ industry will be _____-sloping

true

The operation of the "invisible hand" means the pursuit of private interests promotes social interests in pure competition. true or false

zero

The representative firm in a purely competitive industry: Will earn ____ economic profit in the long run

true

The short-run supply curve of a purely competitive industry tends to be steeper than the long-run supply curve. true or false

Combined amount of consumer and producer surpluses is at its minimum possible

When a purely competitive market is at its long-run equilibrium, then all of the following are true, except: -Marginal benefit of the last unit of the product equals the marginal cost of producing that unit -Combined amount of consumer and producer surpluses is at its minimum possible -Maximum willingness of buyers to pay for the last unit of the product equals the minimum acceptable price for the seller of that unit -Price equals marginal cost, and they are equal to the lowest attainable average cost of production

Price

Which is true of a purely competitive firm in the long-run equilibrium? ______ equals marginal cost

Profits long run

not an assumption that we make in analyzing pure competition in the long run ____ are not relevant to firm behavior anymore, because competitive firms earn zero profits in the ___ ____

false

pure competition in the long run The long-run adjustment in pure competition happens through shifts in the industry demand curve true or false