econ quiz 7

-Which of the following distinguishes the short run from the long run in pure competition?

Firms can enter and exit the market in the long run, but not in the short run

-The MR = MC rule applies

Firms in all types of industires

-If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then

New firms will enter this market

-Long-run competitive equilibrium

Results in zero econimic profits

-The primary force encouraging the entry of new firms into a purely competitive industry is

economic profits earned by firms already in the industry.

-Entrepreneurs in purely competitive industries

innovate to lower operating costs and generate short-run economic profits.

-Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm

should continue producing in the short run, but leave the industry in the long run if the situation persists.

-In a purley comettive industry

there may be economic profits in the short run, but not in the long run.

-For a purely competitive producer, the short-run supply curve is

777

-Refer to the above table. If the market price for the firm's product is $12, the competitive firm will produce

99

-Which of the following is not a characteristic of pure competition?

A price strageties by firms

-A purely competitive seller is

A price taker

-Which of the following industries most closely approximates pure competition?

Agurculture

-For a purely competitive seller, price equals

All of these

-The process by which new firms and new products replace existing dominant firms and products is called

Creative destruction

-The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

Downsloping, perfectly elastic

-Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

P = MC = minimum ATC.

-Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is

P2

-A purely competitive firm

cannot earn economic profit in the long run.

-Marginal revenue is the

change in total revenue associated with the sale of one more unit of output.