Chap 11 econ

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

economic profits earned by firms already in the industry

In a purely competitive industry

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

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.

Which of the following is true concerning purely competitive industries?

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

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 economic profits

We would expect an industry to expand if firms in that industry are

earning economic profits

Which of the following statements is correct?
A. Economic profits induce firms to enter an industry; losses encourage firms to leave.
B. Economic profits induce firms to leave an industry; profits encourage firms to leave.
C. Economic profits and losses have no significant impact on the growth or decline of an industry.
D. Normal profits will cause an industry to expand.

A

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price

and industry output will be less than the initial price and output

Which of the following statements is correct?
A. The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
B. The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
C. The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run supply curve.
D. The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping

A

A constant-cost industry is one in which

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

higher and total output will be larger than originally

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

leave the industry and price and output will both decline

A purely competitive firm

cannot earn economic profit in the long run

A constant-cost industry is one in which:

resource prices remain unchanged as output is increased.

An increasing-cost industry is associated with

an upsloping long-run supply curve

An increasing-cost industry is the result of:

higher resource prices which occur as the industry expands

A purely competitive firm is precluded from making economic profit in the long run because:

of unimpeded entry to the industry

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:

increase, output to increase, price to decrease, and profits to decrease

A decreasing-cost industry is one in which:

input prices fall or technology improves as the industry expands

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:

the LCD television industry is a decreasing-cost industry.

Suppose that an industry's long-run supply curve is downsloping. This suggests that:

it is a decreasing-cost industry.

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result:

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

The MR = MC rule applies:

in both the short run and the long run.

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

rise as the industry expands.

Allocative efficiency is achieved when the production of a good occurs where:

P = MC

Resources are efficiently allocated when production occurs where

price is equal to marginal cost.

The term productive efficiency refers to:

the production of a good at the lowest average total cost.

If the price of product Y is $25 and its marginal cost is $18:

resources are being underallocated to Y.

The term allocative efficiency refers to:

the production of the product-mix most desired by consumers.

Under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved.

If for a firm P = minimum ATC = MC, then:

both allocative efficiency and productive efficiency are being achieved.

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

P = MC = minimum ATC.

Entrepreneurs in purely competitive industries

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

Innovations that lower production costs or create new products

often generate short-run economic profits that do not last into the long run.

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

creative destruction

Creative destruction is

the process by which new firms and new products replace existing dominant firms and products.

Patents are most likely to infringe on innovation

for products that incorporate many different technologies into a single product.

Patent trolls:

buy up patents in order to collect royalties and sue other companies

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Chap 11 econ

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

economic profits earned by firms already in the industry

In a purely competitive industry

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

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.

Which of the following is true concerning purely competitive industries?

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

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 economic profits

We would expect an industry to expand if firms in that industry are

earning economic profits

Which of the following statements is correct?
A. Economic profits induce firms to enter an industry; losses encourage firms to leave.
B. Economic profits induce firms to leave an industry; profits encourage firms to leave.
C. Economic profits and losses have no significant impact on the growth or decline of an industry.
D. Normal profits will cause an industry to expand.

A

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price

and industry output will be less than the initial price and output

Which of the following statements is correct?
A. The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
B. The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
C. The long-run supply curve for a purely competitive industry will be less elastic than the industry’s short-run supply curve.
D. The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping

A

A constant-cost industry is one in which

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

higher and total output will be larger than originally

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

leave the industry and price and output will both decline

A purely competitive firm

cannot earn economic profit in the long run

A constant-cost industry is one in which:

resource prices remain unchanged as output is increased.

An increasing-cost industry is associated with

an upsloping long-run supply curve

An increasing-cost industry is the result of:

higher resource prices which occur as the industry expands

A purely competitive firm is precluded from making economic profit in the long run because:

of unimpeded entry to the industry

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:

increase, output to increase, price to decrease, and profits to decrease

A decreasing-cost industry is one in which:

input prices fall or technology improves as the industry expands

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:

the LCD television industry is a decreasing-cost industry.

Suppose that an industry’s long-run supply curve is downsloping. This suggests that:

it is a decreasing-cost industry.

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result:

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

The MR = MC rule applies:

in both the short run and the long run.

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

rise as the industry expands.

Allocative efficiency is achieved when the production of a good occurs where:

P = MC

Resources are efficiently allocated when production occurs where

price is equal to marginal cost.

The term productive efficiency refers to:

the production of a good at the lowest average total cost.

If the price of product Y is $25 and its marginal cost is $18:

resources are being underallocated to Y.

The term allocative efficiency refers to:

the production of the product-mix most desired by consumers.

Under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved.

If for a firm P = minimum ATC = MC, then:

both allocative efficiency and productive efficiency are being achieved.

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

P = MC = minimum ATC.

Entrepreneurs in purely competitive industries

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

Innovations that lower production costs or create new products

often generate short-run economic profits that do not last into the long run.

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

creative destruction

Creative destruction is

the process by which new firms and new products replace existing dominant firms and products.

Patents are most likely to infringe on innovation

for products that incorporate many different technologies into a single product.

Patent trolls:

buy up patents in order to collect royalties and sue other companies

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