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 |
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 |
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 |