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 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. |
Which of the following statements is correct? |
Economic profits induce firms to enter an industry; losses encourage firms to leave. |
When a purely competitive firm is in long-run equilibrium: |
price equals marginal cost. |
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. |
Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then: |
there is no tendency for the firm’s industry to expand or contract. |
A purely competitive firm is precluded from making economic profits in the long run because: |
of unimpeded entry to the industry. |
In a decreasing-cost industry: |
lower demand leads to higher long-run equilibrium prices. |
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 down sloping. This suggests that: |
it is a decreasing-cost industry. |
The MR = MC rule applies: |
in both the short run and the long run. |
A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is: |
producing less output than allocative efficiency requires. |
The term productive efficiency refers to: |
the production of a good at the lowest average total cost. |
Under pure competition in the long run: |
both allocative efficiency and productive efficiency are achieved. |
The diagram portrays: |
the equilibrium position of a competitive firm in the long run. |
Creative destruction is: |
the process by which new firms and new products replace existing dominant firms and products. |
The theory of creative destruction was advanced many years ago by: |
Joseph Schumpeter. |
Micro Econ Chapter 11
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