Question 1

The competitive firm's long-run supply curve

Accepted Answer

A)   is always perfectly horizontal.
B)   includes only that part of the long-run marginal cost curve that lies above long-run average cost.
C)   includes only that part of the long-run marginal cost curve that is sloping upwards.
D)   is identical to its long-run average cost curve.E) B) and C)
F) None of the above

Question 2

Suppose notebooks are produced by a competitive constant-cost industry.Which of the following must cause Nanna's Notebooks to exit the industry in the long run?

Accepted Answer

A)   Nanna's is notified of a rent increase,but her competitors' rents are unchanged.
B)   A fire destroys half of Nanna's inventory.
C)   A photographer wins a $10,000 judgment from a lawsuit charging that Nanna's used his photos on notebook covers without permission.
D)   The price of cardboard used in notebook production rises.E) A) and B)
F) A) and C)

Question 3

When do new firms tend to enter a competitive industry?

Accepted Answer

A)   When the large firms in the industry are earning zero profit.
B)   When the smaller firms are leaving the industry.
C)   When the new entrants can earn positive profits.
D)   When there is an absence of fixed costs in the long run.E) B) and C)
F) A) and D)

Question 4

A competitive firm will shut down its operations in the short run when the market price falls below its

Accepted Answer

A)   marginal revenue.
B)   marginal cost.
C)   average cost.
D)   average variable cost.E) B) and D)
F) B) and C)

Question 5

Given two supply curves passing through the same point,the flatter one has the higher elasticity.

Accepted Answer

A) True 
 B)False

Question 6

A competitive firm's shutdown price is equal to the minimum value of the firm's

Accepted Answer

A)   marginal cost.
B)   average cost.
C)   average variable cost.
D)   fixed and sunk costs.E) A) and D)
F) B) and D)

Question 7

Bonzo is in business for himself making and selling Easter baskets.His daily cost for wicker is $100 and his daily revenue is $120.Bonzo quit his job at the Basket Weaving factory where he earned $15 a day,to enter the Easter basket business.Given this information,we know that his accounting profit

Accepted Answer

A)   is $120 and his economic profit is $105.
B)   and economic profit are both $20.
C)   is $20 and his economic profit is $5.
D)   and economic profit are both $5.E) A) and D)
F) A) and C)

Question 8

Higher costs,whether fixed or variable,will cause a leftward shift in the industry's short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 9

The annual insurance premiums for Michael's Machine Shop have permanently risen because of a recent series of thefts by employees,but there is no change in the premiums paid by Michael's competitors.If machine shops are a competitive constant-cost industry,then in the long run

Accepted Answer

A)   Michael's profit will fall to zero.
B)   Michael's Machine Shop will be driven out of business.
C)   the higher fixed costs will have no effect on Michael's pricing and production decisions.
D)   the demand for service from Michael's Machine Shop will fall.E) A) and B)
F) A) and C)

Question 10

A government subsidy would allow all firms in a competitive constant-cost industry to earn a positive profit in the long run.

Accepted Answer

A) True 
 B)False

Question 11

When a manufacturer produces 25 tables, the marginal and average costs are both equal to $50 per table. A 26th table raises the marginal cost to $54 per table and the average cost to $52 per table. What is the firm's elasticity of supply when 25 table are produced?

Accepted Answer

A)  	1/4.
B)  	1/2.
C)  	1.
D)  	2.E) A) and C)
F) A) and B)

Question 12

If all firms in a competitive industry experience an increase in marginal costs,then which of the following is most likely to occur in the short run?

Accepted Answer

A)   Firms will enter the market.
B)   Existing firms will expand production.
C)   Firms will shutdown.
D)   Firms will exit the market.E) C) and D)
F) B) and C)

Question 13

Which of the following is not necessarily true in the long for a competitive industry?

Accepted Answer

A)   Firms earn zero profits.
B)   Firms set MC = MR.
C)   A firm will not produce if the market price is less than their break-even price.
D)   The long-run supply curve is more elastic than the short-run supply curve.E) None of the above
F) A) and B)

Question 14

A perfectly competitive market has demand Q = 100 - P and supply Q = P - 10.An individual firm has MC = 10 + 2Q.

Accepted Answer

The answer of A perfectly competitive market has demand Q...

Question 15

In a competitive constant-cost industry,all firms have the same break-even price.

Accepted Answer

A) True 
 B)False

Question 16

Different firms in a competitive industry will have differing shutdown points when

Accepted Answer

A)   they have different cost curves.
B)   they are charging different prices.
C)   they entered the industry at different times.
D)   they all have identical cost curves.E) A) and B)
F) A) and C)

Exam 7: Competition

In a competitive constant-cost industry,all firms have the same break-even price.

Correct Answer
verified

A competitive firm will shut down its operations in the short run when the market price falls below its

Correct Answer
verified

When do new firms tend to enter a competitive industry?

Correct Answer
verified

A perfectly competitive market has demand Q = 100 - P and supply Q = P - 10.An individual firm has MC = 10 + 2Q.

Correct Answer
verified

The annual insurance premiums for Michael's Machine Shop have permanently risen because of a recent series of thefts by employees,but there is no change in the premiums paid by Michael's competitors.If machine shops are a competitive constant-cost industry,then in the long run

Correct Answer
verified

If all firms in a competitive industry experience an increase in marginal costs,then which of the following is most likely to occur in the short run?

Correct Answer
verified

Which of the following is not necessarily true in the long for a competitive industry?

Correct Answer
verified

Higher costs,whether fixed or variable,will cause a leftward shift in the industry's short-run supply curve.

Correct Answer
verified

Different firms in a competitive industry will have differing shutdown points when

Correct Answer
verified

Suppose notebooks are produced by a competitive constant-cost industry.Which of the following must cause Nanna's Notebooks to exit the industry in the long run?

Correct Answer
verified

A government subsidy would allow all firms in a competitive constant-cost industry to earn a positive profit in the long run.

Correct Answer
verified

The competitive firm's long-run supply curve

Correct Answer
verified

When a manufacturer produces 25 tables, the marginal and average costs are both equal to $50 per table. A 26th table raises the marginal cost to $54 per table and the average cost to $52 per table. What is the firm's elasticity of supply when 25 table are produced?

Correct Answer
verified

A competitive firm's shutdown price is equal to the minimum value of the firm's

Correct Answer
verified

Bonzo is in business for himself making and selling Easter baskets.His daily cost for wicker is $100 and his daily revenue is $120.Bonzo quit his job at the Basket Weaving factory where he earned $15 a day,to enter the Easter basket business.Given this information,we know that his accounting profit

Correct Answer
verified

Given two supply curves passing through the same point,the flatter one has the higher elasticity.

Correct Answer
verified

Exam 7: Competition

In a competitive constant-cost industry,all firms have the same break-even price.

Correct AnswerverifiedShow Answer

A competitive firm will shut down its operations in the short run when the market price falls below its

Correct AnswerverifiedShow Answer

When do new firms tend to enter a competitive industry?

Correct AnswerverifiedShow Answer

A perfectly competitive market has demand Q = 100 - P and supply Q = P - 10.An individual firm has MC = 10 + 2Q.

Correct AnswerverifiedShow Answer

The annual insurance premiums for Michael's Machine Shop have permanently risen because of a recent series of thefts by employees,but there is no change in the premiums paid by Michael's competitors.If machine shops are a competitive constant-cost industry,then in the long run

Correct AnswerverifiedShow Answer

If all firms in a competitive industry experience an increase in marginal costs,then which of the following is most likely to occur in the short run?

Correct AnswerverifiedShow Answer

Which of the following is not necessarily true in the long for a competitive industry?

Correct AnswerverifiedShow Answer

Higher costs,whether fixed or variable,will cause a leftward shift in the industry's short-run supply curve.

Correct AnswerverifiedShow Answer

Different firms in a competitive industry will have differing shutdown points when

Correct AnswerverifiedShow Answer

Suppose notebooks are produced by a competitive constant-cost industry.Which of the following must cause Nanna's Notebooks to exit the industry in the long run?

Correct AnswerverifiedShow Answer

A government subsidy would allow all firms in a competitive constant-cost industry to earn a positive profit in the long run.

Correct AnswerverifiedShow Answer

The competitive firm's long-run supply curve

Correct AnswerverifiedShow Answer

When a manufacturer produces 25 tables, the marginal and average costs are both equal to $50 per table. A 26th table raises the marginal cost to $54 per table and the average cost to $52 per table. What is the firm's elasticity of supply when 25 table are produced?

Correct AnswerverifiedShow Answer

A competitive firm's shutdown price is equal to the minimum value of the firm's

Correct AnswerverifiedShow Answer

Bonzo is in business for himself making and selling Easter baskets.His daily cost for wicker is $100 and his daily revenue is $120.Bonzo quit his job at the Basket Weaving factory where he earned $15 a day,to enter the Easter basket business.Given this information,we know that his accounting profit

Correct AnswerverifiedShow Answer

Given two supply curves passing through the same point,the flatter one has the higher elasticity.

Correct AnswerverifiedShow Answer

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