978-1259723223 Test Bank TBChap011 Part 3

subject Type Homework Help
subject Pages 14
subject Words 4294
subject Authors Campbell McConnell, Sean Flynn, Stanley Brue

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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Ac c e s s i b ili t y :
Keyboard Navigation
Blooms: Understand
Diff icult y:
02 Medium
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Test Bank: I
Topic:
Technological Advance and Competition
82. (Consider This) Approximately what percentage of start-up firms in the United States go
bankrupt within the first two years?
83. (Consider This) Which of the following statements is true about U.S. firms?
84. (Last Word) Patents are most likely to infringe on innovation
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85. (Last Word) "Patent trolls"
86. (Last Word) Eliminating patents would tend to
True / False Questions
87. After all long-run adjustments have been completed, a firm in a competitive industry will
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produce that level of output where average total cost is at a minimum.
88. The long-run supply curve for a decreasing-cost industry is downsloping.
89. Long-run supply curves for a purely competitive industry can never be downsloping.
90. Marginal cost is a measure of the alternative goods that society forgoes in using resources to
produce an additional unit of some specific product.
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Ac c e s s i b ili t y :
Keyboard Navigation
Blooms: Understand
Diff icult y:
02 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an
efficient allocation of resources.
Test Bank: I
Topic:
Pure Competition and Efficiency
91. Because the equilibrium position of a purely competitive seller entails an equality of price
and marginal costs, competition produces an efficient allocation of economic resources.
92. Allocative efficiency is achieved by equalizing consumer surplus and producer surplus.
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93.
If this diagram represents a typical firm in the industry and the firm is producing at the profit-
maximizing level of output in the short run, then in the long run we would expect more firms to
enter the market.
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94.
If this diagram represents a typical firm in the industry and the firm is producing at the profit-
maximizing level of output in the short run, then in the long run we would expect economic
profits in this market to rise.
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95.
If the firm shown in this graph is producing at the profit-maximizing level of output in the short
run, then it is achieving productive and allocative efficiency.
96. When entrepreneurs in competitive industries successfully innovate to lower production
costs, it usually results in long-run economic profits for the firm.
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11-48
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Diff icult y:
02 Medium
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Test Bank: I
Topic:
Technological Advance and Competition
97. The process by which new firms and new products destroy existing dominant firms and their
products is called creative destruction.
98. All of the following are long-run changes, except
99. If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as
a
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Ac c e s s i b ili t y :
Keyboard Navigation
Blooms: Understand
Diff icult y:
02 Medium
Learning Objective: 11-01 Explain how the long run differs from the short run in pure
competition.
Test Bank: II
Topic:
The Long Run in Pure Competition
100. All of the following statements apply to a purely competitive market in the long run, except
101. Which of the following is not an assumption that we make in analyzing pure competition in
the long run?
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102. In pure competition, if the market price of the product is higher than the minimum average
cost of the firms, then
103. If a purely competitive firm is currently facing a situation where the price of its product is
lower than the average variable cost, but it believes that the market demand for its product will
increase soon, then
104. If a purely competitive firm is facing a situation where the price of its product is lower than
the average cost, then all of the following apply, except
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. other firms will want to enter the industry because of the positive economic profits.
D. the firm may earn economic profits in the long run if it expands its plant in order to exploit
economies of scale.
105. Assume that the market for soybeans is purely competitive. Currently, firms growing
soybeans are earning positive economic profits. In the long run, we can expect
106. Assume that the market for corn is purely competitive. Currently, firms growing corn are
suffering economic losses. In the long run, we can expect
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic:
The Long-Run Adjustment Process in Pure Competition
107. The representative firm in a purely competitive industry
108. Which of the following is true of normal profits?
109. Which of the following statements about pure competition in the long run is not true?
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110. Which of the following is not a factor that automatically pushes firms in pure competition to
earn only normal profits in the long run?
111. If the representative firm in a purely competitive industry is in short-run equilibrium and, at
its current output level, its marginal cost exceeds its average total cost, then we can conclude
that
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112.
The graphs are for a purely competitive market in the short run. The graphs suggest that in the
long run, assuming no changes in the given information,
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113.
The accompanying graphs are for a purely competitive market in the short run. The graphs
suggest that in the long run, assuming no changes in the given information, the market
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114.
The accompanying graphs are for a purely competitive market in the short run. The graphs
suggest that in the long run, as automatic market adjustments occur, the demand curve facing the
individual firm will
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115.
The accompanying graphs are for a purely competitive market in the short run. The graphs
suggest that as long run adjustments consequently occur, the firms in the industry will find that
116. Suppose that the corn market is purely competitive. If the corn farmers are currently earning
negative economic profits, then we would expect that in the long run the market's
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment
process of pure competition.
Test Bank: II
Topic:
The Long-Run Adjustment Process in Pure Competition
117. If firms enter a purely competitive industry, then in the long run this change will shift the
industry
118. If firms are losing money in a purely competitive industry, then the long-run adjustments in
this situation will cause the market supply to
119. Assume the market for ball bearings is purely competitive. Currently, each of the firms in
this market is earning positive economic profits. In the long run, as adjustments occur in the
industry, we can expect the market price of ball bearings to
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. increase and individual firms' profits to increase.
C. decrease and individual firms' profits to increase.
D. decrease and individual firms' profits to decrease.
120.
Refer to the accompanying graphs for a competitive market in the short run. Which of the
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121.
Refer to the accompanying graphs for a competitive market in the short run. What will happen in
the long run to industry supply and the equilibrium price, P, of the product?
122.

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