Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Refer to the accompanying graphs for a competitive market in the short run. What will happen to
the representative firm's economic profits as long-run market adjustments occur?
123. The long-run supply curve under pure competition is derived by observing what happens to
market price and quantity when market
124. The long-run supply curve under pure competition will be
11-62
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diffi culty :
02 Medium
Learning Objective: 11-03 Explain the differences between constant-cost, increasing-cost, and
decreasing-cost industries.
Test Bank: II
Topic:
Long-Run Supply Curves
125. The long-run supply curve would be perfectly elastic when
126. The long-run supply curve for a purely competitive industry would be horizontal when
127. The long-run supply curve would be upward-sloping if
11-63
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. resource prices are set by the government.
128. The long-run market supply curve would be downward-sloping if the representative firms'
130. If there is a decrease in demand for a product in a purely competitive industry, it results in
an industry contraction that will end when the product price is
131. An industry where a change in the number of firms does not affect the prices of the
resources used in the industry will have a long-run supply curve that is
132. If the long-run supply curve is upward-sloping, it indicates that resource prices fall when
11-65
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 11-03 Explain the differences between constant-cost, increasing-cost, and
decreasing-cost industries.
Test Bank: II
Topic:
Long-Run Supply Curves
133. A long-run supply curve that is downward-sloping indicates that the firms' ATC curves
134. What happens in a decreasing-cost industry when some firms leave and the industry's output
contracts?
135. Assume a purely competitive decreasing-cost industry is initially in long-run equilibrium
but then there is a decrease in market demand for the product. After all economic adjustments to
this new situation have taken place, product price will be
11-66
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. higher, and total output will be higher.
D. lower, but total output will be higher.
136. Assume a purely competitive constant-cost industry is initially at long-run equilibrium.
Now suppose that a decrease in demand occurs. After all the long-run adjustments have been
completed, the new equilibrium price
137. Which statement is correct? The long-run supply curve for a purely competitive
11-67
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Topic:
Long-Run Supply Curves
138. One explanation for the existence of an increasing-cost industry is that
140. An industry that has increasing returns to scale and fixed factor prices will have a long-run
supply curve that is
11-68
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diffi culty :
02 Medium
Learning Objective: 11-03 Explain the differences between constant-cost, increasing-cost, and
decreasing-cost industries.
Test Bank: II
Topic:
Long-Run Supply Curves
141.
The provided graph represents a(n)
11-69
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
decreasing-cost industries.
Test Bank: II
Topic:
Long-Run Supply Curves
142.
The provided graph depicts long-run supply for
143.
The provided graph depicts a situation where, if the market demand for the product increases, the
prices of the resources used by the firms in the industry would
144.
The industry represented by the accompanying graph must be one where
145.
The industry indicated by the accompanying graphs would be a(n)
146.
The industry represented by the accompanying graph must be one where
147. Productive efficiency refers to
11-74
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 ib i l i t y:
Keyboard Navigation
Blooms: Understand
Diffi culty :
02 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an
efficient allocation of resources.
Test Bank: II
Topic:
Pure Competition and Efficiency
148. An industry is producing at the least-cost rate of production when
149. Allocative efficiency occurs when the
150. Allocative efficiency means that
11-75
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B. society’s scarce resources are used to produce products that align with consumer
preferences.
C. the product is sold at a price equal to the average cost of producing it.
D. the marginal benefit of the product exceeds its marginal cost.
151. In long-run equilibrium, a purely competitive firm will operate where price is
152. Which would indicate that a firm is operating under conditions of pure competition and is
being productively efficient?
11-76
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:
Pure Competition and Efficiency
153. Which of the following statements about a competitive firm is correct?
154. In long-run equilibrium under pure competition, all firms will produce at minimum
155. In the context of analyzing economic efficiency, we can interpret the market demand curve
to be showing
11-77
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C. the marginal benefit that consumers place on each unit of the product.
D. the average variable cost of producing the product.
156. In the context of analyzing economic efficiency, we can interpret the market supply curve to
be showing
157. Pure competition produces a socially optimal allocation of resources in the long run
because
158. When a purely competitive firm is in long-run equilibrium, it is said to achieve allocative
efficiency because
159. Which is true of a purely competitive firm in long-run equilibrium?
160. Resources are efficiently allocated when production occurs at that output at which
11-79
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Diffi culty :
02 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an
efficient allocation of resources.
Test Bank: II
Topic:
Pure Competition and Efficiency
161. Resources are efficiently allocated when production occurs at that output level where price
162. When a purely competitive firm is in long-run equilibrium, price is equal to
163.
The accompanying graph shows the long-run supply and demand curves in a purely competitive
market. The curves suggest that this industry is
