Question 1

When a perfectly competitive industry is in long-run equilibrium,its firms:

Accepted Answer

In long-run equilibrium, firms in a perfectly competitive industry allocate all their resources efficiently, meaning they produce at the lowest possible average cost. Since there are no barriers to entry or exit, competition drives economic profits to zero in the long run, so firms only earn normal profits. Therefore, choice D is correct.

Question 2

In a long-run equilibrium,economic profits in a perfectly competitive industry are:

Accepted Answer

In the long-run, new firms can enter or existing firms can exit the industry. This process will continue until all firms earn zero economic profit, as there are no barriers to entry or exit. Therefore, in the long run, economic profit in a perfectly competitive industry will be zero.

Question 3

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry?

Accepted Answer

When consumer income falls, there will be a decrease in demand for the product, which will lead to a decrease in price. This decrease in price will result in lower profits for firms in the industry, making it less profitable for them to stay in business. As a result, some firms may choose to exit the industry.

Question 4

Use the following to answer question: 
-(Figure: The Perfectly Competitive Firm)Use Figure: The Perfectly Competitive Firm.The firm faces demand curve d and maximizes profit.In a long-run equilibrium,this firm will produce _____ units of output and sell its output for _____.

Accepted Answer

The answer of Use the following to answer question: 
-(Figure:...

Question 5

Use the following to answer question: 
-(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $3,in the short run the industry will supply _____ pounds.

Accepted Answer

In the short run, the industry will supply 0 pounds because the price is below the average variable cost.

Question 6

Provided that there are no external benefits or costs,resources are efficiently allocated for a perfectly competitive firm when:

Accepted Answer

In a perfectly competitive market, firms are price takers, so they cannot control the price of their goods. Therefore, to maximize their profits, they should produce at the level where marginal cost (MC) is equal to the market-determined price (P). At this output level, the firm will sell its product at a price that just covers its marginal cost, which means that it is efficient in its use of resources. Therefore, the correct choice is C, which states that at the profit-maximizing output level, P should equal MC.

Question 7

In perfectly competitive long-run equilibrium:

Accepted Answer

In long-run equilibrium, firms will produce at the minimum point of their average total cost curves. This is because in perfect competition, firms have no pricing power and must accept the market price. If a firm were to produce at a point above the minimum of its average total cost curve, it would not be able to compete with other firms in the market and would eventually exit the market. As a result, all firms will produce at the minimum point of their average total cost curves, ensuring productive efficiency.

Question 8

Use the following to answer question: 
-(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Accepted Answer

The answer of Use the following to answer question: 
-(Table:...

Question 9

Which statement is TRUE?

Accepted Answer

The long-run industry supply curve indeed relates the price of a good or service to the quantity produced after all adjustments to a price change have been made, reflecting the industry's response to changes in demand over time, including adjustments in the number of firms and production capacities.

Question 10

If some firms in a perfectly competitive industry are earning positive economic profits,then in the long run,the:

Accepted Answer

In a perfectly competitive market, if firms are earning positive economic profits, it attracts new firms into the industry. This increases the supply of the product, which shifts the short-run industry supply curve to the right, leading to a decrease in the price until economic profits are zero.

Question 11

When economic profits in an industry are zero:

Accepted Answer

When economic profits in an industry are zero, it means that firms are earning a normal profit, which is the return necessary to keep resources in their current use. Therefore, firms are doing as well as they could do in other markets, indicating they are earning what they would expect to earn elsewhere, given the risks involved.

Question 12

Use the following to answer question: 
-(Figure: The Perfectly Competitive Firm)Use Figure: The Perfectly Competitive Firm.The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit.The firm's economic profit in the long run will be:

Accepted Answer

In the long run, perfectly competitive firms earn zero economic profit due to free entry and exit of firms in the market. The firm's average total cost curve intersects the demand curve at the minimum point of the average total cost curve, which is at a quantity of 600. At this quantity, the price is $5 and the average total cost is $5, resulting in zero economic profit.

Question 13

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,a decrease in population decreases the demand for haircuts.In the short run,we expect that the market price will _____ and the output of a typical firm will _____.

Accepted Answer

In a perfectly competitive market, a decrease in demand leads to a decrease in market price and a decrease in the output of a typical firm in the short run, as firms adjust to the lower demand by reducing production and prices fall to equate the lower demand with supply.

Question 14

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _____ apple prices due to the _____ firms.

Accepted Answer

In the long run, if Lilly is currently earning positive economic profits, more firms will be attracted to the market causing the supply of apples to increase. This increase in supply will lead to a decrease in the equilibrium price of apples, resulting in lower apple prices. Therefore, Lilly should expect lower apple prices due to the entry of new firms.

Question 15

A perfectly competitive industry is said to be efficient because the:

Accepted Answer

In a perfectly competitive industry, the firms have no market power, so they must accept the market price for their output. This market price is determined by the intersection of the industry's supply and demand curves. In the long run, firms in the industry adjust their production levels and inputs to minimize their average total cost of production. This leads to a situation where the industry produces the desired quantity of output at the lowest possible cost. Therefore, the average total cost of production of the industry's output is minimized in the long run, making it efficient.

Question 16

Use the following to answer question: 
-(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $4,in the short run the industry will supply _____ pounds.

Accepted Answer

In a perfectly competitive market, each firm will supply the quantity where price equals marginal cost. Without specific details from the "Table: Cherry Farm," we assume each farm, including Hank and Helen's, will produce and supply the same quantity. If the price is $4 and assuming this price leads each of the 100 farms to supply 4 pounds (as an example, since the exact supply per farm at $4 is not provided), the total industry supply would be 400 pounds (100 farms * 4 pounds per farm). The correct answer is inferred based on the premise of equal supply contribution from each farm in a perfectly competitive market.

Question 17

When a perfectly competitive firm is in long-run equilibrium,the firm is producing at _____ cost.

Accepted Answer

In long-run equilibrium, a perfectly competitive firm is producing at the minimum point of its average total cost curve, which is the lowest possible cost of production for the firm. Therefore, the correct choice is D - minimum average total cost.

Question 18

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.In the long run,the:

Accepted Answer

If some firms in a perfectly competitive industry are earning positive economic profits, it means that there is excess demand for the product in the market. This attracts new firms to enter the industry, increasing the supply and eventually driving down the price. As the price decreases, the profits of the existing firms also decrease and eventually, in the long run, they will earn normal profits. Thus, new firms will enter the industry until all firms are earning only normal profits, and the number of firms in the industry increases. Therefore, the correct answer is D.

Question 19

Use the following to answer question: 
-(Table: Lilly's Apple Orchard)Use Table: Lilly's Apple Orchard.Lilly is the price-taking owner of an apple orchard;the orchard's variable costs are given in the table.Her orchard has fixed costs of $30.If the price of a bushel of apples is $85,we would expect total industry output to _____ and Lilly's output to _____ in the long run.

Accepted Answer

If the price of a bushel of apples is $85, it is likely that more firms will enter the industry, leading to an increase in industry output. As a price-taking owner, Lilly would also increase her output in the long run to maximize profits.

Question 20

A perfectly competitive industry is in a state of long-run equilibrium.Which expression must be TRUE?

Accepted Answer

In a perfectly competitive market in long-run equilibrium, price (P) equals both marginal revenue (MR) and marginal cost (MC), as firms will continue to adjust production until these values are equal. Additionally, in the long run, firms in perfect competition will produce where average total cost (ATC) is minimized. Therefore, P = MR = MC = ATC is the expression that must be true in this scenario.

Quiz 12: Perfect Competition and the Supply Curve

When a perfectly competitive industry is in long-run equilibrium,its firms:

In a long-run equilibrium,economic profits in a perfectly competitive industry are:

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry?

Use the following to answer question: -(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm.The firm faces demand curve d and maximizes profit.In a long-run equilibrium,this firm will produce _ units of output and sell its output for _.

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $3,in the short run the industry will supply _____ pounds.

Provided that there are no external benefits or costs,resources are efficiently allocated for a perfectly competitive firm when:

In perfectly competitive long-run equilibrium:

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Which statement is TRUE?

If some firms in a perfectly competitive industry are earning positive economic profits,then in the long run,the:

When economic profits in an industry are zero:

Use the following to answer question: -(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm.The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit.The firm's economic profit in the long run will be:

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _ apple prices due to the _ firms.

A perfectly competitive industry is said to be efficient because the:

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $4,in the short run the industry will supply _____ pounds.

When a perfectly competitive firm is in long-run equilibrium,the firm is producing at _____ cost.

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.In the long run,the:

A perfectly competitive industry is in a state of long-run equilibrium.Which expression must be TRUE?

Quiz 12: Perfect Competition and the Supply Curve

When a perfectly competitive industry is in long-run equilibrium,its firms:

In a long-run equilibrium,economic profits in a perfectly competitive industry are:

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry?

Use the following to answer question: -(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm.The firm faces demand curve d and maximizes profit.In a long-run equilibrium,this firm will produce _____ units of output and sell its output for _____.

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $3,in the short run the industry will supply _____ pounds.

Provided that there are no external benefits or costs,resources are efficiently allocated for a perfectly competitive firm when:

In perfectly competitive long-run equilibrium:

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Which statement is TRUE?

If some firms in a perfectly competitive industry are earning positive economic profits,then in the long run,the:

When economic profits in an industry are zero:

Use the following to answer question: -(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm.The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit.The firm's economic profit in the long run will be:

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _____ apple prices due to the _____ firms.

A perfectly competitive industry is said to be efficient because the:

Use the following to answer question: -(Table: Cherry Farm) Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $4,in the short run the industry will supply _____ pounds.

When a perfectly competitive firm is in long-run equilibrium,the firm is producing at _____ cost.

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.In the long run,the:

A perfectly competitive industry is in a state of long-run equilibrium.Which expression must be TRUE?

Use the following to answer question: -(Figure: The Perfectly Competitive Firm) Use Figure: The Perfectly Competitive Firm.The firm faces demand curve d and maximizes profit.In a long-run equilibrium,this firm will produce _ units of output and sell its output for _.

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _ apple prices due to the _ firms.