Question 1

A constant cost industry is more likely to arise in a market where

Accepted Answer

In a constant cost industry, the entry or exit of firms does not affect the prices of inputs because the industry does not demand a significant portion of the resources available, thus not altering the supply conditions of those resources.

Question 2

What characterizes a constant cost industry and what causes it to be a constant cost industry?

Accepted Answer

The answer of What characterizes a constant cost industry and...

Question 3

Recall the Application about the demand and price for margarine to answer the following question(s).
-Recall the Application. The reason that the change in demand for margarine did not change the equilibrium price in the long run is because the margarine industry is an example of ________ industry.

Accepted Answer

In a constant-cost industry, the cost of producing each unit does not change as the industry expands or contracts. Therefore, even if the demand for margarine changes, the equilibrium price remains the same because the cost of producing each unit of margarine remains constant. This is why the change in demand did not affect the equilibrium price in the long run.

Question 4

In a perfectly competitive market, what would you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product rises?

Accepted Answer

The answer of In a perfectly competitive market, what would...

Question 5

In a constant cost industry, an increase in price causes

Accepted Answer

In a constant cost industry, an increase in price makes the industry more attractive for new firms, leading to some firms entering the industry to take advantage of the higher prices.

Question 6

Which of the following products is the most likely to have constant costs in the long run?

Accepted Answer

Ice is a commodity that can be produced using consistent technology and raw materials, with few variable costs. Once a production system is established, the costs of producing ice will remain relatively constant over the long run. In contrast, wine grapes and copper are subject to fluctuations in production costs due to changes in soil quality, weather patterns, and technology. Housing costs are influenced by a range of factors, including labor costs, material prices, and interest rates, all of which can change over time.

Question 7

An increase in price causes exit from a constant cost industry.

Accepted Answer

In a constant cost industry, the cost of production does not change with an increase in price. Therefore, firms would continue to operate and supply the same quantity at the higher price. Only in a decreasing cost industry would an increase in price cause exit because lower costs would be passed on to consumers, increasing demand and causing firms to increase output.

Question 8

In a constant cost industry, inputs prices do not change with changes in output.

Accepted Answer

In a constant cost industry, input prices remain the same regardless of changes in output levels. This is because there are no economies of scale or other factors that could affect input prices.

Question 9

Recall the Application about the demand and price for margarine to answer the following question(s).
-Recall the Application. Between 2000 and 2009, total U.S. consumption of margarine ________ and the price, in real terms, ________.

Accepted Answer

The application states that between 2000 and 2009, the total U.S. consumption of margarine decreased by roughly half, which eliminates choices A and D. The application also states that the price, in real terms, stayed roughly the same, which eliminates choice B. Therefore, the correct answer is C, which states that the consumption decreased by roughly half and the price stayed roughly the same.

Question 10

A constant cost industry has an infinitely elastic long-run supply curve.

Accepted Answer

In a constant cost industry, the cost of production does not change with the increase or decrease in output. Therefore, firms can enter or leave the industry without affecting the cost of production. As a result, the long-run supply curve is infinitely elastic, meaning that firms can supply any amount of output at a constant cost.

Question 11

A constant cost industry is one in which

Accepted Answer

A constant cost industry is one in which the long-run supply curve is horizontal, meaning that firms can increase production without facing higher costs. Demand being horizontal and short-run supply being horizontal are not defining characteristics of a constant cost industry.

Question 12

The long-run supply curve is upward sloping in a constant cost industry.

Accepted Answer

In a constant cost industry, the long-run supply curve is perfectly elastic (horizontal) because input prices do not change as industry output changes.

Question 13

What happens in the short run and long run in a constant cost industry such as bags of ice after a natural disaster like a hurricane?

Accepted Answer

The answer of What happens in the short run and...

Question 14

In a constant cost industry, a decrease in price causes

Accepted Answer

In a constant cost industry, a decrease in price reduces profits, leading some firms to exit the industry to avoid losses.

Question 15

Explain why perfectly competitive firms make zero economic profit in the long run.

Accepted Answer

The answer of Explain why perfectly competitive firms make zero...

Question 16

A constant cost industry is one in which

Accepted Answer

In a constant cost industry, input prices do not change as output changes in the long run, ensuring that the cost of producing each unit remains the same. This means that the industry supply curve remains constant in the long run, and there is no tendency for prices to rise or fall. Supply elasticity and short-run supply curves are not necessarily related to constant costs.

Question 17

Large industries that employ most of the available resources tend to have constant costs in the long run.

Accepted Answer

In the long run, large industries may experience economies or diseconomies of scale, leading to decreasing or increasing costs, respectively, rather than constant costs.

Question 18

Consider a perfectly competitive market. What do you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product falls?

Accepted Answer

The answer of Consider a perfectly competitive market. What do...

Quiz 6: Perfect Competition

A constant cost industry is more likely to arise in a market where

What characterizes a constant cost industry and what causes it to be a constant cost industry?

Recall the Application about the demand and price for margarine to answer the following question(s) . -Recall the Application. The reason that the change in demand for margarine did not change the equilibrium price in the long run is because the margarine industry is an example of ________ industry.

In a perfectly competitive market, what would you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product rises?

In a constant cost industry, an increase in price causes

Which of the following products is the most likely to have constant costs in the long run?

An increase in price causes exit from a constant cost industry.

In a constant cost industry, inputs prices do not change with changes in output.

Recall the Application about the demand and price for margarine to answer the following question(s) . -Recall the Application. Between 2000 and 2009, total U.S. consumption of margarine and the price, in real terms, .

A constant cost industry has an infinitely elastic long-run supply curve.

A constant cost industry is one in which

The long-run supply curve is upward sloping in a constant cost industry.

What happens in the short run and long run in a constant cost industry such as bags of ice after a natural disaster like a hurricane?

In a constant cost industry, a decrease in price causes

Explain why perfectly competitive firms make zero economic profit in the long run.

A constant cost industry is one in which

Large industries that employ most of the available resources tend to have constant costs in the long run.

Consider a perfectly competitive market. What do you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product falls?

Quiz 6: Perfect Competition

A constant cost industry is more likely to arise in a market where

What characterizes a constant cost industry and what causes it to be a constant cost industry?

In a perfectly competitive market, what would you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product rises?

In a constant cost industry, an increase in price causes

Which of the following products is the most likely to have constant costs in the long run?

An increase in price causes exit from a constant cost industry.

In a constant cost industry, inputs prices do not change with changes in output.

Recall the Application about the demand and price for margarine to answer the following question(s) . -Recall the Application. Between 2000 and 2009, total U.S. consumption of margarine ________ and the price, in real terms, ________.

A constant cost industry has an infinitely elastic long-run supply curve.

A constant cost industry is one in which

The long-run supply curve is upward sloping in a constant cost industry.

What happens in the short run and long run in a constant cost industry such as bags of ice after a natural disaster like a hurricane?

In a constant cost industry, a decrease in price causes

Explain why perfectly competitive firms make zero economic profit in the long run.

A constant cost industry is one in which

Large industries that employ most of the available resources tend to have constant costs in the long run.

Consider a perfectly competitive market. What do you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product falls?

Recall the Application about the demand and price for margarine to answer the following question(s) . -Recall the Application. Between 2000 and 2009, total U.S. consumption of margarine and the price, in real terms, .