Question 1

An increasing-cost industry is one in which the average cost of production ________ as the total output of the industry ________.

Accepted Answer

In an increasing-cost industry, due to limited resources, as the total output of the industry increases, the cost of production per unit increases as well. This may be due to factors such as scarcity of raw materials or limited availability of skilled labor. As a result, the average cost of production increases as the industry expands, leading to higher prices for consumers. Option A correctly describes this relationship between the average cost of production and total output in an increasing-cost industry.

Question 2

If there are 100 identical firms in a perfectly competitive industry, and the typical firm supplies 50 units of output at a price of $30, the industry output is 5,000 units at a price of $30.

Accepted Answer

In a perfectly competitive industry, all firms produce identical products and are price takers, meaning they must sell their products at the market price. Therefore, if the typical firm supplies 50 units of output at a price of $30, all other firms in the industry will also supply 50 units at the same price. Thus, the industry output would be 100 firms x 50 units per firm = 5,000 units. The price would also remain at $30 since all firms must sell at the market price.

Question 3

A firm's short-run supply curve is its marginal cost curve above the shut down point.

Accepted Answer

In the short run, a firm's supply curve is indeed its marginal cost curve above the shut down point. This is because in the short run, a firm's variable costs are not completely adjustable and it has to cover these costs in order to continue operating. Therefore, the price at which a firm is willing to supply a certain quantity of output in the short run is equal to its marginal cost, as long as this is above the shut down point.

Question 4

One reason for increasing costs industries is that as an industry grows, it drives up the prices of inputs.

Accepted Answer

As the demand for inputs increase in an industry, the prices of those inputs also tend to rise. This can cause an increase in the overall costs for the industry.

Question 5

A firm's short-run supply curve shows the relationship between price and quantity supplied.

Accepted Answer

A firm's short-run supply curve identifies the quantity that a firm is willing and able to supply at different price levels in the short run. Thus, it shows the relationship between price and quantity supplied.

Question 6

Describe and explain a perfectly competitive firm's short-run supply curve.

Accepted Answer

The answer of Describe and explain a perfectly competitive firm's...

Question 7

An increasing cost industry is one where total costs rise as the industry grows.

Accepted Answer

The answer of An increasing cost industry is one where...

Question 8

Recall the Application about the supply of shipping services to answer the following question(s).
-Recall the Application. The short-run supply curve for shipping services is

Accepted Answer

The short-run supply curve for shipping services is positively sloped because in the short run, it may not be possible for shipping companies to increase the quantity of shipping services they offer due to limited resources, such as ships or labor. As a result, as demand for shipping services increases, the cost to provide additional services also increases, leading to a higher price for these services.

Question 9

Recall the Application about the production of coffee in China to answer the following question(s).
-According to the Application, farmers in the city of Pu'er, China currently earn more growing ________ than they do growing ________.

Accepted Answer

The application states that farmers in Pu'er, China currently earn more growing coffee than they do growing tea. Therefore, choice C is the correct answer.

Question 10

The short-run market supply curve shows the relationship between the market price and the quantity supplied in the short run.

Accepted Answer

In the short run, firms cannot easily change their production capacity, so the market supply curve reflects how much all firms can supply at a given price.

Question 11

Figure 6.4
-Figure 6.4 represents a perfectly competitive firm's costs. Illustrate the firm's short-run supply curve on the graph. Explain.

Accepted Answer

The answer of  Figure 6.4
-Figure 6.4 represents a perfectly...

Question 12

Costs increase with output in an increasing-cost industry because

Accepted Answer

As output increases in an increasing-cost industry, firms may be forced to use less productive inputs, which increases their costs. Additionally, input prices tend to increase as the industry competes for scarce resources, further adding to the costs. Therefore, both options A and B are correct.

Question 13

A competitive firm's short-run supply curve is perfectly elastic.

Accepted Answer

A competitive firm's short-run supply curve is not perfectly elastic; it is upward sloping, reflecting the increasing marginal costs associated with higher levels of output.

Question 14

A firm's short-run supply curve is its marginal cost curve above its average total cost curve.

Accepted Answer

In the short run, a firm's supply curve is its marginal cost curve above its average variable cost curve, not the average total cost curve.

Question 15

In an increasing-cost industry, the long-run market supply curve is

Accepted Answer

In an increasing-cost industry, as the market demand increases, the cost of production also increases. Therefore, firms will require higher prices to cover their increasing costs and remain profitable. As a result, the long-run market supply curve will slope upwards, reflecting the higher prices required to induce firms to produce more output.

Question 16

A firm's short-run supply curve is its marginal cost curve above its average variable cost curve.

Accepted Answer

In the short run, a firm's supply curve is determined by its marginal cost curve as long as the price is greater than or equal to the average variable cost of production. Therefore, the firm will produce at the quantity where marginal cost equals price. However, if the price is less than the average variable cost, then the firm will shut down and produce nothing. Therefore, the short-run supply curve is the portion of the marginal cost curve that lies above the average variable cost curve.

Question 17

Recall the Application about the production of coffee in China to answer the following question(s).
-Recall the Application. Farmers in the city of Pu'er, China, by changing the acreage devoted to coffee production, illustrate the law of supply in that the ________ in the price of coffee ________ the quantity supplied.

Accepted Answer

According to the law of supply, an increase in the price of a commodity leads to an increase in the quantity supplied. Therefore, when farmers in Pu'er changed the acreage devoted to coffee production, an increase in the price of coffee led to an increased quantity supplied.

Question 18

In the long run, each firm in a perfectly competitive market earns zero economic profit.

Accepted Answer

In the long run, firms in a perfectly competitive market will adjust their production and price levels until they earn only normal profits, which is just enough to cover their opportunity cost of capital and other resources. This means that their economic profits will be zero. However, they may still earn accounting profits if they generate more revenue than their explicit costs.

Question 19

Recall the Application about the supply of shipping services to answer the following question(s).
-According to the Application, at a relatively low freight rate, only the ________ efficient ships operate, and they save on cost by traveling at a ________ speed.

Accepted Answer

At a relatively low freight rate, only the most efficient ships operate, and they save on cost by traveling at a slow speed to reduce fuel consumption and other operational costs.

Question 20

Heterogeneous inputs in a perfectly competitive market will cause the industry to face ________ costs because as the firm produces a larger quantity, it is forced to use ________ productive inputs.

Accepted Answer

In a perfectly competitive market, firms have no market power and face a horizontal demand curve. Heterogeneous inputs means that some inputs are more productive than others. As the output increases, the firm will use more of the less productive inputs, leading to increasing costs. Therefore, the correct answer is A, which indicates that costs will increase and the firm will use less productive inputs.

Quiz 6: Perfect Competition

An increasing-cost industry is one in which the average cost of production as the total output of the industry .

If there are 100 identical firms in a perfectly competitive industry, and the typical firm supplies 50 units of output at a price of $30, the industry output is 5,000 units at a price of $30.

A firm's short-run supply curve is its marginal cost curve above the shut down point.

One reason for increasing costs industries is that as an industry grows, it drives up the prices of inputs.

A firm's short-run supply curve shows the relationship between price and quantity supplied.

Describe and explain a perfectly competitive firm's short-run supply curve.

An increasing cost industry is one where total costs rise as the industry grows.

Recall the Application about the supply of shipping services to answer the following question(s) . -Recall the Application. The short-run supply curve for shipping services is

Recall the Application about the production of coffee in China to answer the following question(s) . -According to the Application, farmers in the city of Pu'er, China currently earn more growing than they do growing .

The short-run market supply curve shows the relationship between the market price and the quantity supplied in the short run.

Figure 6.4 -Figure 6.4 represents a perfectly competitive firm's costs. Illustrate the firm's short-run supply curve on the graph. Explain.

Costs increase with output in an increasing-cost industry because

A competitive firm's short-run supply curve is perfectly elastic.

A firm's short-run supply curve is its marginal cost curve above its average total cost curve.

In an increasing-cost industry, the long-run market supply curve is

A firm's short-run supply curve is its marginal cost curve above its average variable cost curve.

In the long run, each firm in a perfectly competitive market earns zero economic profit.

Recall the Application about the supply of shipping services to answer the following question(s) . -According to the Application, at a relatively low freight rate, only the efficient ships operate, and they save on cost by traveling at a speed.

Heterogeneous inputs in a perfectly competitive market will cause the industry to face costs because as the firm produces a larger quantity, it is forced to use productive inputs.

Quiz 6: Perfect Competition

An increasing-cost industry is one in which the average cost of production ________ as the total output of the industry ________.

If there are 100 identical firms in a perfectly competitive industry, and the typical firm supplies 50 units of output at a price of $30, the industry output is 5,000 units at a price of $30.

A firm's short-run supply curve is its marginal cost curve above the shut down point.

One reason for increasing costs industries is that as an industry grows, it drives up the prices of inputs.

A firm's short-run supply curve shows the relationship between price and quantity supplied.

Describe and explain a perfectly competitive firm's short-run supply curve.

An increasing cost industry is one where total costs rise as the industry grows.

Recall the Application about the supply of shipping services to answer the following question(s) . -Recall the Application. The short-run supply curve for shipping services is

Recall the Application about the production of coffee in China to answer the following question(s) . -According to the Application, farmers in the city of Pu'er, China currently earn more growing ________ than they do growing ________.

The short-run market supply curve shows the relationship between the market price and the quantity supplied in the short run.

Figure 6.4 -Figure 6.4 represents a perfectly competitive firm's costs. Illustrate the firm's short-run supply curve on the graph. Explain.

Costs increase with output in an increasing-cost industry because

A competitive firm's short-run supply curve is perfectly elastic.

A firm's short-run supply curve is its marginal cost curve above its average total cost curve.

In an increasing-cost industry, the long-run market supply curve is

A firm's short-run supply curve is its marginal cost curve above its average variable cost curve.

In the long run, each firm in a perfectly competitive market earns zero economic profit.

Recall the Application about the supply of shipping services to answer the following question(s) . -According to the Application, at a relatively low freight rate, only the ________ efficient ships operate, and they save on cost by traveling at a ________ speed.

Heterogeneous inputs in a perfectly competitive market will cause the industry to face ________ costs because as the firm produces a larger quantity, it is forced to use ________ productive inputs.

An increasing-cost industry is one in which the average cost of production as the total output of the industry .

Recall the Application about the production of coffee in China to answer the following question(s) . -According to the Application, farmers in the city of Pu'er, China currently earn more growing than they do growing .

Recall the Application about the supply of shipping services to answer the following question(s) . -According to the Application, at a relatively low freight rate, only the efficient ships operate, and they save on cost by traveling at a speed.

Heterogeneous inputs in a perfectly competitive market will cause the industry to face costs because as the firm produces a larger quantity, it is forced to use productive inputs.