Question 1

E-commerce and an internet presence are important to many firms,requiring employees with specialized skills that are in short supply.The invisible hand solves the employment problem by:

Accepted Answer

The allocative function of price,in this case wages,encourages people to enter professions that are in short supply.

Question 2

The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions. 
The long run equilibrium quantity in this industry is

Accepted Answer

The answer of The following graphs depict a perfectly competitive...

Question 3

The allocative function of price works well under conditions of:

Accepted Answer

Free entry and free exit are necessary for firms to respond to the allocative function of price.

Question 4

In a free market economy,the decisions of buyers and sellers are:

Accepted Answer

Prices allocate and ration goods and services in a free market economy.

Question 5

An implication of entry and exit in response to the profit incentive is that,for perfectly competitive firms,

Accepted Answer

In the long run, firms in a perfectly competitive market will continue to enter the industry as long as economic profits are greater than zero and exit as long as economic profits are less than zero. This means that in the long run, firms will produce the quantity that minimizes average total costs, as they will be able to earn zero economic profit. Therefore, choice C is the correct answer.

Question 6

Assume that all firms in this industry have identical cost functions. 
When price is $15 in this industry,

Accepted Answer

The answer of Assume that all firms in this industry...

Question 7

Assume that all firms in this industry have identical cost functions. 
Firms in this industry will shut down if the price is

Accepted Answer

The answer of Assume that all firms in this industry...

Question 8

Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand function will shift to the right,causing the market:

Accepted Answer

The demand shift increases price and so profits.Profits attract new entry,increasing quantity produced.

Question 9

Assume that all firms in this industry have identical cost functions. 
The firm depicted in the graph on the right faces a demand curve that

Accepted Answer

The answer of Assume that all firms in this industry...

Question 10

One assumption of the perfectly competitive model is that of free entry.This assumption most directly leads to the implication that:

Accepted Answer

Free entry means that firms can easily enter if there are profits to be made.

Question 11

Barriers to entry are created by:

Accepted Answer

Government regulations and natural market characteristics can give rise to barriers to entry.

Question 12

If resources are currently misallocated in a market with no barriers to entry,then the presence of opportunities to profit:

Accepted Answer

Without barriers to entry,misallocations of resources tend to fix themselves through the self-interested actions of firms.

Question 13

The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions. 
In the long run equilibrium in this market,

Accepted Answer

The answer of The following graphs depict a perfectly competitive...

Question 14

The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions. 
Assume that the market is currently as shown in the graph on the left .What is true of the number of firms?

Accepted Answer

The answer of The following graphs depict a perfectly competitive...

Question 15

Assume that all firms in this industry have identical cost functions. 
In the long run,there will be ______ firms in this market.

Accepted Answer

The answer of Assume that all firms in this industry...

Question 16

Some people have argued that the government should provide medical care to everyone.Under this system:

Accepted Answer

Medical care is scarce whether it is paid for by the consumer or not.If prices do not ration medical care,some other method will be necessary.

Question 17

Free entry of firms is a characteristic of:

Accepted Answer

Perfectly competitive firms are characterized by mobile resources,necessary for free entry.

Question 18

The following graphs depict a perfectly competitive firm and its market.
Assume that all firms in this industry have identical cost functions. 
A starting assumption about this industry was that all of the firms had identical cost functions.This assumption

Accepted Answer

In a perfectly competitive market, firms are price takers which means they have no control over the market price and must accept it. As all firms have identical cost functions, any firm that has a cost advantage will be able to offer a lower price and capture more market share. This competitive pressure ensures that firms cannot sustain a cost advantage for long and must adopt the most efficient production processes to remain competitive. Thus, the assumption that all firms in this industry have identical cost functions is realistic.

Question 19

If buyers and sellers are free to pursue their own selfish interests,according to the invisible hand theory,the result would be:

Accepted Answer

Adam Smith theorized that the invisible hand of self interest would guide economic agents to an efficient outcome.

Question 20

One difference between the long run and the short run in a perfectly competitive industry is that:

Accepted Answer

The incentive to earn profit and avoid loss causes firms to enter profitable markets and exit unprofitable ones until the market settles in to a zero-profit equilibrium.

Quiz 7: Efficiency, Exchange, and the Invisible Hand in Action

E-commerce and an internet presence are important to many firms,requiring employees with specialized skills that are in short supply.The invisible hand solves the employment problem by:

The following graphs depict a perfectly competitive firm and its market. Assume that all firms in this industry have identical cost functions. The long run equilibrium quantity in this industry is

The allocative function of price works well under conditions of:

In a free market economy,the decisions of buyers and sellers are:

An implication of entry and exit in response to the profit incentive is that,for perfectly competitive firms,

Assume that all firms in this industry have identical cost functions. When price is $15 in this industry,

Assume that all firms in this industry have identical cost functions. Firms in this industry will shut down if the price is

Which ordering best describes how a perfectly competitive industry would respond to a sudden increase in popularity of the product? The market demand function will shift to the right,causing the market:

Assume that all firms in this industry have identical cost functions. The firm depicted in the graph on the right faces a demand curve that

One assumption of the perfectly competitive model is that of free entry.This assumption most directly leads to the implication that:

Barriers to entry are created by:

If resources are currently misallocated in a market with no barriers to entry,then the presence of opportunities to profit:

The following graphs depict a perfectly competitive firm and its market. Assume that all firms in this industry have identical cost functions. In the long run equilibrium in this market,

The following graphs depict a perfectly competitive firm and its market. Assume that all firms in this industry have identical cost functions. Assume that the market is currently as shown in the graph on the left .What is true of the number of firms?

Assume that all firms in this industry have identical cost functions. In the long run,there will be ______ firms in this market.

Some people have argued that the government should provide medical care to everyone.Under this system:

Free entry of firms is a characteristic of:

The following graphs depict a perfectly competitive firm and its market. Assume that all firms in this industry have identical cost functions. A starting assumption about this industry was that all of the firms had identical cost functions.This assumption

If buyers and sellers are free to pursue their own selfish interests,according to the invisible hand theory,the result would be:

One difference between the long run and the short run in a perfectly competitive industry is that: