QUESTION 1 When economic profits are zero for a firm in a perfectly competitive market, it means that:average total costs are zero.price is equal to...

QUESTION 1

1. When economic profits are zero for a firm in a perfectly competitive market, it means that:
2. A.average total costs are zero.
3. B.price is equal to minimum average total cost.
4. C.average variable costs are minimized.
5. D.All of these are true.

12 points  

QUESTION 2

1. In reality, the long-run supply curve tends to be:
2. A.perfectly elastic.
3. B.perfectly inelastic.
4. C.upward sloping.
5. D.downward sloping.

12 points  

QUESTION 3

1. If a firm is earning a positive economic profit, it means that it:
2. A.is using its resources in the most profitable way.
3. B.should invest its resources in other business opportunities.
4. C.has an opportunity cost that is larger than what the firm is currently earning.
5. D.All of these are true.

12 points  

QUESTION 4

1. In perfect competition, the firm's long-run supply curve is
2. A.the MC curve above the AVC curve.
3. B.the MC curve above the AFC curve.
4. C.the MC curve above the ATC curve.
5. D.the ATC curve above the MC curve.
6. E.the ATC curve above the MC curve.

12 points  

QUESTION 5

1. New firms will enter the market 
2. A.only in the long run. 
3. B.only in the short run. 
4. C.in either the short run or the long run. 
5. D.any time price exceeds average variable cost. 
6. E.whenever total costs are increasing. 

12 points  

QUESTION 6

1. In the long run, if a perfectly competitive industry has some firms earning an economic profit, then we can expect 
2. A.the economic profits of other firms to be negative. 
3. B.the market-supply curve to shift to the left, decreasing market price and increasing market output. 
4. C.the marginal-cost curve to shift down and less output to be produced by each firm in the industry. 
5. D.fewer firms in the industry. 
6. E.more firms in the industry. 

12 points  

QUESTION 7

1. In perfect competition in the long run, the entry of firms will lead to 
2. A.an increase in market supply. 
3. B.a decrease in market supply. 
4. C.no change in market supply. 
5. D.an increase in each firm's marginal-cost curve. 
6. E.an increase in market demand. 

12 points  

QUESTION 8

1. In reality, the long-run supply curve for a perfectly competitive market is upward sloping because:
2. A.of changing costs of production that firms may face.
3. B.not all firms have identical cost structures.
4. C.experienced firms will have different information and costs than new firms.
5. D.All of these are true.

12 points  

QUESTION 9

1. Entry of firms into an industry will cause the market supply curve to shift to the right. 
2. A.True 
3. B.False 

12 points  

QUESTION 10

1. If a business firm is earning more than would be necessary for the business to continue operations in the long run, then 
2. A.total cost exceeds total revenue. 
3. B.total cost is less than accounting profit. 
4. C.accounting profit is zero. 
5. D.economic profit is less than accounting profit. 
6. E.the firm is earning an economic profit. 

12 points