UNIVERSITY / INSTITUTE: Purdue University
CLASS / COURSE: ECON 25100: Microeconomics
1. Which of the following distinguishes the short run from the long run in pure competition?
A. Firms can enter and exit the market in the long run, but not in the short run.
B. Firms attempt to maximize profits in the long run, but not in the short run.
C. Firms use the MR=MC rule to maximize profits in the short run, but not in the long run.
D. The quantity of labor hired can vary in the long run, but not in the short run.
2. The primary force encouraging the entry of new firms into a purely competitive industry is:
A. normal profits earned by firms already in the industry.
B. economic profits earned by firms already in the industry.
C. government subsidies for start-up firms.
D. a desire to provide goods for the betterment of society.
3. In a purely competitive industry:
A. there will be no economic profits in either the short run or the long run.
B. economic profits may persist in the long run if consumer demand is strong and stable.
C. there may be economic profits in the short run, but not in the long run.
D. there may be economic profits in the long run, but not in the short run.
4. Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:
A. minimizes losses by producing at the minimum point of its AVC curve.
B. maximizes profits by producing where MR = ATC.
C. should close down immediately.
D. should continue producing in the short run, but leave the industry in the long run if the situation persists.
5. Which of the following is true concerning purely competitive industries?
A. There will be economic losses in the long run because of cut-throat competition.
B. Economic profits will persist in the long run if consumer demand is strong and stable.
C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.
D. There are economic profits in the long run, but not in the short run.
6. Long-run competitive equilibrium:
A. is realized only in constant-cost industries.
B. will never change once it is realized.
C. is not economically efficient.
D. results in zero economic profits.
7. Which of the following statements is correct?
A. The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
B. The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
C. The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run supply curve.
D. The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping.
8. A constant-cost industry is one in which:
A. a higher price per unit will not result in an increased output.
B. if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.
C. the demand curve and therefore the unit price and quantity sold seldom change.
D. the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units.
9. When a purely competitive firm is in long-run equilibrium:
A. marginal revenue exceeds marginal cost.
B. price equals marginal cost.
C. total revenue exceeds total cost.
D. minimum average total cost is less than the product price.
10. In a decreasing-cost industry:
A. there will be no firm entry because the increased supply will reduce the long-run equilibrium price.
B. the law of demand does not apply.
C. greater demand leads to higher long-run equilibrium prices.
D. lower demand leads to higher long-run equilibrium prices.
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SUBJECTS / CATEGORIES:
1. Business Economics
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