Chapter 11 Quiz

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

A constant-cost industry is one in which:

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

question

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

answer

leave the industry and price and output will both decline.

question

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

answer

The firms in the market are part of a decreasing-cost industry.

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

answer

producing less output than allocative efficiency requires.

question

Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that:

answer

price is greater than marginal cost.

question

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

In long-run equilibrium, purely competitive markets:

answer

maximize the sum of consumer surplus and producer surplus.

question

Entrepreneurs in purely competitive industries:

answer

innovate to lower operating costs and generate short-run economic profits.

question

Which of the following is an example of creative destruction?

answer

Automobile production causes the wagon industry to shut down.

1 of 10

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

A constant-cost industry is one in which:

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

question

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

answer

leave the industry and price and output will both decline.

question

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

answer

The firms in the market are part of a decreasing-cost industry.

question

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

answer

producing less output than allocative efficiency requires.

question

Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that:

answer

price is greater than marginal cost.

question

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

In long-run equilibrium, purely competitive markets:

answer

maximize the sum of consumer surplus and producer surplus.

question

Entrepreneurs in purely competitive industries:

answer

innovate to lower operating costs and generate short-run economic profits.

question

Which of the following is an example of creative destruction?

answer

Automobile production causes the wagon industry to shut down.

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Chapter 11 Quiz

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