QUIZ – Chapter 11

1. When a purely competitive industry is in long-run equilibrium, which statement is true?

A. Average total cost is less than marginal cost

B. Price and average total cost are equal

C. Marginal cost is at its maximum level

D. Marginal revenue is greater than price

2. The long-run supply curve in a constant-cost industry would be:

A. Vertical

B. Horizontal

C. Upsloping

D. Downsloping

3. Productive efficiency refers to:

A. Cost minimization, where P = minimum ATC

B. Production, where P = MC

C. Maximizing profits by producing where MR = MC

D. Setting TR = TC

4. An economy is producing at the least-cost rate of production when:

A. Price and the minimum average total cost are equal

B. Marginal cost is greater than average total cost

C. Marginal revenue is greater than price

D. Price and marginal revenue are equal

5. If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

A. the selling price for this firm is above the market equilibrium price.

B. new firms will enter this market.

C. some existing firms in this market will leave.

D. there must be price fixing by the industry's firms

6. 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.

7. 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.

8. The long-run equilibrium of a purely competitive industry ensures:

A. Consumer and producer surplus is maximized.

B. Consumer and producer surplus is minimized.

C. Only producer surplus is maximized.

D. Only consumer surplus is maximized.

9. In the short-run purely competitive firms earn ________ in equilibrium while in the long-run firms earn ________ in equilibrium, respectively.

A. normal profits; economic profits

B. profits or losses; profits or losses

C. profits; normal profit

D. profits or losses; normal profit

10. Creative destruction

A. stimulates growth.

B. contributes to the production of new goods.

C. forces firms to be innovative.

D. does all of the above.