Economics Chapter 11 Practice – Flashcards
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An industry where expansion or contraction will not affect resource prices and production costs is known as:
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b) a constant-cost industry
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A decreasing-cost industry is one in which firms experience ________ costs as their industry ________.
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a) higher;contracts c) lower;expands
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________ efficiency means that resources are distributed among firms and industries to yield a mix of products and services that is most wanted by society.
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allocative
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_________ efficiency means that goods are produced in the least costly way.
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productive
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Which of the following does an increasing-cost industry experience?
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a) An upward shifting average total cost (ATC) curve as the industry expands. d) A downward shifting average total cost (ATC) curve as the industry contracts.
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Whether a purely competitive industry is a constant-cost industry or an increasing-cost industry, the final long-run equilibrium position of all competitive firms share which of the following characteristics?
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b) In the long run, a multiple equality occurs where price equals marginal cost which equals the minimum average total cost. c) In the long run, a multiple equality occurs where price equals marginal revenue which equals the minimum average total cost. d) Price or marginal revenue will settle where it is equal to minimum average total cost.
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_________ profits in a competitive industry will attract new firms into the industry.
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economic
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Efficiency can be temporarily disrupted and then restored in pure competition by
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a) resource costs b) changes in consumer tastes d) technological changes
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A competitive market strives to generate __________ efficiency and __________ efficiency.
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productive, allocative
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If a firm's price exceeds the firm's minimum average total cost, then:
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d) it will incur an economic profit
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Competition, reflected in the entry and exit of firms, eliminates economic profits and losses by adjusting the product ___________ to equal the minimum long-run average ___________ cost.
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price, total
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Creative __________ captures the idea that the creation of new products and new production methods erodes the market positions of firms committed to existing products and old ways of doing business.
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destruction
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Competitive market economies strive to generate:
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a) allocative efficiency c) productive efficiency
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New firms entering an increasing-cost industry _________ resource prices.
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increase
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A competitive firm may realize an economic profit or loss in the __________ run but will earn only a normal profit in the __________ run.
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short, long
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Lowering production costs through better technology or improved business organization can result in firms:
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a) earning economic profits b) increasing their profits
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Which of the following are considered long-run adjustments in an industry?
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a) The entry and exit of firms d) The expansion or contraction of plant capacity
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Productive efficiency requires that
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d) goods be produced in the least costly way
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All firms in _________ industry share the same basic efficiency characteristics.
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d) a purely competitive
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The entry and exit of firms in an industry are considered __________ adjustments.
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long run
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Higher resource price will result in __________ total costs.
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e) higher average
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The character of the long-run supply curve of the competitive industry can be best described as
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c) the effect, if any, that changes in the number of firms in the industry will have on costs of the individual firms in the industry.
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Strategies attempted by firms for increasing their profits include:
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a) lowering production costs through better technology b) developing a new product that is popular with consumers d) lowering production costs through improved business organization
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An unfavorable shift or __________ in demand will upset the original industry equilibrium and produce __________.
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decrease;losses
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In a perfectly competitive market, after all long-run adjustments are completed
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b) output will occur at each firm's minimum average total cost where product price is equal to marginal revenue.
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New firms entering an increasing-cost industry ___________ resource prices.
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increase
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If market price initially exceeds minimum average total costs, the resulting economic profits will attract new firms to the industry eventually resulting in:
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a) industry expansion that increases supply until price equals minimum wage
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Economic profit for a firm will result if:
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d) price exceeds average total cost
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The long-run goal of every perfectly competitive firm is:
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d) to operate at their minimum ATC
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The dominant position of wagons, ships, and barges was undermined by the railroad system, which in turn was undermined by trucks and later airplanes. Which of the following does this "best" exemplify?
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b) Creative destruction
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In the real world, firms do not have exactly the same ____________ because skills vary from firm to firm.
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c) cost curves
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True or false: Firms within pure competition are likely to earn economic profit in the long run.
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False
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In pure competition, productive efficiency is attained when price __________ minimum average total cost.
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equals
