Question : 111) If a perfectly competitive market in a short-run equilibrium : 1384231

 

111) If a perfectly competitive market is in a short-run equilibrium and each firm has P > SRATC, then

A) individual firms in the industry will increase their output.

B) new firms will enter the market because existing firms are earning economic profits.

C) the market supply curve will become less elastic.

D) existing firms will continue to earn economic profits in the long run.

E) price will fall in the short run as it is too high and firms are making economic profits.

112) If firms in a competitive industry are earning positive economic profits, in the long run we expect

A) the demand curve for the product will shift to the left, so that the price of the product will fall.

B) the supply curve for the product will shift to the right as new firms enter the industry, causing industry output to increase and price to fall.

C) there would be no change in the industry as long as P = MC for the individual firms.

D) the individual firms will lower their price to discourage new firms from entering the industry.

E) the government would intervene and force the firms to lower prices.

113) If firms in a competitive industry are suffering economic losses, then one would expect that in the long run

A) the demand curve for the product will shift to the left, causing equilibrium output and price to decline.

B) there would be no change in the number of firms in the industry as long as firms are covering their average variable costs.

C) the supply curve for the product will shift to the left as firms leave the industry, causing industry output to fall and price to rise.

D) the supply curve for the product will shift to the right as individual firms lower their prices to increase their sales.

E) each firm would raise its price until it was breaking even.

114) Consider a perfectly competitive firm when its industry is in long-run equilibrium. Which of the following statements is correct?

A) The firm has successfully differentiated its product.

B) The firm has successfully established barriers to entry.

C) The firm has a strong profit incentive to expand capacity.

D) The firm has no ability to affect its product’s price.

E) The firm is earning positive economic profits.

115) Consider the following statement of equalities: P = MC = minimum SRATC = minimum LRAC.  This statement of equalities best applies to which of the following?

A) a perfectly competitive firm that is maximizing profits, which will lead other firms to enter this industry

B) a perfectly competitive firm when the industry is in long-run equilibrium

C) a perfectly competitive firm that is producing the optimal quantity, such that other firms will exit the industry

D) a perfectly competitive industry that is in long-run equilibrium

E) a perfectly competitive industry that is in short-run equilibrium

116) Which of the following statements about a perfectly competitive industry in long-run equilibrium is true?

A) In order to stay in the industry each firm is making an economic profit.

B) Losses are tolerable because of high fixed costs.

C) Individual firms will have no incentive for technological improvement.

D) Firms must exhibit economies of scale.

E) Each firm is producing at the minimum point on its LRAC curve.

117) If a competitive firm is producing to the left of the minimum point of its long-run average cost curve, then

A) it cannot be producing its present output efficiently.

B) it can reduce its unit costs by building a larger plant.

C) it can still be in long-run equilibrium as long as P = SRATC.

D) its profits will decrease if it builds a larger plant.

E) it should shut down.

118) Consider a perfectly competitive firm.  Which of the following equalities could hold true in a short-run equilibrium but not in a long-run equilibrium?

A) TC = TFC + TVC

B) P = MC

C) P = AR

D) P = AVC

E) P = MR

119) Refer to Figure 9-5.  At output Q2 and price P2, which of the following is FALSE?

A) There are economic profits to attract new entrants.

B) The firm producing Q2 is at its long-run profit-maximizing position.

C) P = MC = SRATC = LRAC.

D) There are no unexploited internal economies of scale.

E) Firm X is producing at its minimum efficient scale.

120) Refer to Figure 9-5. If Firm X has a capital stock that generates SRATC1, then in the long run Firm X will have to

A) either expand its plant size or exit from the industry.

B) set its output at Q1 with the existing plant size.

C) expand its output to Q2 with the existing plant size.

D) set its output at Q1 with an expanded plant size.

E) maintain its output level at Q1, because it is maximizing its short-run profits.

 

 

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