Question : 6.6  From The Firm to the Market: Long-Run Competitive Equilibrium 1) : 1377380

6.6  From The Firm to the Market: Long-Run Competitive Equilibrium

1) Which of the following statements about the short run and long run is true?

A) The number of firms in the industry is fixed in the short run, but in the long run the number can change.

B) Free entry and exit of firms is possible in the short run, but entry and exit of firms is restricted in the long run.

C) The short-run average cost curves lies below the long-run average cost curves.

D) A firm can vary all of its factors of production in both the short run and the long run.

2) The entry and exit of firms in a perfectly competitive market is mostly dependent on:

A) the number of firms in the market.

B) government regulations.

C) profitability.

D) the number of consumers in the market.

3) Free entry is said to exist in an industry when:

A) all firms entering an industry enjoy economies of scale.

B) entry is unfettered by any special legal or technical barriers.

C) equal amounts of inputs are available to all firms entering an industry.

D) the government subsidizes costs for all new firms entering an industry.

4) Entry of new firms into an existing market causes:

A) an upward movement along the market supply curve.

B) a downward movement along the market supply curve.

C) a rightward shift of the market supply curve.

D) a leftward shift of the market supply curve.

5) If new firms are expected to enter an existing market, ________.

A) the market price is likely to fall

B) the market demand is likely to increase

C) the market supply is likely to fall

D) the profits of all firms are likely to increase

6) When price is less than the firms’ minimum average total cost, ________.

A) new firms will enter the market

B) existing firms will leave the market

C) prices are likely to fall further

D) firms’ profits are likely to be maximum

7) In a perfectly competitive market, the price in the long run:

A) will always be more than the minimum average total cost of the industry.

B) will always be less than the minimum average total cost of the industry.

C) will always equal the minimum average total cost of the industry.

D) will always equal the average fixed cost of the industry.

8) The long-run supply curve for a firm in a perfectly competitive industry is:

A) negatively sloped.

B) positively sloped.

C) vertical.

D) horizontal.

9) In a perfectly competitive market:

A) the long-run market price is equal to the average fixed cost of the industry.

B) the long-run market price is less than the minimum average cost of the industry.

C) the long-run market price is more than the minimum average cost of the industry because of free entry and exit of firms.

D) the long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms.

10) In a perfectly competitive market, all firms in the long run earn:

A) positive economic profit.

B) positive accounting profit.

C) zero economic profit.

D) zero accounting profit.

11) In the long run, under perfect competition:

A) firms earn positive economic profit because of economies of scale.

B) firms earn positive accounting profit because of government regulations.

C) firms earn zero economic profit because of free entry and exit of firms.

D) firms earn negative economic profit because of free entry and exit of firms.

12) A ________ is a payment or a tax break used as an incentive for an agent to complete an activity.

A) tariff

B) subsidy

C) wage

D) rent