Question :
131) If a perfectly competitive firm producing where its MR=MC, : 1384233
131) If a perfectly competitive firm is producing where its MR=MC, but is operating to the left of the minimum point of its LRAC curve,
A) it cannot be optimizing its short-run behaviour.
B) it can reduce its average 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 is in a long-run profit maximizing position.
132) Which of the following conditions is true of a perfectly competitive industry when it is in long-run equilibrium?
A) Firms are entering the industry.
B) Firms are exiting the industry.
C) Price equals minimum short-run average total cost for all firms.
D) Accounting profits for all firms are zero.
E) Firms are experiencing increasing returns to scale.
133) Refer to Figure 9-6. Given that Firms A, B and C are in the same industry, is this industry in long-run equilibrium?
A) No, because Firm A is not producing at a profit-maximizing level of output.
B) No, because if the industry were in equilibrium, all 3 firms would be earning zero economic profits.
C) Yes, because all 3 firms are producing at their minimum average total cost.
D) Yes, because P = MC = MR for each of the 3 firms.
E) Yes, because each of the 3 firms is operating at its minimum efficient scale.
134) Refer to Figure 9-6. Which firm or firms is likely to exit this industry?
A) Firm A
B) Firm B
C) Firm C
D) all of Firms A, B, and C
E) none of Firms A, B, and C
135) Refer to Figure 9-6. Which of the following statements about Firms A, B and C is true?
A) Firm A is suffering losses, Firm B is breaking even, and Firm C is earning profits.
B) Firm A is breaking even, Firm B is suffering losses, and Firm C is earning profits.
C) Firm A is earning profits, Firm B is breaking even, and Firm C is suffering losses.
D) Firms A, B and C are breaking even.
E) Firms A, B and C are earning profits.
136) Suppose a paper mill in Quebec is shut down by its owner, even though the plant and equipment are in excellent shape and the paper is of top quality. What could explain this?
A) The price the firm is receiving for the paper is less than its average variable cost.
B) The paper mill must not have been operating at its profit-maximizing level of output.
C) The price the firm is receiving is less than the average total cost.
D) The price the firm is receiving for the paper is greater than its marginal cost.
E) The owner was not minimizing its production costs.
137) Suppose a perfectly competitive industry is in long-run equilibrium. A new one-time cost-saving technology is then developed and new plants are built. Eventually, a new long-run equilibrium will be established where
A) new plants employ the new technology, but existing plants continue to produce as long as they cover their fixed costs.
B) high-cost and low-cost firms exist side by side and market output will be higher.
C) the industry supply curve has shifted to the left and price and output are both higher.
D) all plants continue to operate until they are physically worn out as long as price is greater than the the firm’s average variable cost.
E) all plants use the new technology, and market output will be higher.
138) Consider the textile industry, which we assume to be a competitive industry, and which experiences continuous cost-reducing technological change. Which of the following statements best describes this industry?
A) High-cost textile mills will co-exist with low-cost mills as long as the revenue for the high-cost mills is covering their variable costs.
B) The price of the product is determined by the minimum ATC of the lowest-cost plants.
C) All textile mills in the industry will be earning zero economic profits or losses.
D) Both A and B
E) Both B and C
139) Which of the following assumptions about perfectly competitive markets is primarily responsible for the horizontal demand curve facing the individual firm?
A) differentiated product
B) consumers are aware of all firms’ prices
C) each firm is small relative to the size of the industry
D) freedom of entry and exit in the industry
E) strategic behaviour
140) Which of the following assumptions about perfectly competitive markets is primarily responsible for firms having zero economic profit in long run equilibrium?
A) homogeneous product
B) consumers are aware of all firms’ prices
C) each firm is small relative to the size of the industry
D) freedom of entry and exit in the industry
E) strategic behaviour
