Question :
121) Refer to Figure 9-5. If Firm X producing output : 1384232
121) Refer to Figure 9-5. If Firm X is producing output Q1 and the market price is P1,
A) there are profits to induce increases in output by Firm X, using its existing plant.
B) there is no lower-cost scale of plant which could be built by Firm X.
C) Firm X is producing at its minimum efficient scale.
D) Firm X is at its long-run profit-maximizing position.
E) new firms have a profit incentive to enter the industry, building larger plants.
122) Refer to Figure 9-5. In this industry, which one of the following is FALSE?
A) If the price were to fall below P2, firms would leave the industry.
B) If the price were to rise above P2, new firms would enter the industry.
C) If the scale of Firm X at output Q2 and price P2 is large enough that Firm X has an appreciable share of the market, Firm X will no longer be a price taker.
D) At output Q2 and price P2, Firm X is maximizing its long-run profits.
E) Only one firm can reach the size of output Q2.
123) Suppose a typical firm in a competitive industry has the following data in the short run: price = $10; output = 100 units; ATC = $8; AVC = $7. What will likely happen in the long run?
A) In the long run the industry will expand because firms are earning economic profits.
B) In the long run the industry will contract because firms are suffering losses.
C) The size of the industry will remain the same in the long run.
D) The typical firm would shut down, until the remaining firms have a higher price.
E) There is not enough information to formulate an answer.
124) Suppose a typical firm in a competitive industry has the following data in the short run: price = $6; output = 100 units; ATC = $8; AVC = $7. What will likely happen in the long run?
A) In the long run the industry will expand because firms are earning economic profits.
B) In the long run the industry will contract because firms are suffering losses.
C) The size of the industry will remain the same in the long run.
D) The typical firm would shut down, until the remaining firms have a higher price.
E) There is not enough information to formulate an answer.
125) In the long run it is not possible for a perfectly competitive firm to
A) alter its plant size.
B) adopt new technology.
C) replace its antiquated equipment.
D) adjust its output.
E) set the product price.
126) In a perfectly competitive market, smaller-than-efficient sized firms can exist in
A) the short run.
B) the long run.
C) both the short and long run.
D) the long run, and they will make positive economic profits.
E) both the short run and the long run, but they must reduce plant size to remain competitive.
127) Comparing the short-run and long-run profit-maximizing positions of a perfectly competitive firm, which statement is true?
A) Price will equal marginal cost in the short run, but not necessarily in the long run.
B) Economic profit may exist in the short run and in the long run.
C) The firm will produce at minimum average cost in both the short and long run.
D) Price should equal average cost in the long run, but not necessarily in the short run.
E) The firm may have unexploited economies of scale in both the short run and the long run.
128) Consider a perfectly competitive firm when its industry is in long-run equilibrium. In this case,
A) price is greater than marginal cost.
B) marginal revenue is greater than marginal cost.
C) price equals minimum short-run and long-run average total cost.
D) economic profits are greater than zero.
E) average fixed costs are at the maximum.
129) Consider a competitive industry in which firms are facing a continual decrease in demand for their product. In the long run
A) new firms will enter the industry and earn normal profits.
B) existing firms will modernize plant and equipment in order to increase efficiency.
C) existing firms will expand output as a means of recovering losses.
D) firms will begin advertising in order to increase demand for their product.
E) capacity in the industry will gradually shrink as plant and equipment is not replaced.
130) Long-run equilibrium in a perfectly competitive industry is characterized by
A) internal economies of scale.
B) an output level at which firms’ SRATC curves are tangent to the downward sloping portion of their LRAC curves.
C) falling costs.
D) rising costs.
E) each firm producing at the minimum point on its LRAC curve.
