Question : 61) Refer to Figure 11-3. In the long run, a : 1384252

61) Refer to Figure 11-3. In the long run, a monopolistically competitive firm will

A) make profit by producing at Q2 and charging price P1.

B) lose money by producing at Q1 and charging price P2.

C) maximize profit and make positive profit by producing at Q1 and charging price P1.

D) maximize profit but only break even by producing at Q1 and charging price P1.

E) maximize profit by producing output level Q2, the minimum point of its LRAC curve

62) Refer to Figure 11-3. A monopolistically competitive firm is allocatively inefficient because in the long-run equilibrium

A) LRAC is not at its minimum.

B) MC is greater than price.

C) price is greater than MC at Q1.

D) price is greater than LRAC at Q1.

E) None of the above – the long-run equilibrium is allocatively efficient.

63) Refer to Figure 11-3. A monopolistically competitive firm is said to be inefficient because in the long-run equilibrium

A) MC is greater than LRAC.

B) MC is greater than price.

C) price is greater than MC at Q1.

D) price is greater than LRAC at Q1.

E) LRAC at Q1 is not at its minimum.

64) Refer to Figure 11-3. Which of the following is a demonstration of the excess-capacity theorem?

A) P1 = MC with zero profits

B) P1 = LRAC with zero profits

C) Q1 is less than Q2

D) LRAC at Q1 is not at its minimum.

E) Both C and D demonstrate the excess-capacity theorem.

65) Refer to Figure 11-3. If an increase in industry demand led to an outward shift in each firm’s demand curve, and no change to the firm’s costs, the typical firm would

A) be making profits and new firms would enter the industry in the long run.

B) be making losses and some firms would exit the industry in the long run.

C) would expand its output in the long run.

D) increase costs in order to break even at P1 and Q1 in the long run.

E) decrease costs in order to break even at P1 and Q1 in the long run.

66) Refer to Figure 11-3. If a decrease in industry demand led to an inward shift of each firm’s demand curve, a typical firm would

A) be making profits and new firms would enter the industry in the long run.

B) be making losses and some firms would exit the industry in the long run.

C) exit the industry and the industry would shut down.

D) increase costs in order to break even at PL and QL in the long run.

E) decrease costs in order to break even at PL and QL in the long run.

67) Refer to Figure 11-1.  If this firm is maximizing its profits, does the diagram depict a long-run equilibrium situation?

A) Yes, because this firm is producing where MC = MR and is earning zero profits.

B) Yes, because this firm is producing where MC = MR and is earning economic profits.

C) No, because this firm is earning profits which will attract new firms to this market.

D) No, because this firm is suffering losses and firms will exit this market.

E) No, because this firm is a natural monopoly.

68) With regard to the long-run equilibrium in the two market structures, the higher unit costs in monopolistic competition relative to perfect competition implies that

A) society would be better off if there were fewer, and more homogeneous, goods produced at the scale at which average costs are minimized.

B) resources are being used inefficiently in perfect competition.

C) there is a tradeoff between product variety and the ability to minimize cost per unit.

D) firms are restricting output to extract positive economic profits.

E) the government should force monopolistically competitive firms to behave like perfectly competitive firms.

69) In long-run equilibrium, a monopolistically competitive industry operates where

A) P > LRAC.

B) MR > MC.

C) LRAC is increasing.

D) LRAC > minimum average cost.

E) LRAC = MC.

70) If a monopolistically competitive industry is in long-run equilibrium, then for each firm

A) the demand curve is tangent to its LRAC curve.

B) the MC curve intersects MR at the minimum level of its LRAC curve.

C) price equals MC at the minimum level of the firm’s LRAC curve.

D) the demand curve cuts the MC curve at the minimum level of the LRAC curve.

E) positive profits are being earned.