Why must profits be zero in long-run competitive equilibrium? a.If profits are not zero,

Why must profits be zero in long-run competitive equilibrium?

a.If profits are not zero, firms will enter or exit the industry.

b.If profits are not zero, firms will produce higher-quality goods.

c.If profits are not zero, marginal revenue will rise.

d.If profits are not zero, marginal cost will rise.

 

 

 

51.If the perfectly competitive firm is producing an output level at which price equals marginal cost, it is

a.earning profits.

b.taking losses.

c.earning normal profit.

d.There is not enough information to answer the question.

 

 

 

52.Assume a constant-cost industry that is initially in long-run competitive equilibrium. An increase in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________, which, in turn, will eventually cause the equilibrium price to be __________ before.

a.decrease; exit; leftward; lower than

b.increase; enter; rightward; higher than

c.decrease; exit; rightward; higher than

d.increase; enter; rightward; the same as

e.increase; exit; leftward; lower than

 

 

 

53.Demand increases in an increasing-cost industry that is initially in long-run competitive equilibrium. After full adjustment, price will be

a.equal to its original level.

b.below its original level.

c.above its original level.

d.There is not enough information to answer the question.

 

 

 

54.A constant-cost industry has a long-run (industry) supply curve that is

a.upward sloping.

b.downward sloping.

c.horizontal.

d.U-shaped.

 

 

 

55.Assume a decreasing-cost industry that is initially in long-run competitive equilibrium. A decrease in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________,which, in turn, will eventually cause the equilibrium price to be __________ before.

a.a decrease; exit; rightward; lower than

b.an increase; enter; rightward; higher than

c.a decrease; exit; leftward; higher than

d.an increase; enter; rightward; the same as

e.an increase; exit; leftward; lower than

 

 

 

56.If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry.

a.rise; marginal cost; enter

b.fall; marginal cost; enter

c.rise; marginal revenue; enter

d.fall; demand; exit

e.fall; marginal cost; exit

 

 

 

57.As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits.

a.leftward; rises; zero

b.leftward; falls; positive

c.leftward; rises; positive

d.rightward; falls; negative

e.rightward; rises; positive

 

 

 

58.Resource allocative efficiency occurs when a firm

a.minimizes costs of production yet charges the highest possible price.

b.produces the quantity of output at which price exceeds average total cost by the greatest amount.

c.produces the quantity of output at which price equals marginal cost.

d.produces the quantity of output at which price equals average total cost.

e.produces the quantity of output at which price equals average variable cost.

 

 

 

59.Resources are allocated efficiently when

a.the exchange value of the resources to demanders equals the opportunity cost of the resources.

b.the marginal benefit to demanders of the resources in the goods they purchase is equal to the marginal cost to suppliers of the resources they use in producing the goods.

c.firms produce the quantity of output at which price is equal to marginal cost.

d.a and b

e.a, b, and c