10) A constant-cost industry is characterized by which of the following? (2pts)
ID: 1164555 • Letter: 1
Question
10)
A constant-cost industry is characterized by which of the following?
(2pts)
a horizontal long-run industry supply curve.
a perfectly elastic market demand curve.
a flat long-run average cost curve
all the above
none of the above
11)
An increasing-cost, perfectly competitive industry experiences a permanent increase in demand. In adjusting to this change, what will happen to the price of the product?
(2pts)
It will decrease in the short-run but return to its original level in the long-run.
It will increase in the short-run and then decrease back to its original level in the long-run.
It will increase in the short-run and then decrease below its original level in the long-run.
It will increase in the short-run and then decrease in the long-run, but end up above its original level in the long-run.
It will increase in the short-run and then increase further in the long-run.
12)
Assume that a perfectly competitive firm owns or rents a higher-quality resource that results in lower average total costs and higher economic profits in the short run. What will happen in the long-run?
(2pts)
The government will tax away any excess profits.
New firms will enter and compete any excess profits away.
The price of the higher-quality resource will be bid upward resulting in economic rents and equalizing costs across firms.
The firm with the higher-quality resource will earn positive economic profits in the long run.
None of the other answers is correct.
13)
According to the textbook, in perfect competition, firms that discriminate against particular groups will
(2pts)
be able to charge higher prices when selling to those groups.
be able to pay workers in those groups lower wages.
be able to earn positive economic profits
be able to do all the above.
have to pay a penalty for doing so.
14)
Which of the following statements is consistent with the textbook’s analysis of perfect competition?
(2pts)
Higher costs for one firm in the industry will result in that firm charging a higher price than the other firms in the industry.
Although individual perfectly competitive firms won’t pay to advertise, the industry as a whole may well advertise.
If all the firms in an industry charge an identical price for their products, this is clear evidence of collusive behavior.
All the above.
None of the above.
15)
The assumptions that define the market structure known as monopoly include which of the following?
(2pts)
Low barriers to entry.
There are many good substitutes available.
There is one seller.
All the above.
None of the above.
16)
All of the following are barriers to entry that might result in monopoly except:
(2pts)
price-discrimination
exclusive ownership of a resource
public franchise
patents
economies of scale
17)
According to the textbook, the cost of rent-seeking
(2pts)
makes the overall cost of monopoly higher than the deadweight loss.
is minor and can be safely ignored when discussing monopoly.
is the direct result of x-ineffciiency.
is the basis for price discrimination.
is the motivation that leads people to be landlords.
18)
A monopolist is currently selling 6 widgets per day at a price of $12 per widget. In order to sell 7 widgets per day it must lower the price it charges on all units to $11 each. The firm’s marginal revenue from selling the 7th widget is
(2pts)
$48
$5
$12
$11
$7
19)
The "deadweight loss" from monopoly is seen on a graph in the shape of a
(2pts)
square
quadrilateral
rhombus
pentagon
triangle
Explanation / Answer
10) a long run horizontal supply curve is correct
In constant cost industry long run supply curve is horizontal.
11) it will increase in the short run then decrease in the long run but end up above original level in the long run.
Increase in demand results in higher price but in long run new firms will enter the market which pushes the price downwards but is still higher original level as entering of new firms also leads to increase in average cost of production per firm.
12) new firms will enter and compete away excess profit.
When there is a positive profit in the market new firms enter the market which reduces price and thus profit.
13) have to pay a penalty for doing so.
There are large number of firms in perfect competition and buyer can always find another seller selling the same product.
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