#1
What is the long-run equilibrium condition for firms in a perfectly competitive market?
Price equals marginal cost
ExplanationPerfectly competitive firms achieve long-run equilibrium when price equals marginal cost.
#2
What is a key assumption of perfect competition in the long run?
Homogeneous products
ExplanationHomogeneous products are a key assumption of perfect competition in the long run.
#3
In the long-run equilibrium of a competitive industry, what is true regarding economic profits?
Economic profits are always zero.
ExplanationLong-run competitive equilibrium ensures zero economic profits.
#4
Which of the following is NOT a characteristic of a competitive industry in long-run equilibrium?
Entry and exit of firms are restricted
ExplanationCompetitive industries in long-run equilibrium allow free entry and exit of firms.
#5
In the long-run equilibrium of a competitive industry, what happens if firms are making economic profits?
New firms will enter the industry, driving down profits.
ExplanationEconomic profits attract new firms in long-run competitive equilibrium, reducing profits.
#6
In long-run equilibrium, what is the relationship between price and marginal cost for firms in a perfectly competitive market?
Price equals marginal cost.
ExplanationPrice equals marginal cost in long-run equilibrium for perfectly competitive firms.
#7
What is the long-run outcome for a monopolistically competitive firm in terms of economic profits?
Zero economic profits
ExplanationMonopolistically competitive firms achieve zero economic profits in the long run.
#8
In the long run, what happens to the number of firms in a monopolistically competitive industry?
More firms enter the industry.
ExplanationMore firms enter the monopolistically competitive industry in the long run.
#9
What is a characteristic of long-run equilibrium in a perfectly competitive market?
Firms produce at the level where marginal cost equals average total cost.
ExplanationPerfectly competitive firms produce at the level where marginal cost equals average total cost in long-run equilibrium.
#10
What is a key feature of long-run equilibrium in a monopolistic competition?
Zero economic profits
ExplanationMonopolistic competition in long-run equilibrium results in zero economic profits.
#11
What effect does an increase in demand have on long-run equilibrium in a perfectly competitive market?
It attracts new firms to enter the industry.
ExplanationIncreased demand in a perfectly competitive market attracts new firms in long-run equilibrium.
#12
What happens to the number of firms in a perfectly competitive market in the long run if economic profits are being earned?
More firms enter the market.
ExplanationEarning economic profits in a perfectly competitive market attracts more firms in the long run.
#13
What is the primary factor that drives firms to enter a perfectly competitive market in the long run?
Economic losses by existing firms
ExplanationEconomic losses by existing firms drive new firms to enter a perfectly competitive market in the long run.
#14
Which statement accurately describes the long-run outcome for firms in monopolistic competition?
Economic profits are zero.
ExplanationMonopolistic competition in the long run results in zero economic profits for firms.
#15
What is a characteristic of long-run equilibrium in monopolistic competition?
Firms produce at the minimum point of their average total cost curve.
ExplanationIn long-run equilibrium, monopolistic competition firms produce at the minimum point of their average total cost curve.
#16
What is the main reason why firms in monopolistic competition might earn economic profits in the short run?
Low barriers to entry
ExplanationLow barriers to entry can lead to economic profits for firms in monopolistic competition in the short run.
#17
In long-run equilibrium in monopolistic competition, what happens to the price level compared to perfect competition?
Price is higher in monopolistic competition.
ExplanationIn long-run equilibrium, the price level is higher in monopolistic competition compared to perfect competition.
#18
What is a characteristic of long-run equilibrium in a monopolistic competition?
Firms produce at the minimum point of their average total cost curve.
ExplanationIn long-run equilibrium, monopolistic competition firms produce at the minimum point of their average total cost curve.
#19
Which of the following best describes the long-run supply curve in a competitive industry?
It is perfectly elastic at the minimum average total cost.
ExplanationLong-run supply in competitive industries is perfectly elastic at the minimum average total cost.
#20
What does the concept of allocative efficiency refer to in the context of long-run equilibrium?
Producing the quantity of goods most desired by consumers.
ExplanationAllocative efficiency in long-run equilibrium means producing the quantity most desired by consumers.
#21
What is the relationship between long-run equilibrium and the minimum efficient scale of production?
Long-run equilibrium occurs at the minimum efficient scale.
ExplanationLong-run equilibrium in a competitive market occurs at the minimum efficient scale of production.
#22
Which condition characterizes long-run equilibrium in a perfectly competitive market?
Price equals marginal cost equals average total cost.
ExplanationLong-run equilibrium in a perfectly competitive market is characterized by price equaling marginal cost and average total cost.
#23
Which condition characterizes long-run equilibrium in monopolistic competition?
Price equals marginal cost equals average total cost.
ExplanationLong-run equilibrium in monopolistic competition is characterized by price equaling marginal cost and average total cost.
#24
What distinguishes long-run equilibrium in monopolistic competition from perfect competition?
Product differentiation
ExplanationProduct differentiation distinguishes long-run equilibrium in monopolistic competition from perfect competition.