Ch.15 MicroEcon Quiz

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

• fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

• fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

• fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

• not fall in the short run because firms will exit to maintain the price.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

• increase price in the long run but not in the short run.

• increase price in the short run but not in the long run.

• not affect price in either the short or the long run.

• increase price both in the short and the long run.

Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. The firm should shut down if the market price is

• above $6 but less than $18.

• less than $6.

• above $6 but less than $13.

• above $13.

Refer to Figure 14-1. The firm will earn a negative economic profit but remain in business in the short run if the market price is

• above $13.

• above $13 but less than $18.

• less than $6.

• less than $13 but more than $6.

Refer to Figure 14-2. If the market price is $10, what is the firm's total cost?

• $35

• $30

• $50

• $15

Figure 14-2 Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-2. If the market price is $10, what is the firm's total revenue?

• $50

• $30

• $15

• $35

Suppose a firm operating in a competitive market has the following cost curves: Refer to Figure 14-2. The firm will earn zero economic profit if the market price is

• $10.

• $6.

• $0.

• $7.

Figure 14-3 Refer to Figure 14-3. In the short run, if the market price is P4, individual firms in a competitive industry will earn

• zero profits.

• positive profits.

• losses and will shut down.

• losses but will remain in business.

Figure 14-4 In the following figure, graph (a) depicts the linear marginal cost (MC) of a firm in a competitive market, and graph (b) depicts the linear market supply curve for a market with a fixed number of identical firms. Refer to Figure 14-4. If there are 100 identical firms in this market, what is the value of Q2?

• 20,000

• 80,000

• 40,000

• 10,000

Refer to Figure 14-7. If the market starts in equilibrium at point Z in graph (b), a decrease in demand will ultimately lead to

• lower prices once the new long-run equilibrium is reached.

• fewer firms in the market.

• more firms in the industry but lower levels of output for each firm.

• a new long-run equilibrium at point X in graph (b).