17. An industry\'s output is produced at the lowest possible cost when A. firms\

Question

17. An industry's output is produced at the lowest possible cost when A. firms' marginal costs are equal B. firms minimize their average costs. C. all firms earn the same profit. D. output is evenly divided among the industry's firms 18. A competitive firm's long-run supply curve is A. horizontal at the firm's break-even price B. steeper than its long-run marginal cost curve C. identical to its long-run average cost curve D. more elastic than its short-run supply curve 19. Bonzo is in business for himself making and selling Easter baskets. His daily cost for wicker is $100 and his daily revenue is $120. Bonzo quit his job at the Basket Weaving factory where he earned $15 a day, to enter the Easter basket business. Given this information, we know that his accounting profit A. is $120 and his economic profit is $105 B. and economic profit are both $20 C. is $20 and his economic profit is $5 D. and economic profit are both $5 20. Bonzo's success in the Easter Basket business has attracted more characters into the Easter Basket industry. If Easter Basket making is a constant cost industry, Bonzo A. and the new entrants can all expect to be enjoying his current level of profits B. can expect his profits to be driven down to zero as new competitors push the price down C. can expect to have to shutdown his operation in the face of new competition D. will have to increase his price to make up for the loss of any sales to new competitors. 21. Assume dental care is provided by a competitive industry. A new government regulation requires each dentist to take a costly new exam for certification. What happens to the price of dental care? A. The price of dental care rises in the short run and rises further in the long run. B. The regulation will cause higher prices in the short run, but it will have no long-run impact. C. There is no change in the short run, but dentists will exit and prices will rise in the long run. D. The exam is a sunk cost, so the price of dental care does not change in either the short run or the long run. 22. Which of the following is not necessarily true in the long for a competitive industry? A. Firms earn zero profits. B. Firms set MCMR. C. A firm will not produce if the market price is less than their break-even price D. The long-run supply curve is more elastic than the short-run supply curve 23. By setting MR MC, a competitive firm decides to sell 100 units when the market price is $20. The average cost of producing the 100 units is $18 per unit. If the firm has fixed costs of $500, then the firm should A. shutdown B. exit the industry C. expand production D. increase their price

Explanation / Answer

17. Option B
Only when the constituent firms produce at the minimum average costs, do we expect the industry output to be produced at lowest cost.

18. Option D
The long run supply curve is more elastic than short run supply curve. This happens due to flexibility obtained due to adjustments that can be made to factors of production in long run.

19.Option C
Accounting profit = Revenue - cost = 120 - 100 = $20
Economic profit = accounting profit - opportunity cost (factory wage) = 20 - 15 = 5

20 Option B
As more competitors will enter the market, the price will decrease and hence profits will be driven to zero.

PS: In the event of multiple MCQs, only first 4 are attempted.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.