Chapter 9 Flashcards
As new firms enter an industry, what will happen to the supply of the product in question and its price?
Supply will increase and the price will fall.
What effect will more innovative technology have on an economy?
it will make it grow.
An increase in demand can lead to growth for a firm especially if _____ are present.
Economies of scale
Technological change will lead to a(n) ____ in production costs and a(n) _____ in profits.
decrease; increase
If the current firms are making _____, new firms will enter into the market place in the long run.
Economic profits
As the price of a product falls and companies are forced out of the industry, what kind of companies will be the first to go?
Those that did not adopt cost saving technology.
What is the relationship between competitive markets and innovation?
Competitive markets encourage innovation.
An increase in demand for a product will lead to a(n) _____ in market price and a(n) _____ in the profits of the firms producing the product.
increase; increase
Given perfect competition, what kind of profits are not possible in the long run?
Economic
Technological change will lead to a(n) ____ in production and a(n) _____ in profits.
increase; increase
If there are economic profits being made in the short-run, what will happen in the industry?
New firms will enter the industry and the industry will grow,
Which of the following will happen if the average firm in a perfectly competitive industry is making economic profits?
Industry capacity will rise
Market price will fall
Market supply will increase
What is true in the long run of competitive firms?
They are not able to make economic profits.
What kind of profits will encourage firms to expand their scale but will disappear in the long run?
Economic
In competitive markets, in the long run, the price will be equal to which three things?
Short-run average cost
Long-run average cost
Marginal cost
If the current firms are making _____, new firms will enter into the market place in the long run.
economic profits
The capacity of a perfectly competitive industry will if the average firm is currently making economic profits.
Increase
__________ efficiency means that products are produced in a way that minimizes both short and long run average costs.
Productive
In the long run competitive firms may make economic profit.
False
In the long run, consumers benefit from productive efficiency by paying the ______ price for a product causing firms to earn only ______ profit.
lowest; a normal
________ efficiency means that resources are distributed among firms and industries to yield a mix of products and services that is most wanted by society.
Allocative
In competitive markets the long run, what is equal to the minimum points on the short and long run average costs curves as well as the marginal cost?
The price
When are society’s resources allocated efficiently?
When perfectly competitive firms produce a quantity of output where price is equal to marginal cost (MC).
Productive efficiency requires that _____.
goods be produced in the least costly way.