Economics Past Paper PDF

1\. Which of the following distinguishes the short run from the long run in pure competition? **[A.]** Firms can enter and exit the market in the long run but not in the short run. B. Firms attempt to maximize profits in the long run but not in the short run. C. Firms use the MR = MC rule to maxi...

1\. Which of the following distinguishes the short run from the long run in pure competition? **[A.]** Firms can enter and exit the market in the long run but not in the short run. B. Firms attempt to maximize profits in the long run but not in the short run. C. Firms use the MR = MC rule to maximize profits in the short run but not in the long run. D. The quantity of labor hired can vary in the long run but not in the short run. 3\. In a purely competitive industry, A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. **[C.]** there may be economic profits in the short run but not in the long run. D. there may be economic profits in the long run but not in the short run. 4\. Balin's Burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of \$20,000 per year. Based on this information, we can conclude that A. Balin's profits will discourage new firms from entering. B. Balin's will increase its market price over the coming months. **[C.]** Balin's is operating in the short run, but not the long run. D. Balin's is operating in the long run. 6\. Karlee's Kreations sells handbags in a purely competitive market. Karlee's is currently breaking even. Based on this information, we can conclude that Karlee's Kreations A. must be operating in long-run equilibrium. B. will leave this market in the long run because no economic profits are being earned. C. will continue operating in this market only if the market price rises. **[D.]** may be operating in either short-run or long-run equilibrium. 7\. Which of the following is true concerning purely competitive industries? A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. **[C.]** In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run but not in the short run. 18\. Which of the following will *not* hold true for a competitive firm in long-run equilibrium? **[A.]** *P* equals AFC. B. *P* equals minimum ATC. C. MC equals minimum ATC. D. *P* equals MC. 22\. A purely competitive firm A. must earn a normal profit in the short run. **[B.]** cannot earn economic profit in the long run. C. may realize either economic profit or losses in the long run. D. cannot earn economic profit in the short run.. Refer to the diagrams, which pertain to a purely competitive firm producing output *q* and the industry in which it operates. Which of the following is *correct*? A. The diagrams portray neither long-run nor short-run equilibrium. B. The diagrams portray both long-run and short-run equilibrium. **[C.]** The diagrams portray short-run equilibrium but not long-run equilibrium. D. The diagrams portray long-run equilibrium but not short-run equilibrium.