1clip_image002.jpg”> Figure 6.4 22) Figure 6.4 represents a perfectly competitive firm’s costs…

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Figure 6.4

22)
Figure 6.4 represents a perfectly competitive firm’s costs. Illustrate the
firm’s short-run supply curve on the graph. Explain.

6.5 The Long-Run Supply Curve for an
Increasing-Cost Industry

1)
An increasing-cost industry is one in which the average cost of production
________ as the total output of the industry ________.
A)
increases; increases
B)
increases; decreases
C)
decreases; increases
D)
None of the above; there are no increasing-cost industries.

2)
Costs increase with output in an increasing-cost industry because
A)
input prices increase as the industry competes for scarce resources.
B)
firms may be forced to use less productive inputs.
C)
the firms become monopolies.
D)
Both A and B are correct.

3)
Heterogeneous inputs in a perfectly competitive market will cause the industry
to face ________ costs because as the firm produces a larger quantity, it is
forced to use ________ productive inputs.
A)
increasing; less
B)
decreasing; less
C)
increasing; more
D)
decreasing; more

4)
In an increasing-cost industry, the long-run market supply curve is
A)
positively sloped.
B)
negatively sloped.
C)
vertical.
D)
horizontal.

Recall
the Application about the production of coffee in China to answer the following
question(s).

5)
Recall the application. Farmers in the city of Pu’er, China currently earn more
growing ________ than they do growing ________.
A)
tea; coffee
B)
rice; coffee
C)
coffee; tea
D)
rice; tea

6)
Recall the Application. Farmers in the city of Pu’er, China changing the
acreage devoted to coffee production illustrates the law of supply in that the
________ in the price of coffee ________ the quantity supplied.
A)
increase; increased
B)
increase; decreased
C)
decrease; increased
D)
decrease; decreased

7)
One reason for increasing costs industries is that as an industry grows, it
drives up the prices of inputs.

8)
An increasing cost industry is one where total costs rise as the industry
grows.

9)
The long-run supply curve is upward sloping in an increasing cost industry.

 

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