QUESTION 1

When a perfectly competitive industry is in long-run equilibrium, which statement is true?

	A.	Average total cost is less than marginal cost
	B.	Price and average total cost are equal
	C.	Marginal cost is at its maximum level
	D.	Marginal revenue is greater than price

QUESTION 2

What is implied if P = MC > AC?

	A.	The market is achieving productive efficiency but is not achieving allocative efficiency.
	B.	The market is achieving allocative efficiency but is not achieving productive efficiency
	C.	The market is achieving neither productive efficiency nor allocative efficiency.
	D.	The market is achieving both allocative efficiency and productive efficiency

QUESTION 3

Which form of pollution control would one expect environmental groups to favour the most?

	A.	Legislative controls, because of the built-in incentive firms have to reduce pollution below the required minimum.
	B.	A pollution tax, because the producer pays all of the tax and the consumer none.
	C.	The pollution tax, because the consumer pays all of the tax and the producer none.
	D.	A.The marketing of pollution permits because the environmental group has the option of directly reducing pollution by buying permits and not using them.

QUESTION 4

Which of the following is true regarding the equilibrium price in perfectly competitive markets in the long run?

	A.	A.It will equal the firm's long- and short-run average costs and also its marginal cost.
	B.	It will equal the firm's long- and short-run average costs but not its marginal cost.
	C.	It will equal the firm's long-run average costs and also its marginal cost but not its short-run costs.
	D.	It will equal the firm's short-run average costs and also its marginal cost but not its long-run costs.

QUESTION 5

The long-run supply curve in a constant-cost industry would be:

	A.	Vertical
	B.	Horizontal
	C.	Upsloping
	D.	Downsloping

QUESTION 6

Productive efficiency refers to:

	A.	Cost minimization, whereP= minimum ATC
	B.	Production, whereP= MC
	C.	Maximizing profits by producing where MR = MC
	D.	Setting TR = TC

QUESTION 7

Economic surplus is

	A.	the ratio of consumer surplus to producer surplus.
	B.	the difference between consumer surplus and producer surplus.
	C.	the difference between tax revenue and government expenditure.
	D.	the sum of consumer surplus and producer surplus.
	E.	minimized at the point of market equilibrium.

QUESTION 8

Refer to the diagram below. When quantity supplied and quantity demanded are equal, producer surplus is equal to