8,9B Web Quiz.docx - (8/9B Web Quiz 1 Pure competition...

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(8/9B Web Quiz) 1) Pure competition: Which would be the best examples of a competitive market? Ans: Agriculture (like wheat, soybean, corn); the stock market 2) Describe the shape of the demand curve facing an individual purely competitive firm. Ans: It is horizontal (perfectly elastic) 3) What is the main difference between the Long Run and the Short run? Ans: In the short run the size of the factory (plant) cannot be changed.
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4) Define LRATC: Assume a business had the option of renting four different size factories each with their own short run ATC curve (ATC1, ATC2, ATC3, and ATC4). See Graph. If this business planned to produce quantity Q2, which size factory should they rent? Ans: ATC2 5) These graphs are short run graphs for a purely competitive industry and for an individual firm. What is going to happen in the long run?
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Ans: Since there are short run profits some firms will enter the industry causing the industry supply curve to increase and the price to drop. 6) Assume pure competition. If a few farmers tried growing a new crop, maybe asparagus, and as
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