AP Economics Terms Quiz 111-120

• Where marginal cost equals average total cost

• Where total revenue equals total cost

• Where marginal revenue equals marginal cost

• Where price equals average variable cost

• Price is below average variable cost

• Price, marginal revenue, marginal cost, and average total cost are all equal

• Marginal cost is minimized

• Average fixed cost equals price

The shutdown point is the output where which cost measure is minimized; if price falls below this level in the short run, the firm produces zero units.

• Average total cost

• Average variable cost

• Marginal cost

• Average fixed cost

In a perfectly competitive long-run equilibrium, what is true about firms’ incentives to enter or exit the market?

• There is incentive for new firms to enter

• There is incentive for existing firms to exit

• There is no incentive to enter or exit

• Entry is blocked by legal barriers

Normal profit represents the opportunity cost of the entrepreneur’s talents; it implies the firm is earning what level of economic profit?

• Positive economic profit

• Negative economic profit

• Zero economic profit

• Increasing economic profit

In a constant cost industry, how does entry or exit affect the cost curves of firms in the industry?

• Entry shifts all firms’ cost curves upward

• Exit shifts all firms’ cost curves downward

• Entry or exit does not shift firms’ cost curves

• Entry lowers marginal cost but raises average total cost

In an increasing cost industry, what is the typical effect of the entry of new firms on the cost curves of all firms?

• Shifts the cost curves downward

• Shifts the cost curves upward

• Leaves the cost curves unchanged

• Eliminates marginal cost

In a decreasing cost industry, what is the typical effect of the entry of new firms on the cost curves of all firms?

• Shifts the cost curves upward

• Shifts the cost curves downward

• Leaves the cost curves unchanged

• Raises average fixed cost only

Which market structure is characterized by a single firm that is the sole producer of a good with no close substitutes and by the presence of barriers to entry?

• Perfect competition

• Monopolistic competition

• Oligopoly

• Monopoly

A barrier to entry is something that prevents other firms from entering an industry. Which description aligns with this concept?

• Freely available inputs and no legal restrictions

• Economies of scale, control of scarce inputs, technological superiority, or government-created barriers

• Many small firms producing identical products with free entry and exit

• Temporary advertising campaigns