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Chapter 11
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.
2. The primary force encouraging the entry of new firms into a purely competitive industry is:
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.
11-1
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McGraw-Hill Education.
4. Suppose a firm in a purely competitive market discovers that the price of its product is above
its minimum AVC point but everywhere below ATC. Given this, the firm:
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.
A. the selling price for this firm is above the market equilibrium price.
B. new firms will enter this market.
C. some existing firms in this market will leave.
D. there must be price fixing by the industry's firms.
11-2
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McGraw-Hill Education.
8. We would expect an industry to expand if firms in that industry are:
A. Economic profits induce firms to enter an industry; losses encourage firms to leave.
B. Economic profits induce firms to leave an industry; profits encourage firms to leave.
C. Economic profits and losses have no significant impact on the growth or decline of an
industry.
D. Normal profits will cause an industry to expand.
A. and industry output will be less than the initial price and output.
B. will be greater than the initial price, but the new industry output will be less than the
original output.
C. will be less than the initial price, but the new industry output will be greater than the
original output.
D. and industry output will be greater than the initial price and output.
11-3
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11. Which of the following statements is correct?
A. The long-run supply curve for a purely competitive increasing-cost industry will be
upsloping.
B. The long-run supply curve for a purely competitive increasing-cost industry will be
perfectly elastic.
C. The long-run supply curve for a purely competitive industry will be less elastic than the
industry's short-run supply curve.
D. The long-run supply curve for a purely competitive decreasing-cost industry will be
upsloping.
13. 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.
11-4
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McGraw-Hill Education.
14. Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and
that an increase in consumer demand occurs. After all economic adjustments have been
completed, product price will be:
A. leave the industry, price will decrease, and quantity produced will increase.
B. enter the industry and price and quantity will both increase.
C. leave the industry and price and output will both increase.
D. leave the industry and price and output will both decline.
11-5
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18. A constant-cost industry is one in which:
20.
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?
11-6
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McGraw-Hill Education.
21.
Refer to the diagrams, which pertain to a purely competitive firm producing output q and the
industry in which it operates. In the long run we should expect:
A. firms to enter the industry, market supply to rise, and product price to fall.
B. firms to leave the industry, market supply to rise, and product price to fall.
C. firms to leave the industry, market supply to fall, and product price to rise.
D. no change in the number of firms in this industry.
22.
Refer to the diagrams, which pertain to a purely competitive firm producing output q and the
industry in which it operates. The predicted long-run adjustments in this industry might be
offset by:
11-7
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McGraw-Hill Education.
23. Assume a purely competitive firm is maximizing profit at some output at which long-run
average total cost is at a minimum. Then:
25. A purely competitive firm is precluded from making economic profits in the long run because:
A. it is a "price taker."
B. its demand curve is perfectly elastic.
C. of unimpeded entry to the industry.
D. it produces a differentiated product.
26. If a purely competitive constant-cost industry is realizing economic profits, we can expect
industry supply to:
11-8
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McGraw-Hill Education.
27. Assume that a decline in consumer demand occurs in a purely competitive industry that is
initially in long-run equilibrium. We can:
A. predict that the new price will be greater than the original price.
B. predict that the new price will be less than the original price.
C. predict that the new price will be the same as the original price.
D. not compare the original and the new prices without knowing what cost conditions exist in
the industry.
28. Under what conditions would an increase in demand lead to a lower long-run equilibrium
price?
A. there will be no firm entry because the increased supply will reduce the long-run
equilibrium price.
B. the law of demand does not apply.
C. greater demand leads to higher long-run equilibrium prices.
D. lower demand leads to higher long-run equilibrium prices.
11-9
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31. When LCD televisions first came on the market, they sold for at least $1,000, and some for
much more. Now many units can be purchased for under $400. These facts imply that:
A. the LCD television industry was once competitive but is now monopolistic.
B. fewer firms produce LCD televisions than was the case five or ten years ago.
C. the demand curve for LCD televisions has shifted leftward.
D. the LCD television industry is a decreasing-cost industry.
32. Suppose that an industry's long-run supply curve is downsloping. This suggests that:
A. it is an increasing-cost industry.
B. relevant inputs have become more expensive as the industry has expanded.
C. technology has become less efficient as a result of the industry's expansion.
D. it is a decreasing-cost industry.
A. the new long-run equilibrium price will be lower than the original long-run equilibrium
price.
B. equilibrium quantity will decline.
C. firms will eventually leave the industry.
D. the new long-run equilibrium price will be higher than the original price.
34. Purely competitive industry X has constant costs and its product is an inferior good. The
industry is currently in long-run equilibrium. The economy now goes into a recession and
average incomes decline. The result will be:
11-10
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McGraw-Hill Education.
35. Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs
decline. Industry X is:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. encountering X-inefficiency.
36.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's total revenue:
A. is $10.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
11-11
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37.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's total cost:
A. is $10.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
11-12
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McGraw-Hill Education.
38.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's economic profit:
A. is zero.
B. is $400.
C. is $200.
D. cannot be determined from the information provided.
40. If the long-run supply curve of a purely competitive industry slopes upward, this implies that
the prices of relevant resources:
11-13
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41.
Refer to the diagram. Line (1) reflects the long-run supply curve for:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
42.
Refer to the diagram. Line (2) reflects the long-run supply curve for:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
11-14
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43.
Refer to the diagram. Line (1) reflects a situation where resource prices:
44.
Refer to the diagram. Line (2) reflects a situation where resource prices:
11-15
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45. Allocative efficiency is achieved when the production of a good occurs where:
A. P = minimum ATC.
B. P = MC.
C. P = minimum AVC.
D. total revenue is equal to TFC.
46. A firm is producing an output such that the benefit from one more unit is more than the cost
of producing that additional unit. This means the firm is:
11-16
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49. If the price of product Y is $25 and its marginal cost is $18:
A. the level of output that coincides with the intersection of the MC and AVC curves.
B. minimization of the AFC in the production of any good.
C. the production of the product mix most desired by consumers.
D. the production of a good at the lowest average total cost.
11-17
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53.
54.
11-18
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McGraw-Hill Education.
55.
56.
11-19
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57.
A. resources are overallocated to this product and productive efficiency is not realized.
B. resources are underallocated to this product and productive efficiency is not realized.
C. productive efficiency is achieved, but resources are underallocated to this product.
D. productive efficiency is achieved, but resources are overallocated to this product.
58.
A. resources are overallocated to this product and productive efficiency is not realized.
B. resources are underallocated to this product and productive efficiency is not realized.
C. productive efficiency is achieved, but resources are underallocated to this product.
D. productive efficiency is achieved, but resources are overallocated to this product.
11-20
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McGraw-Hill Education.
59. Assume that society places a higher value on the last unit of X produced than the value of the
resources used to produce that unit. With no spillovers, this information means that:
60. If production is occurring where marginal cost exceeds price, the purely competitive firm will:
61. If a purely competitive firm is producing where price exceeds marginal cost, then:
A. the firm will fail to maximize profit, but resources will be efficiently allocated.
B. the firm will fail to maximize profit and resources will be overallocated to the product.
C. the firm will fail to maximize profit and resources will be underallocated to the product.
D. resources will be underallocated to the product, but the firm will maximize profit.
62. Which of the following conditions is true for a purely competitive firm in long-run
equilibrium?
11-21
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63. Allocative efficiency occurs whenever:
65. Which of the following would not be expected to occur in a purely competitive market in long-
run equilibrium?
66. Which of the following outcomes is consistent with a purely competitive market in long-run
equilibrium?
11-22
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McGraw-Hill Education.
67. Entrepreneurs in purely competitive industries:
A. have no incentive to innovate because in the long run they will earn no economic profits.
B. innovate to lower operating costs and generate short-run economic profits.
C. utilize pricing strategies to generate short-run economic profits.
D. rarely try to innovate because of a lack of financial resources.
69. The process by which new firms and new products replace existing dominant firms and
products is called:
A. monopolistic competition.
B. mergers and acquisitions.
C. process innovation.
D. creative destruction.
11-23
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71. The theory of creative destruction was advanced many years ago by:
A. Bill Gates.
B. Alfred Marshall.
C. Joseph Schumpeter.
D. Adam Smith.
74. (Consider This) The average life expectancy of a U.S. business is approximately:
A. 2 years.
B. 5.5 years.
C. 10.2 years.
D. 22 years.
11-24
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McGraw-Hill Education.
75. (Consider This) Approximately what percentage of start-up firms in the United States go
bankrupt within the first two years?
A. 3.5.
B. 10.2.
C. 22.
D. 53.
76. (Consider This) Which of the following statements is true about U.S. firms?
A. Over half are bankrupt within the first two years after starting up.
B. Over half are bankrupt within the first five years after starting up.
C. Nearly 65 percent last 10 years or more.
D. The life expectancy of a U.S. firm is approximately 22 years.
A. for products that incorporate many different technologies into a single product.
B. of simple, easy-to-copy products.
C. in the pharmaceutical industry.
D. when they cause creative destruction.
11-25
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79. (Last Word) Eliminating patents would tend to:
80. After all long-run adjustments have been completed, a firm in a competitive industry will
produce that level of output where average total cost is at a minimum.
True False
True False
82. Marginal cost is a measure of the alternative goods that society forgoes in using resources to
produce an additional unit of some specific product.
True False
83. Because the equilibrium position of a purely competitive seller entails an equality of price and
marginal costs, competition produces an efficient allocation of economic resources.
True False
11-26
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McGraw-Hill Education.
84.
Refer to the diagram. If this represents a typical firm in the industry and the firm is producing
at the profit-maximizing level of output in the short run, then in the long run we would expect
more firms to enter the market.
True False
85.
Refer to the diagram. If this represents a typical firm in the industry and the firm is producing
at the profit-maximizing level of output in the short run, then in the long run we would expect
economic profits in this market to rise.
True False
11-27
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86.
Refer to the diagram. If this firm is producing at the profit-maximizing level of output in the
short run, then it is achieving productive and allocative efficiency.
True False
True False
88. The process by which new firms and new products destroy existing dominant firms and their
products is called creative destruction.
True False
11-28
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McGraw-Hill Education.
Chapter 11 Pure Competition in the Long Run Answer Key
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.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-01 Explain how the long run differs from the short run in pure competition.
Topic: Long run in pure competition
2. The primary force encouraging the entry of new firms into a purely competitive industry is:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
11-29
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McGraw-Hill Education.
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. Suppose a firm in a purely competitive market discovers that the price of its product is
above its minimum AVC point but everywhere below ATC. Given this, the firm:
11-30
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McGraw-Hill Education.
5. 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.
A. the selling price for this firm is above the market equilibrium price.
B. new firms will enter this market.
C. some existing firms in this market will leave.
D. there must be price fixing by the industry's firms.
11-31
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McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
A. Economic profits induce firms to enter an industry; losses encourage firms to leave.
B. Economic profits induce firms to leave an industry; profits encourage firms to leave.
C. Economic profits and losses have no significant impact on the growth or decline of an
industry.
D. Normal profits will cause an industry to expand.
11-32
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McGraw-Hill Education.
10. Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now
assume that a decrease in consumer demand occurs. After all resulting adjustments have
been completed, the new equilibrium price:
A. and industry output will be less than the initial price and output.
B. will be greater than the initial price, but the new industry output will be less than the
original output.
C. will be less than the initial price, but the new industry output will be greater than the
original output.
D. and industry output will be greater than the initial price and output.
A. The long-run supply curve for a purely competitive increasing-cost industry will be
upsloping.
B. The long-run supply curve for a purely competitive increasing-cost industry will be
perfectly elastic.
C. The long-run supply curve for a purely competitive industry will be less elastic than the
industry's short-run supply curve.
D. The long-run supply curve for a purely competitive decreasing-cost industry will be
upsloping.
11-33
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McGraw-Hill Education.
12. A constant-cost industry is one in which:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
13. 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.
11-34
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McGraw-Hill Education.
14. Assume a purely competitive increasing-cost industry is initially in long-run equilibrium
and that an increase in consumer demand occurs. After all economic adjustments have
been completed, product price will be:
A. leave the industry, price will decrease, and quantity produced will increase.
B. enter the industry and price and quantity will both increase.
C. leave the industry and price and output will both increase.
D. leave the industry and price and output will both decline.
11-35
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McGraw-Hill Education.
16. When a purely competitive firm is in long-run equilibrium:
AACSB: Analytic
11-36
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McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
20.
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?
11-37
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McGraw-Hill Education.
Difficulty: 2 Medium
Learning Objective: 11-01 Explain how the long run differs from the short run in pure competition.
Topic: Long run in pure competition
Type: Graph
21.
Refer to the diagrams, which pertain to a purely competitive firm producing output q and
the industry in which it operates. In the long run we should expect:
A. firms to enter the industry, market supply to rise, and product price to fall.
B. firms to leave the industry, market supply to rise, and product price to fall.
C. firms to leave the industry, market supply to fall, and product price to rise.
D. no change in the number of firms in this industry.
11-38
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McGraw-Hill Education.
22.
Refer to the diagrams, which pertain to a purely competitive firm producing output q and
the industry in which it operates. The predicted long-run adjustments in this industry
might be offset by:
23. Assume a purely competitive firm is maximizing profit at some output at which long-run
average total cost is at a minimum. Then:
11-39
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McGraw-Hill Education.
24. An increasing-cost industry is the result of:
25. A purely competitive firm is precluded from making economic profits in the long run
because:
A. it is a "price taker."
B. its demand curve is perfectly elastic.
C. of unimpeded entry to the industry.
D. it produces a differentiated product.
11-40
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McGraw-Hill Education.
26. If a purely competitive constant-cost industry is realizing economic profits, we can expect
industry supply to:
27. Assume that a decline in consumer demand occurs in a purely competitive industry that is
initially in long-run equilibrium. We can:
A. predict that the new price will be greater than the original price.
B. predict that the new price will be less than the original price.
C. predict that the new price will be the same as the original price.
D. not compare the original and the new prices without knowing what cost conditions
exist in the industry.
11-41
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McGraw-Hill Education.
28. Under what conditions would an increase in demand lead to a lower long-run equilibrium
price?
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
A. there will be no firm entry because the increased supply will reduce the long-run
equilibrium price.
B. the law of demand does not apply.
C. greater demand leads to higher long-run equilibrium prices.
D. lower demand leads to higher long-run equilibrium prices.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
11-42
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McGraw-Hill Education.
30. A decreasing-cost industry is one in which:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
31. When LCD televisions first came on the market, they sold for at least $1,000, and some for
much more. Now many units can be purchased for under $400. These facts imply that:
A. the LCD television industry was once competitive but is now monopolistic.
B. fewer firms produce LCD televisions than was the case five or ten years ago.
C. the demand curve for LCD televisions has shifted leftward.
D. the LCD television industry is a decreasing-cost industry.
32. Suppose that an industry's long-run supply curve is downsloping. This suggests that:
A. it is an increasing-cost industry.
B. relevant inputs have become more expensive as the industry has expanded.
C. technology has become less efficient as a result of the industry's expansion.
D. it is a decreasing-cost industry.
11-43
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McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
A. the new long-run equilibrium price will be lower than the original long-run equilibrium
price.
B. equilibrium quantity will decline.
C. firms will eventually leave the industry.
D. the new long-run equilibrium price will be higher than the original price.
34. Purely competitive industry X has constant costs and its product is an inferior good. The
industry is currently in long-run equilibrium. The economy now goes into a recession and
average incomes decline. The result will be:
11-44
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McGraw-Hill Education.
35. Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs
decline. Industry X is:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. encountering X-inefficiency.
36.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's total revenue:
A. is $10.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
11-45
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
Type: Graph
37.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's total cost:
A. is $10.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
Type: Graph
11-46
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
38.
Refer to the diagram showing the average total cost curve for a purely competitive firm. At
the long-run equilibrium level of output, this firm's economic profit:
A. is zero.
B. is $400.
C. is $200.
D. cannot be determined from the information provided.
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
Type: Graph
11-47
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long run in pure competition
Topic: Long-run adjustment process in pure competition
40. If the long-run supply curve of a purely competitive industry slopes upward, this implies
that the prices of relevant resources:
41.
Refer to the diagram. Line (1) reflects the long-run supply curve for:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
11-48
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 2 Medium
Learning Objective: 11-03 Explain the differences between constant-cost; increasing-cost; and decreasing-cost
industries.
Topic: Long-run supply
Type: Graph
42.
Refer to the diagram. Line (2) reflects the long-run supply curve for:
A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
11-49
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
43.
Refer to the diagram. Line (1) reflects a situation where resource prices:
11-50
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
44.
Refer to the diagram. Line (2) reflects a situation where resource prices:
45. Allocative efficiency is achieved when the production of a good occurs where:
A. P = minimum ATC.
B. P = MC.
C. P = minimum AVC.
D. total revenue is equal to TFC.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
11-51
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
46. A firm is producing an output such that the benefit from one more unit is more than the
cost of producing that additional unit. This means the firm is:
11-52
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
48. The term productive efficiency refers to:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
49. If the price of product Y is $25 and its marginal cost is $18:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
A. the level of output that coincides with the intersection of the MC and AVC curves.
B. minimization of the AFC in the production of any good.
C. the production of the product mix most desired by consumers.
D. the production of a good at the lowest average total cost.
AACSB: Analytic
Accessibility: Keyboard Navigation
11-53
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
11-54
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
53.
11-55
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
54.
11-56
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
55.
11-57
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
56.
11-58
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
57.
A. resources are overallocated to this product and productive efficiency is not realized.
B. resources are underallocated to this product and productive efficiency is not realized.
C. productive efficiency is achieved, but resources are underallocated to this product.
D. productive efficiency is achieved, but resources are overallocated to this product.
11-59
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
58.
A. resources are overallocated to this product and productive efficiency is not realized.
B. resources are underallocated to this product and productive efficiency is not realized.
C. productive efficiency is achieved, but resources are underallocated to this product.
D. productive efficiency is achieved, but resources are overallocated to this product.
59. Assume that society places a higher value on the last unit of X produced than the value of
the resources used to produce that unit. With no spillovers, this information means that:
11-60
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
resources.
Topic: Pure competition and efficiency
60. If production is occurring where marginal cost exceeds price, the purely competitive firm
will:
61. If a purely competitive firm is producing where price exceeds marginal cost, then:
A. the firm will fail to maximize profit, but resources will be efficiently allocated.
B. the firm will fail to maximize profit and resources will be overallocated to the product.
C. the firm will fail to maximize profit and resources will be underallocated to the product.
D. resources will be underallocated to the product, but the firm will maximize profit.
11-61
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
62. Which of the following conditions is true for a purely competitive firm in long-run
equilibrium?
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-02 Describe how profits and losses drive the long-run adjustment process of pure competition.
Topic: Long-run adjustment process in pure competition
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
11-62
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
64. In long-run equilibrium, purely competitive markets:
65. Which of the following would not be expected to occur in a purely competitive market in
long-run equilibrium?
11-63
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
66. Which of the following outcomes is consistent with a purely competitive market in long-
run equilibrium?
A. have no incentive to innovate because in the long run they will earn no economic
profits.
B. innovate to lower operating costs and generate short-run economic profits.
C. utilize pricing strategies to generate short-run economic profits.
D. rarely try to innovate because of a lack of financial resources.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
11-64
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
68. Innovations that lower production costs or create new products:
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
69. The process by which new firms and new products replace existing dominant firms and
products is called:
A. monopolistic competition.
B. mergers and acquisitions.
C. process innovation.
D. creative destruction.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
AACSB: Analytic
11-65
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
71. The theory of creative destruction was advanced many years ago by:
A. Bill Gates.
B. Alfred Marshall.
C. Joseph Schumpeter.
D. Adam Smith.
11-66
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
73. Which of the following is an example of creative destruction?
74. (Consider This) The average life expectancy of a U.S. business is approximately:
A. 2 years.
B. 5.5 years.
C. 10.2 years.
D. 22 years.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
75. (Consider This) Approximately what percentage of start-up firms in the United States go
bankrupt within the first two years?
A. 3.5.
B. 10.2.
C. 22.
D. 53.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
11-67
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
76. (Consider This) Which of the following statements is true about U.S. firms?
A. Over half are bankrupt within the first two years after starting up.
B. Over half are bankrupt within the first five years after starting up.
C. Nearly 65 percent last 10 years or more.
D. The life expectancy of a U.S. firm is approximately 22 years.
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
A. for products that incorporate many different technologies into a single product.
B. of simple, easy-to-copy products.
C. in the pharmaceutical industry.
D. when they cause creative destruction.
11-68
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
78. (Last Word) "Patent trolls:"
11-69
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
80. After all long-run adjustments have been completed, a firm in a competitive industry will
produce that level of output where average total cost is at a minimum.
TRUE
TRUE
82. Marginal cost is a measure of the alternative goods that society forgoes in using resources
to produce an additional unit of some specific product.
TRUE
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
83. Because the equilibrium position of a purely competitive seller entails an equality of price
and marginal costs, competition produces an efficient allocation of economic resources.
TRUE
11-70
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-04 Show how long-run equilibrium in pure competition produces an efficient allocation of
resources.
Topic: Pure competition and efficiency
84.
Refer to the diagram. If this represents a typical firm in the industry and the firm is
producing at the profit-maximizing level of output in the short run, then in the long run we
would expect more firms to enter the market.
TRUE
11-71
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
85.
Refer to the diagram. If this represents a typical firm in the industry and the firm is
producing at the profit-maximizing level of output in the short run, then in the long run we
would expect economic profits in this market to rise.
FALSE
11-72
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
86.
Refer to the diagram. If this firm is producing at the profit-maximizing level of output in the
short run, then it is achieving productive and allocative efficiency.
FALSE
FALSE
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
11-73
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
88. The process by which new firms and new products destroy existing dominant firms and
their products is called creative destruction.
TRUE
AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 11-05 Discuss creative destruction and the profit incentives for innovation.
Topic: Technological advance and competition
11-74
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Another random document with
no related content on Scribd:
No, kettu siinä rupeaa laulamaan itkuvirsiä ja hoitamaan sekä
tuudittelemaan karhun lapsia, mutta äijä itse lähtee jo aamulla ruoan
hankintaan, kun oli ruoka loppunut, ja muutenkin talon töistä huolta
pitämään. Illalla tultuaan hän kysyy ketulta: »Ovatko lapset saaneet
ruokaa?» Kettu laulaa huilutteli viekkaasti ja salaperäisesti
vastaukseksi: »Syötin, juotin, kapaloin, Kekkuli-Matti, Kekkuli-Matti».
Väsyneenä karhu tyytyy tähän, menee maata ja aamulla taas lähtee
raskaisiin töihinsä. Illalla tultuaan hän keittää huttua ja käy
sanomassa revolle: »Tule itkijä syömään!» Repo vastaa: »En jouda,
vielä on virsi kesken, kinnersuonet kiskomatta, kantasuonet
katkomatta, perämalja perkkaamatta, päälotisko loppimatta!» —
»Kuinka lapset voivat?» — »Hyvin voivat, syötin juotin, kapaloin»,
vastasi kettu. Karhu tyytyi taas tähän ja meni seuraavana aamuna
tavalliseen tapaan töihinsä. Kun hän sitten illalla taas tulee
väsyneenä tupaan ja kysyy, ovatko lapset saaneet ruokaa, vastaakin
kettu, joka, jumalaton, oli syönyt sekä akan että lapset, röyhkeästi ja
ilkkuen⁻ »Tirru, lirru hännässäni, lallil-lallil laukussani, karhun pojat
vatsassani.» — »Kuule, annappas kun tulen itse katsomaan, miten
siellä ovat asiat», sanoi karhu pahaa aavistaen ja lähti aitalle.
»Poikasi ovat», selitti kettu aitan ovelta, »kasvaneet niin suuriksi,
ettet sinä mahdu sisään, ennen kuin minä tulen ulos.» Ja kettu tulee
ulos sekä lähtee samassa ryntäämään pakoon. Mutta huonosti hän
olikin nopeutensa laskenut, sillä lastensa kuolemasta raivostunut
karhu läksi häntä ajamaan kauhealla vauhdilla takaa. Kettu mennä
kujutti, kujutti, mutta ei auttanut, vaan jo tavoitti hänet karhu, hairaisi
niskasta kiinni ja muka kysyi: »Mihinkäs sinä menet?» Kettu
hädissään ja hämmästellen vastasi: »Minä menen pois.» — »No
lähde, veikkonen, palkkaasi ottamaan!» arveli siihen muka karhu ja
puristi hiukan kettua suussaan. Ketulla oli siinä kova hengen hätä.
Silloin kettu muisti, minkä kepposen hänelle oli tehnyt teeri, ja
päätti käyttää sitä hyväkseen, luottaen karhun yksinkertaisuuteen.
Hän rupeaa pyytämään: »Sano, hyvä ystäväiseni, vielä viimeisellä
hengen retkellä, kun minua piika rukkaa viedään, mistä nyt tuulee!»
Karhusta, joka on hyväsydäminen ja tyhmä, ei tämä pyyntö tuntunut
kohtuuttomalta, mutta ei hän kuitenkaan hirvinnyt avata suutaan,
mutisihan vain: »Hmh!» — »En minä kuullut, en minä kuullut»,
valitteli repo, mutta karhu vain nosteli päätään, katseli ja sanoi
uudelleen: »Hmh!» Kettu taas valittaa: »En minä kuullut, en minä
kuullut, sano vielä! Minä olen tullut säikäyksestä huonokuuloiseksi,
kun kurki pudotti minut korkealta kallioon. Lieneekö itätuuli?» Karhua
rupesi jo harmittamaan, kun toinen selvää pohjatuulta väittää
itätuuleksi, mutta ei vieläkään sanonut mitään. Uudelleen repo
kyseli, idästäkö nyt sitten tuulee, kunnes karhu menetti
kärsivällisyytensä ja täydellä voimalla ärjäisi: »Pohjoisesta!»
Suureksi täytyi siinä silloin suun venähtää ja kettu julmettunut pääsi
irti!
Moitti vielä siinä karhua siitä, että aivan tahallaan laskee toisen
pois hampaistaan: »Olisit ennen vetänyt läpi hampaitten ja sanonut:
'Ii-itäisestä!', niin ei olisi suusi auennut. Oma syysi!» Ja kettu muka
vielä kiitteli karhua: »Ja palkkani minä olen saanut ja poikasi minä
olen syönyt!» Karhu kiukuissaan siinä väänteli kiviä ja kantoja, mutta
kettu nauroi: »Kynsi vain puita ja juuria, eivät sinun kyntesi minuun
ulotu!»
Mutta kun karhu ei näyttänytkään aikovan lähteä pois kiven
juurelta, ikävystyi kettu siellä oloonsa ja alkoi lepytellä karhua, älyten
hyvän lepytyskeinon. Hän tiesi karhun pitävän mehiläisen medestä
enemmän kuin mistään muusta herkusta maailmassa, ja uskotteli nyt
karhulle, että jos tämä säästää hänen henkensä, niin hän vie hänet
sellaiselle mesiäiskennolle, ettei vielä ole nähty. Paikalla rupesi
karhulla himoittamaan mettä ja mesileipää, ja hän lupasi säästää
ketun, jos tämä vain pitää puheensa. Niin unohti karhu lastensa
kuoleman ja ketun kavaluuden makean meden vuoksi ja kettu läksi
juosta litvittelemään hänen edellään lupaamalleen mesipaikalle.
Silloin neuvoi sitten hevonen sutta: »Kun sinä nyt alat minua
syödä ja haukata takaapäin, niin käärihän häntä kaulaasi hyvin
tiukkaan, sekoita hampaasi häntäjouhiin ja sotke vielä käpäläsi
häntään hyvin lujasti. Muuten minä en pysy yhdessä kohti, vaan
pakenen ja hypin, kun minua ruvetaan syömään. Ja silloin kun alotat,
niin rääkäise kovasti ja nyki hännästä!» »Joo», neuvoi kettukin,
»sitten sinä samalla opit lentokonstin, kuten lupasin», ja niin teki susi
työtä käskettyä.
Juostessaan kettu koko ajan miettii, millä tavalla saisi suden akalle
parhaiten oikein kipeän kepposen tehdyksi, ja muistaakin siinä erään
asian. Hän juoksee minkä jaksaa erään puun luo, joka jo juuressaan
tekee hyvin ahtaan haaran, kasvaen kahden korkean kiven välissä.
Siitä ahtaasta haarasta hän nyt pujahti lävitse ja suden akka törmäsi
arvelematta perään. Mutta nytpä kävikin niin, ettei suden akka siitä
mahtunutkaan, vaan kiilautui siihen lujasti kiinni. Nopeasti kuin vilaus
kiersi kettu uudelleen takaisin ja piteli suden akkaa siinä aika pahoin,
tämän kykenemättä ollenkaan vastustamaan. Nutuutettuaan häntä
täten hyväisesti lähti kettu kiireesti pakoon. Hän tunsi nyt itsekin, että
paras oli koettaa saada hänen ja suden akan väliin niin paljon maata
ja vettä kuin suinkin, ja siksi hän meni niin nopeasti kuin ikänä
mahdollista. Kauan juostuaan hän vihdoin tuli järven rannalle, jossa
oli suuri palanut kanto. Siinä hän nokesi itsensä aivan mustaksi,
jättäen vain valkean rintansa nokeamatta, ja meni sitten rannassa
olevaan veneeseen istumaan, ottaen melan käteensä ja siinä muka
meloskellen. Tuskin hän oli sen saanut tehdyksi, kun jo suden akka
saapuu jälkiä myöten huohottaen, tulee rannalle, näkee olion veneen
perässä ja kysyy: »Oletko, musta muuriainen, nähnyt kettu veijaria
tästä kulkevaksi?» Ei voinut nyt kettu kieltää vanhaa luontoansa,
vaan sanoi: »Näinhän toki! Juuri-ikään kyyditsin järven yli. Sanoi
menevänsä Inkerinmaalle.» — »No tiesikö tuo lurjus mitä uusia?»
kysyi suden akka varovaisesti. »Eipä se sen tärkeämpiä — suden
akkaa kehui nutuuttaneensa,» vastaa taas kettu liuvari. Silloin suden
akka lähti takaisin pesälleen ja mennessään itkeä kohotti: »Voi, voi!
Nythän sillä nauraa jo koko maailma!»
*****
Semmoinen se!
XVIII.
Sillä aikaa kun tämä tapahtui, oli Horpon kolme oinasta suuttunut
emännälleen ja lähtenyt luvatta syömään vihantaan peltoon,
valkeaan vainioon. Ensimmäinen söi yhden päivän ja lähti kotiin
iltasella. Tulipas silloin karhu vastaan, juuri saapuneena Horpon
maille ja kysyi jyrkästi: »Mikä nimesi on?» Toinen vastaa: »Oinas!»
Karhu siihen vain ilmoittaa: »Minä syön sinut!», ja niin söi.
Toinen oinas söi vihannassa pellossa, valkeassa vainiossa kaksi
päivää ja lähti iltasella kotiin. Tuli karhu vastaan, samat laati tarinat ja
samat teki oinaalle lopuksi temput.