Principles of Economics 7th Edition Taylor Test Bank All Chapters

Principles of Economics 7th Edition
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Chapter 9—The Rise and Fall of Industries
1. Three reasons for the rise and fall of industries are

a. government subsidy, cost-reducing technology, and changing tastes.
b. new ideas, cost-reducing technology, and changing tastes.
c. government subsidy, population growth, and cost-reducing technology.
d. population growth, cost-reducing technology, and changing tastes.
e. new ideas, necessity, and changing tastes.
ANS: B PTS: 1 DIF: moderate OBJ: factual
NAT: Markets, market failure, and externalities TOP: Rise and Fall of Industries
BLM: Bloom's: Knowledge | AACSB: Analytic
2. A group of firms, each of which produces similar products, is called a(n)

a. market.
b. trust.
c. conglomerate.
d. industry.
e. production group.
ANS: D PTS: 1 DIF: basic OBJ: factual
NAT: Markets, market failure, and externalities TOP: Industry
BLM: Bloom's: Knowledge
3. An industry is
a. a group of firms that produce similar products.
b. a collection of production facilities.
c. a group of consumers who wish to purchase similar products.
d. supply and demand for a product.
e. a union of workers from different firms.
ANS: A PTS: 1 DIF: basic OBJ: factual
4. T or F. One reason old industries die off is that entrepreneurs create new industries that replace the old
ones.
ANS: T PTS: 1 DIF: basic OBJ: factual

5. T or F. Consumers are part of an industry.
ANS: F PTS: 1 DIF: basic OBJ: factual

6. T or F. The definition of a market is broader than that of an industry.

7. T or F. An industry tends to expand as market demand increases.

8. List three reasons for the rise and fall of industries.
ANS:
New ideas, cost-reducing technology, and changes of taste
PTS: 1 DIF: moderate OBJ: factual

9. Define the term industry.
ANS:
An industry is a group of firms that produce similar products.
PTS: 1 DIF: moderate OBJ: factual

10. The long-run competitive equilibrium model describes what happens to an industry after
a. all existing firms disappear.
b. only one firm survives.
c. the government intervenes.
d. the entry and exit of firms over time.
e. the market no longer exists.
NAT: Perfect competition TOP: Long-Run Equilibrium Model
11. Which of the following statements is false?

a. The long-run equilibrium model takes into account the entry and exit of firms.
b. The long-run equilibrium model is an attempt to explain the behavior of industries.
c. Firms enter an industry when economic profits are positive.
d. The long-run equilibrium model can be applied only to U.S. industries.
e. Firms exit an industry in the long run when economic profits are negative.
ANS: D PTS: 1 DIF: moderate OBJ: factual
NAT: Perfect competition TOP: Entry and Exit
12. Which of the following is a condition of long-run competitive equilibrium?

a. There are incentives for firms to enter the industry.
b. There are incentives for firms to exit the industry.
c. There is no incentive for firms to enter or exit the industry.
d. There are incentives for firms to produce more output.
e. There are incentives for firms to change plant size.
ANS: C PTS: 1 DIF: basic OBJ: factual
13. In the long run, firms enter an industry when

a. firms in the industry realize positive economic profits.
b. firms in the industry realize economic losses.
c. other firms exit the industry.
d. economic profits in the industry are zero.
e. firms in the industry become price-makers.
14. In the long run, if price is greater than average total cost in an industry, then
a. some firms leave the industry.
b. some firms are attracted to the industry.
c. all firms leave the industry.
d. there is no incentive for any firm to enter or leave the industry.
e. the industry disappears.
BLM: Bloom's: Analysis | AACSB: Analytic
15. Firms may enter or exit a competitive industry

a. in the short run.
b. in the long run.
c. in either the short run or the long run.
d. only when they are no longer price-takers.
e. immediately after they begin operation.
16. T or F. The number of firms increases in the long run when the industry realizes profits.

NAT: Perfect competition TOP: Entry BLM: Bloom's: Knowledge
17. T or F. The entry and exit of firms occurs in the long run.

18. T or F. In economics, firms can enter an industry in the short run.

19. T or F. The long-run competitive equilibrium model can be used to predict the number of firms in an
industry given a certain level of market demand.
ANS: T PTS: 1 DIF: moderate OBJ: factual
20. In a competitive industry, firm demand is

a. downward-sloping.
b. vertical.
c. nonexistent.
d. horizontal.
e. unchanging.
ANS: D PTS: 1 DIF: moderate OBJ: factual
NAT: Perfect competition TOP: Firm Demand
21. The market demand curve in a competitive market is

a. vertical.
b. downward-sloping.
c. horizontal.
d. unit elastic.
e. perfectly elastic.
NAT: Perfect competition TOP: Market Demand
22. When firms enter an industry, market supply

a. and firm demand both decrease.
b. increases and firm demand does not change.
c. and firm supply both decrease.
d. and firm demand both increase.
e. increases and firm demand shifts down.
ANS: E PTS: 1 DIF: moderate OBJ: conceptual
NAT: Perfect competition TOP: Firm Entry
23. When firms exit an industry,

a. firm profits typically fall.
b. market supply decreases, pushing market price higher.
c. market supply decreases, decreasing the firm's output price.
d. demand decreases and economic profits continue to decline.
e. market supply decreases, increasing price and bringing firms back into the industry.
ANS: B PTS: 1 DIF: moderate OBJ: conceptual
NAT: Perfect competition TOP: Firm Exit
24. If zero economic profit is being earned in a competitive industry,

a. firms leave the industry.
b. firms permanently shut down.
c. firms enter the industry.
d. no firms enter or leave the industry.
e. firms temporarily shut down.
ANS: D PTS: 1 DIF: moderate OBJ: conceptual
NAT: Perfect competition TOP: Firm Entry and Exit
25. Free entry and exit means that

a. banks charge no interest on a loan to start a firm.
b. there are no artificial barriers to entering and exiting an industry.
c. no investment is necessary in order to enter an industry.
d. it costs nothing to start a firm.
e. a firm is free to enter and exit a nation without having to pay high tax levies.
NAT: Perfect competition TOP: Free Entry and Exit
26. A firm in a long-run equilibrium state

a. produces at the minimum of average variable cost.
b. produces at the minimum of marginal cost.
c. suffers accounting profit losses.
d. enjoys economies of scale.
e. makes no economic profit.
ANS: E PTS: 1 DIF: moderate OBJ: factual
NAT: Perfect competition TOP: Long-Run Equilibrium
27. If the typical firm in an industry is experiencing economies of scale,

a. short-run equilibrium cannot exist.
b. some firms exit the industry.
c. industry expansion occurs.
d. long-run equilibrium is achieved.
e. firms need to divest and become smaller.
ANS: C PTS: 1 DIF: challenging OBJ: conceptual
28. Which of the following does not need to be true for long-run equilibrium to be attained?
a. Constant returns to scale are reached.
b. The latest in technology is utilized.
c. Profit is being maximized.
d. There is no incentive to enter or exit the industry.
e. Economic profits equal zero.
29. Which of the following is true in a long-run competitive equilibrium?

a. Price is greater than average total cost.
b. Profits are greater than zero.
c. Marginal cost is greater than average total cost.
d. Market supply is greater than market demand.
e. There is no incentive to enter or exit the industry.
30. If the government subsidizes the production of wind energy, then the industry produces
a. more energy in the short run and firm entry occurs in the long run.
b. more energy in the short run and firm exit occurs in the long run.
c. less energy in the short run and firm entry occurs in the long run.
d. less energy in the short run and firm exit occurs in the long run.
e. the same amount of energy in both the short run and long run.
ANS: A PTS: 1 DIF: moderate OBJ: conceptual
31. If higher taxes raise the unit cost of a competitive industry, then producers
a. decrease production in the short run and the number of producers decreases in the long
run.
b. decrease production in the short run and the number of producers increases in the long run.
c. increase production in the short run and the number of producers decreases in the long run.
d. increase production in the short run and the number of producers increases in the long run.
e. keep production constant in the short run and the number of producers remains the same in
the long run.
32. If higher taxes raise the unit cost of a competitive industry, then in the long run, industry supply
a. and market price decrease.
b. decreases and market price increases.
c. increases and market price decreases.
d. and market price increase.
e. and market price remain constant.
33. If an innovation lowers the marginal cost of production for firms in a competitive industry, then in the
long run, the number of firms
a. increases and firms in the industry make normal profits.
b. does not change and firms in the industry make profits.
c. decreases and firms in the industry incur losses.
d. decreases and firms in the industry make profits.
e. decreases and firms in the industry make normal profits.
34. T or F. Firm demand in a competitive industry, like market demand, is downward-sloping.

NAT: Perfect competition TOP: Firm Demand
35. T or F. Free entry and exit refers to industries with very low start-up costs.

NAT: Perfect competition TOP: Free Entry and Exit
36. T or F. When economic profits equal zero for firms in an industry, there is no entry or exit.

37. T or F. By definition, when market supply (the sum of firms' marginal cost curves) equals market
demand, long-run equilibrium is achieved.
ANS: F PTS: 1 DIF: challenging OBJ: conceptual

38. T or F. In long-run competitive equilibrium, market price equals a firm's average total cost.
ANS: T PTS: 1 DIF: moderate OBJ: conceptual

39. If, at the equilibrium level of output, a typical competitive firm's price is greater than its ATC, the firm
a. should raise the price.
b. should lower the price.
c. should decrease output.
d. finds that new firms are attracted to this industry.
e. should increase output.
NAT: Perfect competition TOP: Short Run
40. In a competitive market, the presence of short-run economic profits would, in the long run, cause
economic profits to
a. disappear because market costs increase.
b. disappear because firms are able to take advantage of economies of scale.
c. continue.
d. decline but be larger than zero.
e. disappear because the market supply curve has shifted to the right.
NAT: Perfect competition TOP: Long Run
41. If market demand increases, a competitive firm sees

a. its cost curves shift up.
b. its profit-maximizing output level increase.
c. its marginal cost fall.
d. its profits decrease.
e. the demand curve facing the firm shift down.
ANS: B PTS: 1 DIF: basic OBJ: conceptual
NAT: Perfect competition TOP: Market Demand and the Competitive Firm
42. When market demand increases in a competitive industry,

a. the number of firms increases, causing short-run market supply to increase.
b. firms become less efficient.
c. firms' marginal cost curves shift to the right.
d. economic profits stay at zero because of competition.
e. market price increases, making it possible for ATC curves to shift up.
NAT: Perfect competition
TOP: Market Demand Change and Effect on Industry Supply
43. Suppose that a competitive market is initially in long-run equilibrium. Which of the following are the
most likely results of an increase in market demand?
a. Existing firms will produce less and some firms will exit the market so that the market
supply curve will shift to the left.
b. Some existing firms will produce more while some other firms will exit the market so that
the market supply curve will remain the same.
c. Existing firms will produce more and new firms will enter the market so that the market
supply curve will shift to the right.
d. Existing firms will produce less while new firms will enter the market so that the effect on
the market supply curve is uncertain.
e. Nothing will change in the market.
ANS: C PTS: 1 DIF: moderate OBJ: conceptual
44. T or F. An increase in market demand can be shown by shifting a firm's demand curve to the right.
ANS: F PTS: 1 DIF: moderate OBJ: conceptual

NAT: Perfect competition TOP: Market Demand and the Competitive Firm
45. T or F. In the long run, market supply increases as market demand increases.

NAT: Perfect competition TOP: Long Run
46. Suppose a mechanic uses $150,000 of his own money to start a business. The rate of interest he could
earn in a savings account is 5 percent, and the rate of interest he could earn by investing in bonds is 8
percent. What is the opportunity cost of capital when the mechanic uses his money to start his own
business?
a. $8,000/year
b. $7,500/year
c. $150,000
d. $12,000/year
e. $19,500/year
ANS: D PTS: 1 DIF: challenging OBJ: conceptual
NAT: Costs of production TOP: Implicit Cost
BLM: Bloom's: Application | AACSB: Analytic
47. Suppose a dentist has total revenue of $320,000, and his total costs are $250,000 for the year. Also
suppose the dentist left a job paying $112,000 a year to start his own practice. What is the dentist's
accounting profit?
a. −$28,000
b. −$42,000
c. $182,000
d. $70,000
e. $112,000
NAT: Costs of production TOP: Accounting Profit
48. Suppose a dentist has total revenue of $320,000, and his total costs are $250,000 for the year. Also
suppose the dentist left a job paying $112,000 a year to start his own practice. What is the dentist's
economic profit?
a. $182,000
b. −$42,000
c. −$28,000
d. $112,000
e. $70,000
NAT: Costs of production TOP: Economic Profit
49. When economic profit is equal to zero, we say that

a. implicit costs equal zero.
b. a normal profit is being earned.
c. total cost is greater than total revenue.
d. accounting profit is negative.
e. the business is not profitable.
NAT: Perfect competition TOP: Normal Profit
50. A normal profit may be defined as

a. the minimum amount of profit required to keep a business operating in the long run.
b. an accounting profit equal to the sum of all opportunity costs.
c. the maximum amount of profit that a business has ever made.
d. economic profit that is equal to accounting profit.
e. accounting profit equal to zero.
51. The difference between accounting profit and economic profit is
a. total costs.
b. implicit costs.
c. total opportunity costs.
d. normal profits.
e. marginal cost.
ANS: B PTS: 1 DIF: basic OBJ: factual
NAT: Costs of production TOP: Accounting and Economic Profit
Exhibit 9-1
52. Refer to Exhibit 9-1. If all firms are identical, the equilibrium number of firms in the industry is
a. 125,000.
b. 3,333.
c. 2,500.
d. 3,000.
e. 250,000.
NAT: Perfect competition TOP: Number of Firms
BLM: Bloom's: Application
53. Refer to Exhibit 9-1. If the market demand curve is D1, what happens in the long run?
a. Firm entry occurs.
b. Firm exit occurs.
c. Some firms increase capital input.
d. Some firms increase labor input.
e. Most firms do nothing.
ANS: B PTS: 1 DIF: basic OBJ: conceptual
54. Refer to Exhibit 9-1. If the market demand curve is D3, what happens over time?
a. Some existing firms increase capital input.
b. Firm exit occurs.
c. Some existing firms decrease labor input.
d. Market price decreases.
e. Most firms do nothing.
55. Refer to Exhibit 9-1. When does firm entry occur?

a. When demand is at D3
b. When demand is at D1
c. When demand is at D2
d. When price is P1 or greater
e. When price is P2 or less
NAT: Perfect competition TOP: Firm Entry
56. Refer to Exhibit 9-1. Which of the following describes a long-run competitive equilibrium?
a. When market demand is at D2, each firm produces more than 75 units.
b. When market demand is at D2, each firm produces 75 units.
c. When market demand is at D2, each firm produces fewer than 75 units.
d. When market demand is at D2, each firm produces 250,000 units.
e. When price is P2, each firm produces 250,000 units.
57. Refer to Exhibit 9-1. Which demand curve results in normal profits?
a. D1
b. D2
c. D3
d. Both D1 and D2
e. Both D2 and D3
58. Refer to Exhibit 9-1. Which demand curve results in economic losses?
a. D1
b. D2
c. D3
d. Both D1 and D2
e. Both D2 and D3
NAT: Perfect competition TOP: Economic Profit
Exhibit 9-2
59. T or F. Refer to Exhibit 9-2. If the market demand curve is D1, then the firm earns normal profit.

60. Refer to Exhibit 9-2. If the demand curve shifts from D1 to D2, then
a. some firms enter the industry.
b. some firms exit the industry.
c. the number of firms does not change.
d. firms earn a normal profit.
e. most firms earn a loss.
NAT: Perfect competition TOP: Entry
61. As firms enter a competitive industry,

a. both market demand and industry output increase.
b. industry economic profits increase.
c. output price falls and individual firms increase output.
d. output price falls and cost curves shift down.
e. output price falls and industry output increases.
ANS: E PTS: 1 DIF: challenging OBJ: conceptual
NAT: Perfect competition TOP: Entry and Firm Output
62. A competitive firm's long-run equilibrium exists where price

a. equals MC at minimum ATC.
b. equals TR.
c. exceeds AFC.
d. equals both AVC and MC.
e. exceeds ATC.
63. In a competitive industry, which of the following cannot be true for a firm in the long run?
a. Price equals marginal cost.
b. Profits are maximized.
c. The firm takes market price as given.
d. Economic profits equal zero.
e. Price equals average variable cost.
NAT: Perfect competition TOP: Profits in the Long Run
64. In a competitive industry where the typical firm is making economic profit,
a. entry occurs as long as economic profit can be made.
b. entry occurs until supply equals demand.
c. entry occurs until price equals minimum average variable cost.
d. entry occurs until price equals marginal cost.
e. exit occurs as firms are sold to the highest bidders.
ANS: A PTS: 1 DIF: challenging OBJ: conceptual
NAT: Perfect competition TOP: Entry in a Competitive Industry
65. Suppose a competitive industry is in long-run equilibrium. When demand increases, market price
a. decreases in the short and long run.
b. rises in the short run and falls in the long run.
c. decreases in the short run and rises in the long run.
d. rises in the short and long run.
e. rises in the short run and rises more in the long run.
NAT: Perfect competition TOP: Entry in a Competitive Industry
66. Which of the following statements is false?

a. Given the nature of cost curves, positive economic profits can only induce entry of new
firms.
b. Entry and expansion can occur at the same time in the same industry.
c. When positive economic profits prevail in an industry, firms often expand.
d. When economic profits are negative, firms might leave an industry.
e. An industry ceases to either expand or contract when economic profits are zero.
ANS: A PTS: 1 DIF: moderate OBJ: factual
NAT: Perfect competition TOP: Entry and Expansion
67. When economic losses occur in an industry,

a. the industry ceases to exist.
b. the only way the industry can change is by firms leaving it.
c. the only way the industry can change is by firms divesting themselves of capital.
d. firms in the industry may divest; others may exit the industry.
e. the industry expands with more firms.
NAT: Perfect competition TOP: Exit
68. Which of the following is a condition for industry expansion through expansion of existing firms
instead of entry of new firms?
a. Firms take advantage of diseconomies of scale.
b. A firm size is greater than the minimum efficient sale.
c. A firm's average total cost decreases as a result of technological change.
d. A firm produces beyond the minimum long-run average total cost.
e. Firms make normal profits.
ANS: C PTS: 1 DIF: moderate OBJ: factual
69. T or F. A firm earns normal profit if its total revenue is greater than its total cost.

70. T or F. Industry expansion cannot occur without firms entering an industry.

71. T or F. An increase in market price is likely to result in more firm entry in the long run.
ANS: T PTS: 1 DIF: basic OBJ: conceptual

NAT: Perfect competition TOP: Entry
72. T or F. In the long run, an industry can expand when existing firms expand by investing in new capital.

73. All else being constant, when firms leave a competitive market, then
a. market supply decreases and market price rises.
b. both market demand and market supply decrease.
c. market supply decreases and market price falls.
d. market demand decreases and market price falls.
e. market demand increases and market price rises.
NAT: Perfect competition TOP: Industry Decline
74. When an industry is in decline,

a. it is indicative of a weak economy.
b. it might be due to an increase in demand for the product.
c. it is common for firms to earn economic losses.
d. firm entry occurs.
e. all firms eventually leave the industry.
75. Which of the following is false?

a. As firms exit an industry, market supply decreases.
b. As firms exit an industry, market price increases as demand increases.
c. As firms exit an industry, economic losses for the remaining firms decrease.
d. As firms exit an industry, at least some firm output increases.
e. As firms exit an industry, industry output is reduced.
76. Firms leave a competitive industry in the long run when

a. price is less than the minimum of marginal cost.
b. price is less than the minimum of average variable cost.
c. the return on investment is less than 10 percent.
d. price is less than the minimum of average total cost.
e. price is equal to the minimum of average total cost.
77. If market demand decreases in a market previously in long-run equilibrium,

a. the number of firms increases as each firm downsizes.
b. it is an indication that the industry has not kept up with new technology.
c. market price first rises and then falls in the movement to a new long-run equilibrium.
d. the immediate or short-run effect is a decrease in market price.
e. the industry ceases to exist.
78. Suppose that a competitive market is initially in long-run equilibrium. Which of the following are the
most likely results of a decrease in market demand?
a. Some existing firms will produce more while some other firms will exit the market so that
the market supply curve will remain the same.
b. Existing firms will produce less and some firms will exit the market so that the market
supply curve will shift to the left.
c. Existing firms will produce more and new firms will enter the market so that the market
supply curve will shift to the right.
d. Existing firms will produce less while new firms will enter the market so that the effect on
the market supply curve is uncertain.
e. Nothing will change in the market.
TOP: Decrease in Market Demand and Effect on Industry Supply
79. In the long run, if a firm cannot cover its costs, then the profit-maximizing firm
a. increases output and lowers price.
b. continues to produce as long as total revenue exceeds fixed costs.
c. seeks more rewarding opportunities in some other industry.
d. continues to produce so that it maximizes its opportunity costs.
e. continues to produce as long as total revenue exceeds variable costs.
80. When firms leave an industry,

a. it is due to long-term losses.
b. other firms immediately enter to take their place.
c. it is because they anticipate an increase in demand.
d. other firms enter.
e. it is always due to a decrease in demand.
81. T or F. If losses are incurred in a competitive industry, then over the long run, we can expect a greater
quantity supplied because market price will rise.
ANS: F PTS: 1 DIF: challenging OBJ: conceptual

NAT: Perfect competition TOP: Losses in an Industry
82. T or F. When an industry is in decline, firms do not necessarily exit; they may just shrink.

83. An industry previously in long-run equilibrium might experience economic profits for any of the
following reasons except when
a. new, cost-saving production technology is developed.
b. new markets open up as trade barriers are reduced.
c. prices of inputs in the production process increase.
d. substitutes for the industry's output cease to be produced.
e. market demand increases.
NAT: Perfect competition TOP: Changes in Costs
84. A change in production costs may occur for any of the following reasons except when
a. new production technology is introduced.
b. a new, cheaper, rival product is introduced.
c. the price of an input falls.
d. demand of other industries for a key input increases.
e. the use of cost savings management is introduced.
NAT: Perfect competition TOP: Changes in Costs
85. A technological breakthrough that reduces the cost of materials in a perfectly competitive industry
would, in the long run,
a. lead to higher profits.
b. raise prices.
c. lower the output produced by each firm.
d. increase the number of producers.
e. decrease the number of producers.
NAT: Perfect competition TOP: Change in Technology
86. In the long-run equilibrium, which of the following is at its minimum point?
a. Price
b. Average variable cost
c. Average fixed cost
d. Average total cost
e. Marginal cost
NAT: Perfect competition TOP: Average Total Cost
87. Which of the following conditions results in firms producing at the minimum average total cost in the
long run?
a. Free entry and exit of firms
b. Government price control
c. Economies of scale
d. Diseconomies of scale
e. Industry expansion
ANS: A PTS: 1 DIF: moderate OBJ: factual
NAT: Perfect competition TOP: Firm Entry and Exit
88. In a long-run equilibrium, a firm produces where

a. constant returns to scale are reached.
b. short-run average total cost is at a minimum.
c. long-run average total cost is at a minimum.
d. price equals marginal cost.
e. all of these are true.
ANS: E PTS: 1 DIF: basic OBJ: conceptual
NAT: Perfect competition TOP: Minimum Average Costs
89. When firms in an industry are all producing at the minimum of average total costs,
a. consumers pay the highest possible price.
b. firms begin to leave the industry.
c. per unit costs are at their lowest.
d. there is no consumer surplus.
e. price is greater than marginal cost.
ANS: C PTS: 1 DIF: basic OBJ: conceptual
90. In the long run, firms reduce capital input under which of the following conditions?
a. Economies of scale
b. Diseconomies of scale
c. Constant returns to scale
d. When average total cost increases with output
e. When price equals marginal cost
NAT: Perfect competition TOP: Movement of Capital
91. With free entry and exit in a competitive market, capital

a. moves to declining industries.
b. moves to growing industries.
c. does not move.
d. becomes more expensive.
e. does not reflect market demand.
NAT: Perfect competition TOP: Capital Allocation
92. Which of the following statements is false about capital in an industry?

a. An industry experiencing economic profits gains capital.
b. Increased government taxation of an industry prevents some capital movement.
c. The movement of capital occurs in the short run and the long run.
d. Market forces cause capital to move where it is most highly valued.
e. The movement of capital is determined by how profitable industries are.
ANS: C PTS: 1 DIF: challenging OBJ: conceptual
NAT: Perfect competition TOP: Movement of Capital
93. In a competitive market, capital allocation is efficient when it causes price to

a. equal marginal cost.
b. equal average variable cost.
c. be greater than marginal cost.
d. be greater than average variable cost.
e. be greater than average total cost.
NAT: Perfect competition TOP: Efficient Allocation of Capital
94. T or F. A reduction in capital cost shifts the long-run average total cost curve down.

NAT: Costs of production TOP: Change in Costs
95. T or F. Cost saving technologies result in an increase in economic profits in both the short run and the
long run.
NAT: Costs of production TOP: Change in Costs
96. T or F. In the long-run competitive equilibrium, consumers pay for the lowest cost that a firm incurs.

NAT: Perfect competition TOP: Change in Costs
97. T or F. If price is greater than minimum average total cost in a competitive industry, entry occurs.
ANS: T PTS: 1 DIF: moderate OBJ: factual

98. T or F. The long-run equilibrium for a competitive firm occurs when its average total cost continues to
decline.

99. T or F. In the long-run competitive equilibrium model, capital is allocated in the most efficient
manner.

100. T or F. In a system of competitive markets, capital, like all inputs, is allocated to its most highly valued
uses, making its allocation efficient.

101. T or F. The long-run competitive equilibrium results in efficient allocation of capital.

102. Explain what is wrong with the following statement: "It's not fair that firms profit so highly in an
industry that benefits from new, cost saving technology; they should have to immediately pass cost
savings directly on to the consumer."
ANS:
This statement assumes that consumers do not eventually benefit from the reduced costs. As a result of
the economic profits earned by firms already in the industry, entry occurs, increasing supply and
decreasing market price. This increases benefits to consumers over time. If profits were somehow
forced to be reduced by immediately passing cost savings directly to consumers, such entry and
expansion of the industry would not occur and consumers would benefit less in the long run than
otherwise.
PTS: 1 DIF: challenging OBJ: conceptual NAT: Perfect competition

TOP: Firm Entry Effects BLM: Bloom's: Analysis | AACSB: Analytic
103. Explain why a sudden decrease in demand in a competitive industry causes price to fluctuate more in
the short run than in the long run, compared to the original equilibrium price.
ANS:
In the short run, the number of firms cannot change, so the reduction in output in an industry when
demand decreases can occur only by firms reducing output along their respective marginal cost curves.
In the long run, however, firms can divest and other firms can exit. Both of these actions cause
short-run market supply to shift left, bringing price back down, nearer to the original price. In the short
run, price adjustment is greater. In the long run, quantity adjustment is greater.

TOP: Change in Demand BLM: Bloom's: Analysis | AACSB: Analytic
104. Draw a diagram of a competitive industry in a long-run equilibrium. Be sure to illustrate both the
market and a representative firm. When would entry occur? When would exit occur?
ANS:
If market demand increased for some reason or if market supply increased due to lower costs, entry
would occur. Exit would occur in the opposite circumstances.

TOP: Long-Run Equilibrium BLM: Bloom's: Analysis | AACSB: Analytic
105. Can individual firm expansion affect market supply? Explain.
ANS:
Yes. When an individual firm expands, its quantity of capital input increases. This shifts it to the right
along its long-run average total cost curve. The long-run average total cost curve is made up of many
short-run average total cost curves, so the firm actually shifts from one set of short-run cost curves to
another. This means that the firm's supply curve, its marginal cost curve, shifts right. Because market
supply is the sum of firm supplies, market supply also shifts right.
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administration of the Royal Navy and of merchant
shipping in relation to the Navy from MDIX to
MDCLX, with an introduction treating of the
preceding period
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Title: A history of the administration of the Royal Navy and of

merchant shipping in relation to the Navy from MDIX to
MDCLX, with an introduction treating of the preceding
period
Author: M. Oppenheim
Release date: August 8, 2022 [eBook #68713]
Language: English
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*** START OF THE PROJECT GUTENBERG EBOOK A HISTORY

OF THE ADMINISTRATION OF THE ROYAL NAVY AND OF
MERCHANT SHIPPING IN RELATION TO THE NAVY FROM MDIX
TO MDCLX, WITH AN INTRODUCTION TREATING OF THE
PRECEDING PERIOD ***
A HISTORY OF THE
ADMINISTRATION
OF THE ROYAL NAVY
VOLUME I
MDIX-MDCLX
A HISTORY OF THE ADMINISTRATION

OF THE ROYAL NAVY
AND OF MERCHANT SHIPPING
IN RELATION TO THE NAVY
BY M. OPPENHEIM
VOL I
MDIX-MDCLX
JOHN LANE THE BODLEY HEAD

LONDON AND NEW YORK
MDCCCXCVI
A HISTORY OF THE ADMINISTRATION
OF THE ROYAL NAVY
AND OF MERCHANT SHIPPING
IN RELATION TO THE NAVY
FROM MDIX TO MDCLX WITH
AN INTRODUCTION TREATING
OF THE PRECEDING PERIOD
BY M. OPPENHEIM
JOHN LANE THE BODLEY HEAD
LONDON AND NEW YORK
MDCCCXCVI
J. MILLER AND SON, PRINTERS, EDINBURGH

CONTENTS
PAGE
List of Illustrations viij
Preface ix
Introduction—The Navy before 1509 1
Henry VIII, 1509-1547 45
Edward VI, 1547-1553 100
Mary and Philip and Mary, 1553-1558 109
Elizabeth, 1558-1603 115
James I, 1603-1625 184
Charles I, 1625-1649, Part I—The Seamen 216
—— Part II—Royal and Merchant Shipping 251
—— Part III—The Administration 279
The Commonwealth, 1649-1660 302
Appendix A—Inventory of the Henry Grace à Dieu 372
—— B—The Mutiny of the Golden Lion 382
—— C—Sir John Hawkyns 392
—— D—A Privateer of 1592 398
Index 401
LIST OF ILLUSTRATIONS
PAGE
The Tiger (of Henry VIII). Hand-coloured in
facsimile of a portion of the original MS.
in the British Museum, (Add. MSS., 22047) Frontispiece
Wyard’s Medal, 1650. From one of the four
Remaining Medals (British Museum) Title Page
The Seal of the Navy Office xiij
An Elizabethan Man-of-War. From a
contemporary Drawing in the Bodleian
Library, Oxford, (Rawlinson MSS., A 192, 20) 130
The Medway Anchorage (temp. Elizabeth).
Hand-coloured in facsimile of a portion of
the Original MS. in the British Museum,
(Cott. MSS., Aug. I, i, 52) 150
PREFACE
Of the following pages the Introduction and the portion dealing
with the period 1509-1558 are entirely new. The remainder originally
appeared in the English Historical Review, but the Elizabethan
section has been rewritten and much enlarged in the light of fresh
material found since it was first printed, and many additions and
alterations have been made to the other papers. Of the four
Appendices three are new.
Sixteen years ago the doyen of our English naval historians,
Professor J. K. Laughton, wrote,
‘Every one knows that according to the Act of Parliament, it

is on the Navy that “under the good providence of God, the
wealth, safety, and strength of the kingdom chiefly depend,”
but there are probably few who have realised the full meaning
of that grave sentence.’[1]
Since those words were penned, a more widely diffused interest in

naval matters has permeated all classes of society, and there is,
happily, a vastly increased perception of what the Navy means for
England and the Empire.[2] The greater interest taken in naval
progress has caused a new attention to be bestowed on the early
history of the Navy, and there is little apology required for the plan—
however much may be needed for the execution—of a work dealing
with the civil organisation under which the executive has toiled and
fought. Whole libraries have been written about fleets and
expeditions, but there has never yet been any systematic history of
the organisation that rendered action on a large scale possible, or of
the naval administration generally, and although its record does not
appear to the writer to be a matter for national pride, it has its
importance as a corollary of—and if only as a foil to—that of the
Navy proper. This work as a whole, is therefore intended to be a
history of the later Royal Navy, and of naval administration, from the
accession of Henry VIII until the close of the Napoleonic wars, in all
the details connected with the subject except those relating to actual
warfare.
The historical evolution of many of the great administrative offices
of the state, as they exist now, can be, in most cases, observed
through the centuries and the course and causes of their growth
traced with sufficient exactness. Originally a delegation of some one
or more of the functions of the monarch, they have developed from
small and obscure beginnings in the far off past and increased with
the growth of the nation. The naval administration of to-day has no
such dignity of antiquity. It will be for the readers of these volumes in
their entirety to decide whether it has earned that higher honour
which comes of loyal service performed with justice to the
subordinates dependent on it, and with honesty to the British people
who have entrusted it with such important duties.
The Board of Admiralty came into power subsequent to the period
at which this volume ends. It dates, properly from 1689, or, at the
utmost, reaches back to 1673, but its forerunner, the modern
administration which is the subject of the present volume, sprang full
grown into life in 1546 when the outgrown mediæval system ended.
The Admiralty Board is in the place, and administers the duties, of
the Lord Admiral, but that officer although the titular head of the
Navy never had any very active or continuous part in administration,
nor was the post itself a very ancient one. James, Duke of York,
afterwards James II, was the first Lord Admiral who really took actual
charge of domestic naval affairs and the Admiralty succeeded him,
and to his powers, thus overshadowing the Navy Board. Between
1546 and 1618, the Navy was governed by the Principal Officers,
controlling the various branches of naval work, who constituted the
Navy Board; between 1618 and 1689 we have a transitional period
when the Navy Officers, Commissioners of the Admiralty,
Parliamentary Committees, Lord Admiral, and the King, were all at
different times, and occasionally simultaneously, ruling and directing.
The Admiralty now more nearly represents in function and
composition the old Navy Board, abolished in ignominy in 1832, than
the Board of the seventeenth or eighteenth centuries with which,
except in the power still retained by the First Lord, it has little in
common but name.
Our subject then in this volume, is the Navy Board as the
predominant authority between 1546 and 1660. Although a history of
the modern administration should in exactness, therefore, begin in
1546, an academic preciseness of date would be obtained at the
expense of historical accuracy since Henry VIII remodelled the Navy,
before he touched the administration. The year of his accession has
therefore been chosen as the starting point. But it should be borne in
mind that there is very much less difference between the great and
complex administration of to-day, and the Navy Board or—as it was
then sometimes called—the Admiralty, of 24th April 1546, than
between the Board of 24th April and what existed the day before.
Within the twenty-four hours the old system had been swept away
and replaced; its successor has altered in form but not in principle.
The sources of information are sufficiently indicated by the
references. The great majority of them being used for the first time,
subsequent inquiry may modify or alter some of the conclusions here
reached. Unless a date is given in a double form (e.g. 20th February
1558-9) it will be understood to be new or present style, so far as the
year is concerned. Few attempts have been made to give the
modern equivalents of the various sums of money mentioned during
so many periods when values were continually fluctuating. With one
exception all the MS. collections known to the writer, likely to be of
value, have been fully examined, but there are also many papers not
available for research in the possession of private owners. The one
exception referred to is the collection of Pepys MSS., at Magdalene
College, Cambridge. An application to examine these was refused
on the ground that a member of the university was working at them.
It is to be hoped that this ingenuous adaptation of the principles of
Protection to historical investigation will duly stimulate production.
There remains the pleasant duty of thanking those from whom I
have received assistance. To Mr S. R. Gardiner, and Professor J. K.
Laughton, I am obliged for various suggestions on historical and
naval questions; to Professor F. Elgar for information on the difficult
subject of tonnage measurement. I have to thank Mr F. J. Simmons
for assistance in the task of index compilation and proof-reading.
As this is the first opportunity I have had of publicly acknowledging
my indebtedness to Mr E. Salisbury of the Record Office, I am glad
to be now able to express my sincere gratitude to that gentleman for
constant and cordially given help in many ways during the five years
this book has been in preparation.
September 1896.
INTRODUCTION
THE NAVY BEFORE 1509
The creation of the modern Royal Navy has been variously The Modern Navy.
attributed to Henry VII, to Henry VIII, and to Elizabeth.
Whichever sovereign may be considered entitled to the honour, the statement, as
applied to either monarch, really means that modification of mediæval conditions,
and adoption of improvements in construction and administration, which brought
the Navy into the form familiar to us until the introduction of steam and iron. And
in that sense no one sovereign can be accredited with its formation. The
introduction of portholes in, or perhaps before the reign of Henry VII,
differentiated the man-of-war, involved radical alterations in build and armament,
and made the future line-of-battle ship possible; the establishment of the Navy
Board by Henry VIII, made the organisation of fleets feasible and ensured a
certain, if slow, progress because henceforward cumulative and, in the long run,
independent of the energy and foresight of any one man under whom, as under
Henry V, the Navy might largely advance, to sink back at his death into decay.
Under Elizabeth the improvements in building and rigging constituted a step
longer than had yet been taken towards the modern type, the Navy Board
became an effectively working and flourishing institution, and the wars and
voyages of her reign founded the school of successful seamanship of which was
born the confidence, daring and self-reliance still prescriptive in the royal and
merchant services.
It is not the purpose of this work to deal with the history, of The origin of the
the Navy previous to the accession of Henry VIII, but no real Navy:—William I.
line of demarcation can be drawn in naval more than in other
history, and it will be necessary to briefly sketch the conditions generally existing
before 1509, and in somewhat more detail, those relating to the fifteenth century.
[3] In the widest sense the first Saxon king who possessed galleys of his own may
be said to have been the founder of the Royal Navy; in a narrower but truer
sense, the Royal Navy as an appanage of imperial power, and an entity of steady
growth, really dates from the Norman conquest. The Saxon navy although
respectable by way of number, was essentially a coast defence force, mustered
temporarily to answer momentary needs, and lacking continuity of existence and
purpose. There is but one instance of a Saxon fleet being employed out of the
four seas, that which Canute used in the conquest of Norway, and in it the
Scandinavian element was probably larger than the Saxon. With the advent of
William I, the channel, instead of remaining a boundary, became a means of
communication between the divided dominions of one monarch, and a
comparatively permanent and reliable naval force, both for military transport and
for command of the passage between the insular and continental possessions of
the Crown, became a necessity of royal policy. For nearly two centuries this duty
was mainly performed by the men of the Cinque Ports who, in return for certain
privileges and exemptions, were bound, at any moment, to place fifty-seven ships
at the service of the Crown for fifteen days free of cost, and for as much longer
time as the king required them at the customary rate of pay.[4] These claims,
practically constituting the Cinque Ports fleet a standing force, were ceaselessly
exercised by successive monarchs, and, at first sight, such demands might seem
to be destructive of that commercial progress which is the primary basis of the
growth or maintenance of shipping. But the methods of warfare in those ages
were more profitable than commerce, and the decay of the Ports was not due to
poverty caused by the calls made upon their shipping for military purposes. The
existence of the Cinque Ports service was indirectly a hindrance to the growth of
a crown navy, since it was obviously cheaper for the king to order the Ports to act
than to man and equip his own vessels; it was not until ships of larger size and
stronger build than those belonging to the Ports were required, that the royal
ships came into frequent use.
As well as mobilising the Cinque Ports fleet, the sovereign Results of the
was able to issue writs to arrest the ships of private owners Conquest:—Growth
throughout the kingdom, together with the necessary number of Trade and
Shipping.
of sailors, when rival fleets had to be fought or armies to be
transported. The Normans, descendants of the Vikings, must have been better
shipbuilders and better seamen than the Saxons, and the large number of
nautical words that can be traced back to Norman French bear witness to
improvements in rigging and handling due to them. The Crusades must have
reacted on the English marine by bringing under the observation of our seamen
the construction of ships belonging to the Mediterranean powers, then far in
advance of the North in the art of shipbuilding. And during the century which
followed the Conquest, the foreign trade, which is the nursery of shipping, was
steadily growing. Under the Angevin kings the whole coast line of France, from
Flanders to Bayonne, was, with the exception of Brittany, subject to English rule,
and the inter-coast traffic that naturally followed was the greatest stimulus to
maritime enterprise this country had yet experienced. The result was seen in the
Crusade of 1190, when the fleet of Richard I for the Mediterranean was made up
of vessels drawn from the ports of the empire, but many of them doubtless
belonging to the continental possessions of the crown; and as John certainly
possessed ships of his own, it may be inferred that Richard, and his
predecessors also had some. When a general arrest was ordered, foreign ships
were seized as well as English, and this practice continued as late as the first
years of Elizabeth. Richard I issued, in 1190, regulations for the government of
his fleet. These regulations doubtless only methodised customs already existing,
and as they dealt with offences against life and property bear the mark of their
commercial origin. Offences against discipline must have been punished by
military law and military penalties, and required no new code.
During the reign of John we meet the first sign of a naval John:—The Clerk of
administration in the official action of William of Wrotham, like the Ships.
many of his successors a cleric, and the first known ‘Keeper
of the king’s ships.’ This office, possibly in its original form of very much earlier
date and only reconstituted or enlarged in function by John, and now represented
in descent by the Secretaryship of the Admiralty, is the oldest administrative
employment in connection with the Navy. At first called ‘Keeper and Governor’ of
the king’s ships, later, ‘Clerk of the king’s ships,’ this official held, sometimes
really and sometimes nominally, the control of naval organisation until the
formation of the Navy Board in 1546. His duties included all those now performed
by a multitude of highly placed Admiralty officials. If a man of energy, experience,
and capacity, his name stands foremost in the maintenance of the royal fleets
during peace and their preparation for war; if, as frequently happened, a
merchant or subordinate official with no especial knowledge, he might become a
mere messenger riding from port to port, seeking runaway sailors, or bargaining
for small parcels of naval stores. Occasionally, under such circumstances, his
authority was further lessened by the appointment of other persons, usually such
as held minor personal offices near the king, as keepers of particular ships. This
was a method of giving a small pecuniary reward to such a one, together with the
perquisites he might be able to procure from the supply of stores and provisions
necessary for the vessel and her crew.
In the course of centuries the title changed its form. In the fifteenth and
sixteenth centuries the officer is called ‘clerk of marine causes,’ and ‘clerk of the
navy;’ in the seventeenth century, ‘clerk of the acts.’ Although Pepys was not the
last clerk of the acts, the functions associated with the office, which were the
remains of the larger powers once belonging to the ‘Keeper and Governor,’ were
carried up by him to the higher post of Secretary of the Admiralty.
With the reign of Henry III we find the royal ships large Henry III.
enough to become attractive to merchants, who hired them
from the king for freight, perhaps at lower rates than could be afforded by private
owners. There is hardly a reign, down to and including that of Elizabeth, in which
men-of-war were not hired by merchants, and the earlier trading voyages to Italy
and the Levant during the last quarter of the fifteenth century were nearly all
performed by men-of-war let out for the voyage. The Navy was mainly made up
of sailing vessels even before the reign of Henry III, and by that period many of
them possessed two masts, each carrying a single sail. The conversion of a
merchantman into a fighting-ship was accomplished by fitting it with temporary
fore and after castles, which became later the permanent forecastle and poop,
the addition of a ‘top castle’ or fighting top, and the provision of proper armament.
Doubtless the king’s own ships were more strongly built, and better adapted by
internal arrangements for their work, than the hired merchantmen. The supreme
government of the Navy in the thirteenth and fourteenth centuries was in the
hands of the King’s Council, who ordered, equally, the preparation and fitting of
ships and the action of the admirals commanding. These officers, known during
the greater part of the thirteenth century as keepers or governors of the sea, were
usually knights or nobles in command of the soldiers. While holding commission
they appear to have had jurisdiction in the matter of discipline on board their
fleets, but not of law suits or maritime causes until 1360; before that date such
causes were dealt with at common law.[5] There were usually two, one having
charge of the East, the other of the South Coast, but occasionally, an officer had
a particular section placed under his care, such as the coasts of Norfolk and
Suffolk. Their period of service was commonly short and often only for a special
employment. The maintenance of a fleet was a part of the King’s Household
expenses; in the Wardrobe Accounts for 1299-1300 are the amounts paid for
fifty-four vessels and their crews hired for the conveyance of stores for the Scotch
war.
Galleys, although frequently mentioned, were at no time a Galleys.
chief portion of our fleets. Large fleets were mainly composed
of impressed merchantmen, and galleys are expensive and useless for trading
purposes compared with sailing ships; the natural home of the galley was the
landlocked Mediterranean, and even there its utility was limited to the summer
months, so that it was still less suitable for Northern latitudes. But the great
difficulty was in manning them. Forced labour by captives taken in the continual
warfare normal amongst the states on the Mediterranean littoral solved that
problem for them, but here the cost of the free oarsman, to whom the drudgery
was in any case distasteful, was prohibitive. We shall see that, down to the close
of the sixteenth century, attempts were at various times made to form such a
service, but always unsuccessfully, and the supreme moment of the galley
service, so far as it ever existed here, was the reign of Edward I.[6] This king
steadily increased the strength of the Navy. In 1294 and 1295 galleys were built
by him at York, Southampton, Lynn, Newcastle and Ipswich, of which at least two
pulled 120 oars apiece. Perhaps the experiment was conclusive for, neither as
regards number or size do such ever occur again. Although Edward III had one or
two built, most of those he employed were temporarily hired from the Genoese or
from Aquitainean ports, and the total number bore a very small proportion to the
sailing vessels in his fleets. The records of the first years of Edward II show that
the crown possessed at least eleven vessels, all sailing ships, but the
circumstances of the reign were not conducive to the growth of a Royal Navy,
although there seem to have been ten ships in 1322.
A far-seeing statesmanship in relation to the political value Edward III:—Relative
of sea-power has been attributed to Edward III on the estimation of Army
strength of the victories of 1340 and 1350, and of two lines of and Navy.
a poem, written nearly a century later, referring to the gold noble of 1344.[7] This
view assigns to Edward a knowledge, in the modern sense, of ‘the influence of
sea-power on history’ greater than that possessed by such a statesman as
Edward I, and a policy in connection with maritime matters of which the results, at
anyrate, were directly the opposite of his intentions. The claim to be lord of the
narrow seas was not a new one, and was as much and merely a title of dignity as
any other of the sovereign’s verbal honours, not following the actual enforcement
of ownership but consequent to the fact of the channel lying between England
and Normandy.[8] And it was a title also claimed by France. There is no sign in
the policy of the early kings of any perception of the value of a navy as a militant
instrument like an army, or any sense of the importance of a real continuity in its
maintenance and use. Society was based on a military organisation, but there
was no place in that organisation for the Navy except as a subsidiary and
dependent force. Fleets were called into being to transport soldiery abroad, to
keep open communications, or to meet an enemy already at sea, but the real
work of conquest was always held to be the duty of the knights and archers they
carried from one country to another. There is no understanding shewn of the
ceaseless pressure a navy is capable of exercising, and the disbandment of all,
or the greater part, of the fleet was usually the first step which followed the
disembarkation of troops or a successful fleet action. In an age when the land
transit of goods was hampered by innumerable disadvantages, the position of
England, dominating the natural way of communication between the prosperous
cities of the north and their customers, was one of splendid command had its far-
reaching political possibilities been realised. That they did not comprehend a
function only understood many generations later cannot be made a subject of
censure, but it has a distinct bearing on the question of Edward’s superiority in
this matter to his predecessors and successors. In the same way as theirs the
methods of Edward III were directed to conquests by land, and, once the troops
were transported or an opposing fleet actually in existence was crushed, the
Channel was left as bare of protection to merchantmen, and as destitute of any
power capable of enforcing the reputed sovereignty of the narrow seas, as it
remained down to the days of the Commonwealth. Beyond the fact that in 1340
and 1350 Edward commanded in person, where his predecessors had been
represented by deputies, his action in relation to the Royal Navy differs in no
respects from theirs. The gold noble of 1344, into which so much meaning has
been read, was struck in combination with the people of Flanders for political and
trading purposes, and in connection with Edward’s intrigues to obtain their
financial and military support. It is noteworthy that in December 1339, six months
before the battle of Sluys, Flanders, Brabant, and Hainault, agreed that a
common coinage should be struck, and this, in all probability, marks the first
inception of the noble when Edward realised the purposes to which a common
coinage for England and the Low Countries might be made to work. In 1343 the
Commons petitioned for a gold coin to run equally in England and Flanders and
thus strengthened the king’s purpose. But the ship on this coin, the noble, was
obviously an afterthought since the florin, the first issue of the same year, called
in on account of its unpopularity, bore the royal leopard on the whole and half
noble and the royal crest on the quarter one; if therefore the king meant all that is
supposed to be implied by the device it occurred to him very suddenly and
subsequent to the first, and deliberately thought out, issue.[9] All that the writer of
the Libel of English Policie says is that, in 1436, the noble proves to him four
things. Further reasons, in relation to other passages of the poem, will be
adduced on a later page to show that his work is only one more instance among
the many in which individual and unofficial thinkers have been in advance of the
statesmanship of their age and whose views, ignored by their contemporaries
have become the accepted opinions of a subsequent period.
The commercial policy of Edward III was emphatically not Edward III:—
one of protection to English shipping, being a nearer Commercial policy in
approach to free trade than existed for centuries after his relation to shipping.
death. During the greater part of his reign the needs in ships for his campaigns
were supplied from the accumulations of the reigns of Edward I and Edward II,
the second of which was not necessarily disastrous to commerce. But when
these were exhausted it was found that a system which had aimed merely at
obtaining a highest possible yearly revenue for the purpose of supporting armies
had, whether or not in itself, fiscally praiseworthy resulted in the ruin of English
shipping. In 1372 and 1373, the Commons complained of the destruction of
shipping and the decay of the port towns, and it is collateral evidence of Edward’s
real lack of insight into the value of a marine—its slow creation and its easy loss
—that some of the causes to which they attributed these circumstances were
directly due to a reckless indifference to, or ignorance of, the only conditions
which could render a merchant marine, subject to conscription, possible.[10]
Vessels, they said, were pressed long before they were really wanted, and until
actually taken into the service of the crown, ships were idle and seamen had to
be paid and supported at the expense of the owners; the effect of royal
ordinances which had driven many shipowners to other occupations, and the
decrease in the number of sailors due to these and other causes, formed further
articles of remonstrance.[11]
The year which saw the decease of the ‘Lord of the Sea,’ was marked by the
sack of Rye, Lewes, Hastings, Yarmouth, Dartmouth, Plymouth, Folkestone,
Portsmouth, and the Isle of Wight, a sufficient commentary on the title, and an
adequate illustration of the system which had left absolutely no navy, royal or
mercantile, capable of protecting the coasts.
In 1378 the Commons again attributed the defenceless Payment of hired
state of the kingdom not so much to the late king’s ships.
impressment of ships as to the losses and poverty caused by
non-payment, or delay in payment for their use, and lack of compensation for
waste of fittings and stores. Every meeting of Parliament was signalised by fresh
representations, and that of 1380 obtained a promise that owners should receive
3s 4d a ‘ton-tight’ for every three months, commencing from the day of arrival at
the port of meeting; in 1385 this allowance was reduced to two shillings, and
remained at that rate, notwithstanding frequent petitions for a return to the older
amount, for at least half a century.[12] It is not known when the payment of 3s 4d
a ton was first introduced, nor on what principle it was calculated, but, in 1416,
the Commons said that it ran ‘from beyond the time of memory.’ The following
petition, undated, but probably belonging to one of the early years of Henry IV,
shows that it was older than the Edwards, and, incidentally, yields some
interesting information:
‘To the very noble and very wise lords of this present Parliament very
humbly supplicate all owners of ships in this kingdom. That whereas in
the time of the noble King Edward and his predecessors, whenever any
ship was commanded for service that the owner of such a ship took 3s
4d per ton-tight in the three months by way of reward for repair of the
ship and its gear, and the fourth part of any prize made at sea, by which
reward the shipping of this kingdom was then well maintained and ruled
so that at that time, 150 ships of the Tower were available in the
kingdom;[13] and since the decease of the noble King Edward, in the time
of Richard, late King of England, the said reward was reduced to two
shillings the ton-tight, and this very badly paid, so that the owners of such
ships show no desire to keep up and maintain their ships, but have them
lying useless; and by this cause the shipping of this kingdom is so
diminished and deteriorated that there be not in all the kingdom more
than 25 ships of the Tower.’[14]
They then beg a return to the old rates. We may gather from this document
that, at some time during the reign of Edward III there were one hundred and fifty
large fighting ships available, and there is some reason to believe that, both in
number and size, the fourteenth and fifteenth century navy has been too much
underrated when compared with that of the sixteenth century. At least one
merchantman of the time of Edward III was of three hundred tons, others were of
two hundred, and it will be shown that, in the middle of the fifteenth century, the
number and tonnage of merchant vessels will compare favourably with any
subsequent period up to, and in fact later, than the accession of Elizabeth.
While, under Richard II, the guard of the seas was The close of the xiv
maintained with chequered success by hired ships, the century:—The
French, under the able rule of Charles V, not only possessed French Navy.
a navy but had founded a dockyard at Rouen completely equipped according to
the ideas of the age.[15] Thirteen galleys and two barges are mentioned in this

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Survey of Economics Principles Applications and Tools

1. Three reasons for the rise and fall of industries are

2. A group of firms, each of which produces similar products, is called a(n)

ANS: T PTS: 1 DIF: basic OBJ: factual

5. T or F. Consumers are part of an industry.

ANS: F PTS: 1 DIF: basic OBJ: factual

6. T or F. The definition of a market is broader than that of an industry.

ANS: T PTS: 1 DIF: basic OBJ: factual

ANS: T PTS: 1 DIF: basic OBJ: factual

8. List three reasons for the rise and fall of industries.

PTS: 1 DIF: moderate OBJ: factual

9. Define the term industry.

PTS: 1 DIF: moderate OBJ: factual

11. Which of the following statements is false?

12. Which of the following is a condition of long-run competitive equilibrium?

13. In the long run, firms enter an industry when

15. Firms may enter or exit a competitive industry

ANS: T PTS: 1 DIF: basic OBJ: factual

ANS: T PTS: 1 DIF: basic OBJ: factual

18. T or F. In economics, firms can enter an industry in the short run.

ANS: F PTS: 1 DIF: basic OBJ: factual

20. In a competitive industry, firm demand is

21. The market demand curve in a competitive market is

22. When firms enter an industry, market supply

23. When firms exit an industry,

24. If zero economic profit is being earned in a competitive industry,

25. Free entry and exit means that

26. A firm in a long-run equilibrium state

27. If the typical firm in an industry is experiencing economies of scale,

29. Which of the following is true in a long-run competitive equilibrium?

34. T or F. Firm demand in a competitive industry, like market demand, is downward-sloping.

ANS: F PTS: 1 DIF: basic OBJ: factual

ANS: F PTS: 1 DIF: basic OBJ: factual

ANS: T PTS: 1 DIF: basic OBJ: factual

ANS: F PTS: 1 DIF: challenging OBJ: conceptual

ANS: T PTS: 1 DIF: moderate OBJ: conceptual

41. If market demand increases, a competitive firm sees

42. When market demand increases in a competitive industry,

ANS: F PTS: 1 DIF: moderate OBJ: conceptual

ANS: T PTS: 1 DIF: moderate OBJ: conceptual

49. When economic profit is equal to zero, we say that

50. A normal profit may be defined as

55. Refer to Exhibit 9-1. When does firm entry occur?

ANS: T PTS: 1 DIF: moderate OBJ: conceptual

61. As firms enter a competitive industry,

62. A competitive firm's long-run equilibrium exists where price

66. Which of the following statements is false?

67. When economic losses occur in an industry,

ANS: F PTS: 1 DIF: moderate OBJ: conceptual

70. T or F. Industry expansion cannot occur without firms entering an industry.