1. Suppose the minimum possible price of constructing homes is $50 per square fo
ID: 1090893 • Letter: 1
Question
1. Suppose the minimum possible price of constructing homes is $50 per square foot. As a result of a sharp drop in the demand for home construction, the equilibrium price of home construction falls to $40 per square foot. Assuming the home construction industry is perfectly competitive and there are no specialized inputs, firms will:
enter the industry as the price rises above $40 in the long run.
2. In the case of a natural monopoly, as the number of firms in the industry increases, the average cost of producing a:
fixed number of units increases.
3. In a long-run equilibrium, monopolistically competitive firms produce where:
exit the industry, and the price will fall below $40 in the long run. exit the industry, and the price will rise above $40 in the long run. exit the industry, and the price will remain at $40 in the long run.enter the industry as the price rises above $40 in the long run.
2. In the case of a natural monopoly, as the number of firms in the industry increases, the average cost of producing a:
fixed number of units decreases. fixed number of units stays the same. variable number of units stays the same.fixed number of units increases.
3. In a long-run equilibrium, monopolistically competitive firms produce where:
marginal cost is equal to price. marginal revenue is equal to price. average total cost is equal to price. marginal revenue is greater than marginal cost.Explanation / Answer
average total cost is equal to price.
exit the industry, and the price will remain at $40 in the long run.Related Questions
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