1) If market demand increases in a perfectly competitive decreasing-cost industr
ID: 1100119 • Letter: 1
Question
1)
If market demand increases in a perfectly competitive decreasing-cost industry:
new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
4)
Suppose there is an improvement in the technology of producing TVs and the production of TVs is a competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:
higher TV prices and greater TV production.
lower TV prices and greater TV production.
higher TV prices and lower TV production.
lower TV prices and lower TV production.
6)
If the long-run market supply curve is perfectly elastic, an increase in demand will cause the final equilibrium to be at:
the original price but at a smaller output.
a higher price with a higher output.
the original price but with a higher output.
a higher price but with the same output
9)
Long-run market supply is a horizontal line in a(n):
decreasing-cost industry.
constant-cost industry.
increasing-cost industry.
perfectly competitive industry.
new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
Explanation / Answer
1)
If market demand increases in a perfectly competitive decreasing-cost industry:
new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
4)
Suppose there is an improvement in the technology of producing TVs and the production of TVs is a competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:
higher TV prices and greater TV production.
lower TV prices and greater TV production.
higher TV prices and lower TV production.
lower TV prices and lower TV production.
6)
If the long-run market supply curve is perfectly elastic, an increase in demand will cause the final equilibrium to be at:
the original price but at a smaller output.
a higher price with a higher output.
the original price but with a higher output.
a higher price but with the same output
9)
Long-run market supply is a horizontal line in a(n):
decreasing-cost industry.
constant-cost industry.
increasing-cost industry.
perfectly competitive industry.
new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
new firms will enter the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
some firms will exit the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase.
some firms will exit the industry, factor prices will fall, and the price at which each firm earns zero economic profit will fall.
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