1. If a firm in perfect competiiton changes a lower price than the market price
ID: 1164674 • Letter: 1
Question
1. If a firm in perfect competiiton changes a lower price than the market price what is expected to happen?
A. the market price remains the same and the firm sells out quickly because consumers cannot tell difference mong products?
B. The market price remains the same and the firm sells none because consumers think the product is defective?
C. The market prince goes up because of the law of inverse firm-to-market returns?
2. If an industry has low barriers to entry for firms, what are the implications for long run economic profits and losses fir that industry?
A. in the long run, firms will make normal profit because of the low barriers to entry and exit
B. in the long run, firms will be able to sustain economic profit while sustaining economic loss because of the low barriers to entry and exit.
C. in the long run, firms will still be able to produce while sustaining economic los because of the low barriers to entry and exit.
3.If a mompolist is an industry characterized by monopoly features is making economic profit in the short run, which of the following is true for this firm in the long run? (assume that costs and demand are held constant)
A. the momopolist will be able to sustain economic profits.
B. the monopolist will make normal profit because no firms will enter the industry.
C. the monopolist will make a loss.
Explanation / Answer
Ans1) the correct option is A. the market price remains the same and the firm sells out quickly because consumers cannot tell difference mong products. In perfect competition,firms deal with homogeneous products
Ans2) The correct option is A. the long run, firms will make normal profit because of the low barriers to entry and exit. When there are low barriers to entry, firms will enter the Market when there are positive profits and firms will exit the Market when there are losses. This happens Till the profit is zero
AnS3) the correct option is A. the momopolist will be able to sustain economic profits. Since there is only one Seller in the Market.
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