Question

1) When positive economic profits exist in an industry:

the market price of the good produced by the industry is less than the marginal cost faced by the industry.

the market price of the good produced by the industry is less than the average total cost of the industry.

there is an exit of firms from the industry.

resources flow from less productive uses to that particular industry.

2) When price is less than the firms' minimum average total cost, ________.

firms' profits are likely to be maximum

prices are likely to fall further

new firms will enter the market

existing firms will leave the market

3) The entry of new firms into a perfectly competitive market will cause:

an increase in the profitability of existing firms.

a decrease in the profitability of existing firms.

a right shift of the demand curve of the good being produced by the firms.

a left shift of the demand curve of the good being produced by the firms.

4) Entry of new firms into an existing market causes:

a downward movement along the market supply curve.

a leftward shift of the market supply curve.

an upward movement along the market supply curve.

a rightward shift of the market supply curve.

5) The incentive for new firms to enter into a perfectly competitive market is primarily the:

high level of government intervention in the market.

large number of buyers in the market.

large number of existing firms in the market.

positive profits observed for the existing firms in the market.