14. Which of the following statements about the long run average cost curve (LRAC) would generally be true? 1) When the LRAC is falling, the production firm is experiencing economies of scale. II) The LRAC forms an envelope underneath all the possible short run average cost curves III) The LRAC shifts upwards as industry output increases if the industry is an increasing cost industry. (A) none (B) I only (C) II only (D) III only (E) I and II (F) I and III (G) II and III (H) I, II and III

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13. Consider the following three statements about perfect competition: In the long run, firms enter or exit a perfectly competitive industry in search of higher profits II. Every firm in long run equilibrium will be exactly the right size to deliver the lowest possible average costs of production III. As we move to the right along the long-run supply curve of the perfectly competitive industry, each firm is supplying more output to the market Which of the above statements are true about a perfectly competitive industry? (A) I only (B) II only (C) III only (D) I and II (E) I and III (F) II and III (G) I and II and III (H) none of the above

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13. Which of the following statements are correct about the movement from an initial long-run equilibrium to a new short-run equilibrium in a perfectly competitive market? You can presume that the industry demand curve is negatively sloped. I. As long as the marginal cost curve of each firm has its normal positive slope, a decrease in industry demand for the product will lead to losses for each firm in the industry. II. As long as the marginal cost curve has the normal positive slope, a decrease in industry demand for the product will lead to all firms shutting down. III. As long as the marginal cost curve has the normal positive slope, an excise tax will generally result in an excess burden. Which of the above statements are true? (A) I only (B) II only (C) III only (D) I and II (G) I and II and III (H) none of the above (E) I and III (F) II and III

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