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Economics
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19 May 2019

1. New firms entering a competitive industry will cause the price of the product to

a. fall, due to an increase in supply

b. rise, due to an increase in supply

c. fall, due to an increase in demand

d. rise, due to an increase in demand

e. (a) and (c) above are both correct

2. A perfectly competitive industry in long-run equilibrium is described as being technologically efficient because

a. firms produce at the low point on their LRAC curve

b. firms produce at the minimum efficient scale level of output (qMES)

c. firms earn more than the cost of capital

d. firms are not profitable

e. (a) and (b) above are both correct

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Related questions

If demand surges, the industry-wide output will rise in the long-run due to:

A) an increase in the number of firms within the industry

B) an increase in the profit-maximizing level of output for each firm

C) an increase in efficiency

D) an increase in the number of firms within the industry and in the amount produced by each firm.

1.) The minimum feasible long-run average cost for firms in a perfectly competitive industry is $58 per unit. IF every firm in the industry currently is producing an output consistent with a long-run equilibrium, calculate the marginal cost incurred by each firm and the market price.

Marginal cost is $___ and market price is $___ .

How I calculate this?

2.) A perfectly competitive increasing cost industry is in long-run equilibrium. Due to a change in tastes and preferences, there is a decrease in demand. Which of the following best describes the effect on the industry?

The price will

A.) decrease, firms will produce more, profits will decrease, and more firms will enter until profit returns to zero.

B.) decrease, firms will produce less, profits will increase, and more firms will enter until profit returns to zero.

C.) decrease, firms will produce less, profits will be below zero, and firms will exit until profit returns to zero.

D.) increase, firms will produce more, profits will increase, and more firms will enter until profit returns to zero.

What determines the entry and exit of firms in a perfectly competitive industry in the long run? In a perfectly competitive industry in the long run,

A. new firms cannot enter the market due to barriers but existing firms will exit if they are experiencing losses.

B. new firms will enter if market demand exceeds market supply and existing firms will exit if market supply exceeds market demand.

c. new firms will enter if existing firms are making a profit and existing firms will exit if they are breaking even or experiencing losses.

D. new firms will enter if existing firms are making a profit and existing firms will exit if they are experiencing losses.

E. new firms will enter if the price is above the shutdown point and existing firms will exit if the price is below the shutdown point.

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