ECN 104 Chapter Notes - Chapter 10: Monopolistic Competition, Monopoly Price, Marginal Revenue
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11)
A constant-cost, perfectly competitive industry experiences a permanent increase in demand. In adjusting to this change, what will happen to the price of the product?
It will increase in the short-run and then decrease in the long-run, but end up above its original level in the long-run. |
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It will increase in the short-run and then increase further in the long-run. |
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It will increase in the short-run and then decrease back to its original level in the long-run. |
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It will increase in the short-run and then decrease below its original level in the long-run. |
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It will decrease in the short-run but return to its original level in the long-run. |
12)
Assume that a perfectly competitive firm owns or rents a higher-quality resource that results in lower average total costs and higher economic profits in the short run. What will happen in the long-run?
The price of the higher-quality resource will be bid upward resulting in economic rents and equalizing costs across firms. |
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New firms will enter and compete with any excess profits away. |
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None of the other answers is correct. |
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The government will tax away any excess profits. |
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The firm with the higher-quality resource will earn positive economic profits in the long run. |
13)
Which of the following are characteristics of long-run equilibrium?
No firm has an incentive to change its level of output. |
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No firm has an incentive to change its plant size. |
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Economic profit is zero |
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All of the above |
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None of the above |
14)
Which of the following statements is consistent with the textbookâs analysis of perfect competition?
Although individual perfectly competitive firms wonât pay to advertise, the industry as a whole may well advertise. |
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Higher costs for one firm in the industry will result in that firm charging a higher price than the other firms in the industry. |
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If all the firms in an industry charge an identical price for their products, this is clear evidence of collusive behavior. |
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All of the above |
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None of the above |
15)
The assumptions that define the market structure known as monopoly include which of the following?
High barriers to entry. |
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There is one seller. |
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There are no close substitutes available. |
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All of the above |
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None of the above |