1. Which sequence describes the long-run adjustment in a perfectly competitive m
ID: 1101503 • Letter: 1
Question
1. Which sequence describes the long-run adjustment in a perfectly competitive market, if firms in the market are currently making short-run economic profits?
A) Some firms leave, industry supply increases, market price rises.
B) New firms enter, industry supply decreases, market price falls.
C) New firms enter, industry supply increases, market price falls.
D) Some firms leave, industry supply decreases, market price falls.
Is it C?
3. Which of the following would NOT lead to a shift in the supply curve of sport utility vehicles (SUVs)?
A) A new government vehicle tax on the sales of all SUVs.
B) An increase in the price of steel and other metals used to produce the SUVs.
C) The price of SUVs rises.
D) New technology is developed that allows more SUVs to be produced each day at a lower cost.
E) Producers of SUVs expect the price of SUVs to decline beginning next month.
Is it E?
4. Productive inefficiency implies that:
A) People who want a specific good cannot get them at any price.
B) Workers are lazy.
C) Goods are produced at too high a cost.
D) Too many Twinkies and too few Ding Dongs were produced.
Is it B?
7. Statement 1: Product differentiation is crucial in markets characterized by monopolistic competition. Statement 2: Product differentiation ONLY occurs when products have different physical characteristics.
A) Statement (1) is true; statement (2) is false.
B) Both statements (1) and (2) are false.
C) Statement (1) is false; statement (2) is true.
D) Both statements (1) and (2) are true.
Is it B?
Explanation / Answer
C) New firms enter, industry supply increases, market price falls.
C) The price of SUVs rises.
B) Workers are lazy.
A) Statement (1) is true; statement (2) is false.
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