Assume that the dairy farm industry is a perfectly competitive increasing-cost i

Question

Assume that the dairy farm industry is a perfectly competitive increasing-cost industry. It is currently in long-run equilibrium and the price of milk is $3.00 per gallon. Assume that the demand for milk increases. How will this affect the price of milk in the short-run and long-run? Firms in an industry achieve production efficiency in the long-run when they: Allocation efficiency occurs in a market when: We may be certain that a firm is a monopoly if: Which of the following is not considered an entry barrier?

Explanation / Answer

24. A firm will achieve productive efficiency in the long run when the market price is equal to the minimum long-run average cost.

25. Allocative efficiency occurs in markets when marginal benefit and marginal cost for the last unit sold are equal

26. A monopolist is the single producer of the product in the market and it sets equilibrium output at a point where MR=MC so D is the correct option.

27. Diseconomies of scale is not an entry barrier rather it is a reason for exit of the firms but all others options in the question are entry barriers.

28. A monopolist is the single seller in the market so its demand curve is AR curve and is same for the industry as there is only one seller in the industry. So the correct option is D.

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