Briefly write an argument which supports your answer. (If False, you can also pr

Question

Briefly write an argument which supports your answer. (If False, you can also provide a counterexample) Short run economic costs must be lower than long run economic costs because long run economic costs include the cost of inputs that are fixed in the short run (and thus are not part of short run cost). The long run market supply curve is formed by adding up individual firm supply curves in the industry. If all firms are identical, output prices will never change. Aggregate producer surplus in an industry is measured along the market supply curve is and only if firm production technologies exhibit the quasilinearity property. If the individuals in a group of consumers have identical tastes, then the group can be treated as if it behaved as a single representative consumer. A "social planner" is a fictional societal planner who would always choose the same outcome as the competitive market. In a perfectly competitive market with identical firms, all surplus will be consumer surplus in long run equilibrium. When price elasticity is less than -1, consumer spending increases as price falls. Depending on the shape of the marginal cost curve, a monopolist might produce an output level on the elastic or the inelastic part of demand.

Explanation / Answer

1. This a false statement.

It can be lower or higher. Fixed expense in the short run is not a true economic cost.

2. This is a false statement.

In the short run in case of perfect competition, the market supply curve is the hozizontal summation of the individual supply curves of all the firms and not in the long run.

3. This is False.

If firms are identical, then output prices can change. Prices of the output are determined by both the demand and supply. If there is change in demad, then output prices will change.

4. This is False.

Producer surplus is the difference between area below the price line and area above the supply curve.So, it is measured along the supply curve in all the cases.

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