Which of the following statements concerning equilibrium in the long run is not true?
A. Most firms earn economic profits in the long run.
B. The firm can vary its plant size in the long run.
C. Economic profits are eliminated as new firms enter the industry in the long run.
D. For firms in long-run equilibrium, P = MC = AC.
Answer: A
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Assume that Kelly's various possible activities are mutually exclusive. The opportunity cost from choosing one activity equals the
a. summed value of all her alternative activities b. summed value of all her alternative activities minus the value of the chosen activity c. value of the next most valuable alternative activity d. value of the next most valuable alternative activity minus the value of the chosen activity e. summed value of all her alternative activities minus the value of the next most valuable alternative activity
Suppose external benefits are present in a market which results in the actual market price of $49 and market output of 800 units. How does this outcome compare to the efficient, ideal equilibrium?
a. The efficient price would be higher than $49. b. The efficient price would be lower than $49. c. The efficient price would also be $49. d. The efficient output would be less than 800 units.
Shocks to the economy often result in calls for government action to correct the imbalances these shocks create. Why don't markets tend to correct these imbalances quickly by themselves?
A. Government policy is the primary cause of shocks, so government policy is the only way to correct the imbalances they create. B. Product prices are often "sticky" or inflexible, keeping markets from correcting imbalances quickly. C. Prices adjust too quickly for markets to correct imbalances. D. Buyers and sellers in markets don't react rationally when shocks occur.
A reaction function is
A) companies colluding in order to make higher than competitive rates of return. B) the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry. C) a game in which firms will not negotiate in any way. D) when plans made by firms are known as game strategies.