Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the right due to changes in consumer preferences:
A. the number of firms in the market will increase in the short run.
B. firms will earn positive economic profits in the short run.
C. firms' average costs of production will increase as they increase output levels in the short run.
D. None of these
Answer: B
You might also like to view...
Refer to the information provided in Figure 5.6 below to answer the question that follows.
Figure 5.6Refer to Figure 5.6. The market is initially in equilibrium at the intersection of the demand curve and supply curve S2. If supply shifts from S2 to S1, which of the following statements is true?
A. The market cannot move to a new equilibrium unless demand shifts at the same time that supply shifts. B. There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is less than the original equilibrium quantity. C. Price will still serve as a rationing device causing quantity demanded to rise from 10 to 12 pizzas. D. Price will still serve as a rationing device causing quantity supplied to exceed 12 pizzas.
OPEC periodically meets to agree to restrict the cartel's oil output, and yet almost every member of OPEC produces more than its own output quota. This suggests that OPEC has
A) a threat of substitute goods. B) a noncooperative equilibrium. C) new potential entrants. D) a cooperative equilibrium.
Tools to help solve the adverse selection problem in financial markets include all of the following EXCEPT
A) diversification. B) government regulations to increase information. C) the use of financial intermediaries. D) the private production and sale of information.
A country would tend to experience currency appreciation relative to other countries if: a. the profitability of investments within the country increases relative to the rest of the world. b. people in the foreign currency markets expect the value of the currency to rise in the near future. c. the foreign demand for its exports increases
d. all of the above