A perfectly competitive firm in the long run earns:
A. zero economic profits and zero normal profits.
B. positive normal profits but zero economic profits.
C. positive economic profits but zero normal profits.
D. positive economic profits and positive normal profits.
Answer: B
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The local banking industry currently has a Herfindahl-Hirschman index (HHI) value of 1945 and two of the competing banks have considered merging. Because the merger would raise the HHI by 155 points, the Federal Trade Commission would likely
A) challenge the merger. B) not challenge the merger. C) allow the merger as long as the HHI did not increase by more than 155 points as promised. D) allow the merger under the condition that the HHI remain at the premerger level of 1875.
Externalities affect only the buyer and seller involved in an exchange.
Answer the following statement true (T) or false (F)
A mixed market is one in which:
A. consumers can be buyers and sellers and producers can be sellers and buyers. B. there are different qualities of a good being sold in the market and there is imperfect information about the quality of each good. C. a seller of a good requires that the purchase of one good be tied to the purchase of another. D. demand is positively sloped and supply is negatively sloped.
Answer the following statements true (T) or false (F)
1) In the very short run, demand shocks will tend to change the level of output but have little effect on prices. 2) In the very short run, firms tend to respond to demand shocks by changing their prices. 3) Negative demand shocks have a more significant impact on output and employment when prices are flexible. 4) In the short run, firms are more likely to respond to demand shocks by altering inventory levels than by changing how much they produce.