When a second firm enters a market, the original firm's profits decline because:
A. the original firm's price decreases.
B. the original firm's ATC increases.
C. the original firm's quantity decreases.
D. All of these are correct.
Answer: D
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Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ________ and the market equilibrium quantity will be ________.
A. inefficiently low; inefficiently high B. inefficiently low; inefficiently low C. inefficiently high; inefficiently low D. inefficiently high; inefficiently high
?Consider a market for cookies that is initially in equilibrium. For a given upward-sloping supply curve, the equilibrium price and equilibrium quantity of cookies is most likely to decline when:
A) the price of milk, a complement, increases. B) consumer income increases. C) the number of consumers increases. D) the price of coffee, a complement, decreases. E) price of crackers, a substitute, increases.
Since 1950, expansions in the United States have become ________, while recessions have become ________
A) shorter; shorter B) shorter; longer C) longer; longer D) longer; shorter
Which of the following statements is TRUE?
A) Free trade is beneficial only if your country is strong enough to stand up to foreign competition. B) Free trade is beneficial only if your competitor does not pay unreasonably low wages. C) Free trade is beneficial only if both countries have access to the same technology. D) Free trade is never beneficial for developing countries. E) Free trade can be beneficial to economic welfare of all countries involved.