Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed, product price will be:
A. lower, but total output will be larger than originally.
B. higher and total output will be larger than originally.
C. lower and total output will be smaller than originally.
D. higher, but total output will be smaller than originally.
Answer: B
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Using a graph, show a market equilibrium. Suppose the costs of inputs increase. How is this shown on the graph? Explain what is happening in the market
What will be an ideal response?
In a monopolistically competitive market,
a. entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. b. entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. c. free entry ensures that the number of firms in the market is ideal. d. there may be too few or too many firms in the market, despite free entry.
Which of the following is least likely to be the case?
A. Medicare changes the mix of output away from medical services. B. Housing subsidies encourage the production of additional housing. C. Food stamps encourage the production of more food. D. Student loans change the mix of output in favor of educational services.
Refer to the production possibilities frontier in the figure above. More of good X must be given up per unit of good Y gained when moving from point b to point a than when moving from point c to point b. This fact
A) illustrates decreasing opportunity cost. B) illustrates increasing opportunity cost. C) indicates that good X is more capital intensive than good Y. D) indicates that good Y is more capital intensive than good X.