Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, which of the following statements is true in the long run?
A. The market price drops below $12 as more firms enter the market and build more plants.
B. Both existing firms and new firms earn a zero economic profit.
C. All firms in the industry maximize their profits by producing the output where the marginal cost equals $10.
D. All of these are correct.
Answer: D
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A) decrease; decreases; falls B) decrease; increases; falls C) increase; increases; falls D) increase; decreases; rises E) decrease; decreases; rises
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A) the Bundesbank. B) the European Union Senate. C) the European Central Bank. D) None of the above.
Suppose a buyer hires an interpreter who charges $5 to negotiate a deal with a seller. The buyer's valuation of the good is $50 and the seller's opportunity cost is $35 . If the net benefit to the buyer is equal to the same received by the seller, what is the price agreed upon by the two parties?
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