A sudden increase in the market demand in a competitive industry leads to
a. Losses in the short-run and average profits in the long-run
b. Above average profits in the short-run and average profits in the long-run
c. New firms being attracted to the industry
d. Demand creating supply
c
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Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. At the extreme right end, all 100 voters lie to the left. 
If Candidate X is running against Candidate Z, by moving to the right Candidate X would:
A. force Z to move farther to the right in order to keep the same number of votes. B. not lose any votes from voters on the left and gain some votes from Z. C. lose some votes from voters on the far left but gain approximately the same number of votes from Z. D. win the election if the move placed X anywhere to the right of 25 on the spectrum.
As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic
a. True b. False
Subprime mortgages are mortgage loans:
A. made to borrowers with higher than average credit scores. B. made to borrowers with low credit scores. C. that have less than prime interest rates. D. made at lower than general market interest rates.
Refer to Figure 9.4. In the short run, how much should the firm produce at the price P1?
A. 0
B. Q1
C. Q2
D. Q3