In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X. Refer to the given information. A reduction in the number of firms producing X will:
A. increase D, increase P, and increase Q.
B. increase S, decrease P, and increase Q.
C. decrease S, increase P, and decrease Q.
D. decrease S, decrease P, and increase Q.
Answer: C
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A decrease in the expected future price level: a. Shifts both SRAS and LRAS to the left
b. Shifts both SRAS and LRAS to the right. c. Shifts SRAS left but leaves LRAS unchanged. d. Shifts SRAS right but leaves LRAS unchanged.
Consider a perfectly competitive market in which the firms are earning above-normal profit in the short run. In the long run, forces will come into play to
a. decrease market supply b. shift the horizontal demand curve facing each firm downward c. increase the market price d. encourage existing firms to increase output e. decrease the number of sellers in the market
Comparative advantage explains how two nations can benefit from trade.
Answer the following statement true (T) or false (F)
A firm in monopolistic competition needs ________ market share to qualify as a firm in monopolistic competition
a. no less than 50 percent b. no less than 10 percent c. no more than 5 percent d. no more than 1 percent e. there is no specific percentage