Which of the following is false about the long run?
a. The long-run equilibrium output for a firm in perfect competition occurs at the lowest point on the average total cost curve.
b. The shape of the long-run supply curve depends on the extent to which input costs change when there is entry or exit of firms in the industry.
c. In a constant-cost industry, the prices of inputs do not change as output is expanded.
d. In an increasing-cost industry, the cost curves of the individual firms rise as the total output of the industry decreases.
Question 2
Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
a. Brazil has an absolute advantage in producing only coffee.
b. Brazil has an absolute advantage in producing only sugar.
c. Chile has an absolute advantage in the production of both coffee and sugar.
d. Chile has an absolute advantage in producing only coffee.
e. Brazil has an absolute advantage in the production of both coffee and sugar.
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