Author Question: Assume that a perfectly competitive increasing-cost industry is in long-run equilibrium when market ... (Read 85 times)

stephzh · **on:** Jun 30, 2018

Assume that a perfectly competitive increasing-cost industry is in long-run equilibrium when market demand suddenly increases. Which of the following statements is not correct?
a. Existing firms will earn economic profits in the new long-run equilibrium
b. Existing firms will increase output in the short run
c. New firms will enter the industry in the long run
d. Some resource suppliers to the industry will earn higher income
e. The new long-run equilibrium price will exceed the original equilibrium price

Question 2

Suppose that a price-discriminating monopolist divides its market into two segments. The firm will charge the lower price in the market segment where consumers
a. have relatively less elastic demand
b. have relatively more elastic demand
c. attach a higher marginal value to each unit of the good
d. have perfectly inelastic demand
e. attach higher average value to units of the good