Refer to Figure 13-12. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run?
A) The firms that are making losses will be purchased by their more successful rivals.
B) Inefficient firms will exit the market and new cost-efficient firms will enter the market.
C) Firms will have to raise their prices to cover costs of production.
D) Some firms will exit the market causing the demand to increase for firms remaining in the market.
Question 2
Refer to Table 12-3. What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is 12.50?
A) Price and profit cannot be determined from the information given.
B) P = 12.50; profit = 22.50
C) P = 12.50; profit = 52.50
D) P = 20; profit = 75.00.
