Suppose some firms in a perfectly competitive market are ...

[imowrer]

Suppose some firms in a perfectly competitive market are incurring an economic loss. As a result,
 
  A) all the firms will eventually incur an economic loss.
  B) some firms will leave the market and the price of the good will rise.
  C) some firms will leave the market and the remaining firms' quantity will decrease.
  D) the total market economic profit must equal 0.

Question 2

When does a decrease in supply raise the price more: When demand is elastic or when demand is inelastic? When OPEC decreases the supply of oil, the price of gasoline skyrockets. Hence is the demand for gasoline elastic or inelastic?
 
  What will be an ideal response?

[bblaney]

Answer to Question 1

B

Answer to Question 2

A decrease in supply raises the price more when demand is inelastic. The skyrocketing price of gasoline indicates that the demand for gasoline is inelastic.