Suppose a perfectly competitive increasing-cost industry is in long-run equilibrium when market demand suddenly increases. What happens to the typical firm in the long run?
a. It experiences no change from the original equilibrium
b. It experiences a higher average total cost and equilibrium price
c. It experiences a lower average total cost and equilibrium price
d. It experiences the same equilibrium price but a greater average total cost
e. It experiences the same equilibrium price but a lower average total cost
Question 2
Which of the following is true of perfect price discrimination?
a. Profit is lower than it would be without discrimination.
b. Revenue is higher than it would be without discrimination, but profit is lower.
c. Average revenue and average cost are both higher than they would be without discrimination, so it is not certain whether profit will be higher.
d. Consumer surplus is zero.
e. Profit is zero.
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