Author Question: Under perfect competition, if an industry is characterized by positive economic profits in the short ... (Read 55 times)

Frost2351 · **on:** Jul 1, 2018

Under perfect competition, if an industry is characterized by positive economic profits in the short run
a. firms will leave the market in the long run and the short-run supply curve will shift outward.
b. firms will enter the market in the long run and the short-run supply curve will shift outward.
c. firms will enter the market in the long run and the short-run supply curve will shift inward.
d. firms will leave the market in the long run and the short-run supply curve will shift inward.

Question 2

Suppose that the price elasticity of demand for a product is 1 and that the price elasticity of supply is +1 . Assume also that the income elasticity of demand is +2 . Then an increase in income of 10 will raise equilibrium price by
a. 10.
b. 5.
c. 20.
d. an annual amount that cannot be determined.