Download Impact of Demand Shifts on Economic Profits in Perfectly Competitive Industries - Prof. Ch and more Exams Microeconomics in PDF only on Docsity! 10. In a perfectly competitive industry, zero economic profits are being earned. Theq the market demand curve shifts to the left. After the leftward shift in the demand curvg demand does not change any more. This demand shift will lead to a sequence of events. Which ofthe following is the best description of this sequence? Price rises; economic profits are eamed; firms continue to earn positive economic profits indefinitely. Price falls; economic losses are suffered; some firms will eventually exit the industry, zero economic profits are restored Price rises; economic profits are earned; new firms enter the industry; zero economic profits restored. Price falls; economic losses are suffered; firms continue to earn negative economic profits indefinitely. e. Price falls; economic losses are suffered; some firms will eventually exit the industry until the remaining firms are earning positive economic profits. 11. In our discussion of consumer demand, we assumed that the indMdual conzumer is unable to have effect on the market price. Therefore, the individual consumer takes the market price as Sven. We ds assumed that the individual consumer has diminishing marginal utility, and that marginal utility is in dollars ofwillingness to pay. Under these circumstances, ifthe consumer wants to do the best he/# carl the indMdual consumer's demand curve will be a horizontal line. the indMdual consumer's demand curve will be the downward-sloping marginal-utility the individual consumer does not have a unique, well-defined demand curve. the individual consumer's demand curye will be a downward-sloping straight line, and its will be et<actly twice as great as the slope of the marginal-utility curve. we have no way of knowing what the individual consumer will do, since we assume thd consumers are irrational. 12. Bilgewater Corporation is a monopolist. Bilgewater produces a quantify at which marginal equal to marginal cost. Since its marginal costs are positive, this means that Bilgewater will quantity at which marginal revenue is positive. What does this imply about the elasticity of demad output, when Bilgewater is producing its profit-maximizing quantity? a. Demand is inelastic. a. Demand is unit-elastic. b. Demand is elastic. c. All ofthe above. d. None ofthe above, because it is not possible to calculate elasticity of demand for a 13. Trucking and commercial airlines are examples of industries that a. were transformed when a huge firm was broken up, as a result of an antitrust actiort. b. are natural monopolies. c. are perfectly competitive. d. were substantially deregulated in the 1970s and 1980s. e. all ofthe above. d. a. b. c. d. e. tt4
