A Competitive Market Is in Long-Run Equilibrium

question 251

Multiple Choice

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

• A)rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium.
• B)rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium.
• C)fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
• D)not rise in the short run because firms will enter to maintain the price.

Discern the implications of changes in the price level for exports, imports, and net exports.

Understand the concept of equilibrium in the context of aggregate expenditure and real GDP.

Grasp the nature of investment, including its autonomy from the level of saving.

Understand the concept of the risk-reward relationship and how it applies to various investments.

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