Suppose a Competitive Market Is Comprised of Firms That Face

question 232

Multiple Choice

Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i)
New firms will enter the market.
(ii)
In the short run, price will rise; in the long run, price will rise further.
(iii)
In the long run, all firms will be producing at their efficient scale.

• A)(i) and (ii) only
• B)(i) and (iii) only
• C)(ii) and (iii) only
• D)(i), (ii) and (iii)

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Definitions:

Aponeurosis

An aponeurosis is a flat and broad tendinous sheet or ribbon-like fibrous tissue that connects a muscle to the part it moves or to another muscle.

Tendon

A tough, flexible band of fibrous tissue that connects muscles to bones.

Atonic

Lacking normal muscle tone or strength; often refers to a type of seizure or to a condition affecting bodily muscles.

Myasthenia Gravis

A chronic autoimmune disorder characterized by weakness and rapid fatigue of any of the muscles under your voluntary control, due to a breakdown in communication between nerves and muscles.