Suppose That a Competitive Market Is Initially in Equilibrium

question 510

Multiple Choice

Suppose that a competitive market is initially in equilibrium. Then demand increases. If entering firms face the same costs as existing firms and sufficient resources are available for entering firms,

• A)the long-run market supply curve will be upward sloping.
• B)the long-run market supply curve will be perfectly elastic.
• C)in the long run firms will suffer economic losses, leading them to exit the industry.
• D)the number of firms will decrease, and the market will become a monopoly.

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Definitions:

Share Losses

The financial reductions in value or earnings experienced by shareholders as a result of a decrease in the price or profitability of the shares.

Partnership Agreement

A contract between partners in a partnership, detailing the terms of the relationship, distribution of profits, and the management of the partnership.

Partnership Losses

Financial setbacks attributed to the operational or investment activities of a partnership that are shared among the partners according to their agreement.

Capital Contributions

Monetary or non-monetary assets provided by an owner or partner to increase the capital of a company or partnership.