-Figure 9-12 Shows Three Possible Long-Run Supply Curves for an Industry

question 119

Multiple Choice

-Figure 9-12 shows three possible long-run supply curves for an industry that is currently in equilibrium with price (P*) and quantity (Q*) .Which of the following statements is correct?

• A)The long-run supply curve would be F for a decreasing-cost industry,H for an increasing-cost industry,and G for a constant-cost industry.
• B)All three long-run supply curves indicate that the firms' LRATC curves shift as industry output expands.
• C)If the industry uses a significant portion of a scarce input,the long-run supply curve would likely be curve H.
• D)An industry that moves along long-run supply curve F earns above-normal profits in the long run.
• E)If an increase in market output leads to lower prices for a key input,the long-run supply curve would likely be curve H.

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Definitions:

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the corporation's assets and earnings.

CAPM

The Capital Asset Pricing Model is a framework that explains the connection between the expected return on assets, especially stocks, and their systematic risk.

Characteristic Line

A line in finance that shows a security's expected returns as a function of the overall market's returns.

Market Return

The total return on investment, including capital gains and dividends, from investing in the stock market over a specific period.