If an Industry Has Constant Marginal and Average Costs, Any

question 35

Multiple Choice

If an industry has constant marginal and average costs, any shift in demand will eventually

• A) result in a higher equilibrium price.
• B) be met by a smaller change in quantity supplied.
• C) be met by an equal change in quantity supplied, and equilibrium price will not change.
• D) make economic profits zero in the short run.

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Definitions:

Insurance Companies

Financial institutions that provide coverage against specified losses in exchange for premium payments.

Deductibles

The amount policyholders must pay out of pocket before an insurance company will cover the remaining costs of a claim.

Moral Hazard

The situation where one party is more likely to take risks because they do not bear the full consequences of their actions, often occurring in insurance and finance.

Health Insurance

A form of insurance coverage that pays for medical and surgical expenses incurred by the insured or provides reimbursement for such expenses.