Question

QUESTION 6 Industry is a perfectly competitive industry. Assume that as a result of changes in other markets there is a twenty percent increase in the price of variable inputs used by firms in industry Y. After all adjustments have taken place, we would expect the equilibrium price in industry Yto: increase and the number of firms to increase. decrease and the number of firms to increase. increase and the number of firms to decrease. decrease and the number of firms to decrease. QUESTION 7 1, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should keep output constant and enjoy the above normal profit. lower the price increase its output O reduce its output. QUESTION 8 Which of the following is a characteristic of perfect competition? easy entry and excit differentiated products few firms none of the above QUESTION 9 Which of the following statements about the perfect competitor is INCORRECT? The perfectly competitive firm is always a price taker. The products made by a perfectly competitive firm have no close substitutes. The perfect competitor sells a homogeneous commodity If an individual firm raises price, it will lose business. Click Save and Submit to save and submit. Click Save All Arewers to all answers

Answer 1

6) Third option. This raises cost of production and in short run firms start bearing losses. In the long run some of these firms start leaving the market which shifts the supply curve to the left. This implies that price will increase but number of firms will decrease

7) Third option. When P > MC, each additional unit will generate more MR and less MC which means profit is still not maximized and increased production will be a move towards such objective

8) Easy entry and exit.

9) Second option. The product sold is identical and is perfect substitute of the product sold by rival