Question

Please show as much work and explanation as possible, thank you so much!

10. Which ones of the following statements are true about perfectly competitive markets? (a) The short run supply curve for a firm is upward sloping due to the law of diminishing returns. (b) The industry's short run supply curve is upward sloping due to the law of diminishing returns. (c) The slope of the long run supply curve for an individual firm depends on the industry cost condi- tions (increasing, decreasing or constant). (d) The long run supply curve of an industry can be upward sloping, due to decreasing return to scale. 11. A price cap set below the monopoly price (a) May result in the monopolist increasing output (b) May lead to an increase in total welfare to society ause the firm to shut down

Answer 1

10) ans is A

firm supply curve is the marginal cost curve given price>min of AVC.and Mc curve is an upward sloping curve because of law of diminishing return.

industry long run supply curve depends on the nature of industry. If increasing cost industry then long run supply curve is an upward sloping, horizontal in constant cost industry and downward sloping in decreasing cost industry.

11) ans is A ans B, both are correct

A price cap may result in increasing output because as price decreases, quantity sold increases which increases total welfare to the society