Question

QUESTION 9

1. In a perfectly competitive market, the current price is $8 per unit. The typical firm in the market has ATC = $6.00 and AVC = $5.50.

   	a.	The firms will earn zero economic profits both in the short and long-run.
   	b.	New firms will enter this market in the long-run and the situation will eventually break even.
   	c.	There will be shut down in the short-run and exiting in the long-run.
   	d.	The firms will continue to operate in the short-run but exit in the long-run.

4 points   

QUESTION 10

1. Janie makes dresses. Janie quantity demanded for dress material increases by 10% when her income rises by 5%. For Janie, the income elasticity for dress material is

   	a.	positive, and dress materials are an inferior good.
   	b.	positive, and dress materials are a normal good.
   	c.	negative, and dress materials are an inferior good.
   	d.	negative, and dress materials are a normal good.

Answer 1