Question

QUESTION 1

1. In a constant-cost industry where firms have identical cost, what will happen to the profit of the firms in the long run?

   		Some firms will make positive economic profit, while some firms will make zero economic profit.
   		All firms will be making zero economic profit.
   		Only firms with positive economic profit will stay in the industry, because firms with negative or zero economic profit will exit the industry.
   		Firms can be making positive, zero, or negative economic profit.

QUESTION 2

1. If the idustry has constant cost, when what is the slope of the long-run industry supply curve?

   		The long-run supply curve will be positively sloped.
   		The long-run supply curve will be negatively sloped.
   		The long-run supply curve will be a horizontal line.
   		The long-run supply curve could be positively or negatively sloped.

QUESTION 3

1. In the long run, what is triple equality of the price in a perfectly competitive market?

   		P = MC = minimum ATC.
   		P = MC = minimum AVC.
   		P = MR = minimum AFC.
   		P = MR = minimum AVC.

QUESTION 4

1. The monopolist's demand curve is:

   		a horizontal line at the market price.
   		identical to the market demand curve.
   		identical to the marginal revenue curve.
   		below the marginal revenue curve.

QUESTION 5

1. Which of the following is an example of entry barrier that prevents other firms from entering the market?

   		Network externality.
   		Economies of scale.
   		Patents and licenses.
   		All of the above are entry barriers.

QUESTION 6

1. Which of the following products/services serves as the best example of network externality?

   (Hint: The definition of network externality is that, the more consumers are using the product/service, the more useful the product/service is.)

   		Gym membership.
   		Oil and gas.
   		Facebook.
   		Haircuts.

QUESTION 7

1. A natural monopoly is a market where:

   		a single firm has control over a vital natural resource.
   		many smaller firms can produce the entire market output at the same per-unit cost as could one large firm.
   		a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.
   		many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

Answer 1

1) All firms will be making zero economic profit. This is because free entry and exit will vanish all the economic profit and losses in the long run

2)  long-run supply curve will be a horizontal line. This is because the constant cost industry makes the cost of raw materials same for new firms as well as old forms when entry or exit occurs.

3) P = MC = minimum ATC. this is the long run condition for competitive market which ensures allocative efficiency and productive efficiency

4) identical to the market demand curve

5) all of the above

6) Facebook

7) single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms