Question

Suppose there is an improvement in production of TVs. If the TV industry is initially in a perfectly competitive equilibrium then the improvement will result in:

Higher prices with increased production

Lower prices with decreased production quantities

Lower prices and greater production of TVs

Lower prices but no change in production quantities

If a perfectly competitive firm making positive economic profits can increase profits by increasing output then:

ATC must be falling

marginal revenue is equal to marginal cost

marginal revenue is greater than marginal cost

marginal costs is greater than marginal revenue

In long-run equilibrium,

no entry occurs in an increasing-cost perfectly competitive industry

perfectly competitive firms in an increasing-cost industry can earn economic profit

perfectly competitive firms can earn only a normal profit

perfectly competitive firms in a constant-cost industry can earn economic profit

perfectly competitive firms in a decreasing-cost industry can earn economic profit

A perfectly competitive firm's marginal revenue:

decreases as the firm's output increases.

is sometimes below and sometimes above the selling price.

increases as the firm's output increases.

is constant.

Answer 1

(iii) Lower prices and greater production of TVs.

(Improved technology leads to higher production at lower costs)

(i) ATC must be falling.

(Under normal profits conditon, ATC and price coincide. If ATC fallls, firms will make supernormal profits)

(iii) Perfectly competitive firms can earn only a normal profit.

(iv) Is constant,

(Is a horizontal line, where P = MR = AR)

*****