Question

**True or False: Indicate whether each of the following
statements is true or false and explain why.**

4. The industry supply curve could be downward sloping in the long run.

- The market for apartment rentals is in equilibrium when the rent is $1000 per month and the quantity of apartments rented is 2,000. A rent control law is passed that sets the maximum rent at $800. If the elasticity of demand for apartments is 1.2 and the elasticity of supply is .5, then the shortage of apartment is 500 apartments.

Answer #1

Answer : 4) False.

The long run supply curve is vertical. The short run supply curve is downward sloping. Therefore, the given statement is false.

b) False.

The equilibrium price = $1000

New price = $800

Changes in price (P) = 1000 - 800 = $200

Elasticity of demand = Changes in quantity demanded / Changes in price

=> 1.2 = Changes in quantity demanded / 200

=> Changes in quantity demanded = 1.2 × 200 = 240.

Elasticity of supply = Changes in quantity supplied / Changes in price

=> 0.5 = Changes in quantity supplied / 200

=> Changes in quantity supplied = 0.5 × 200 = 100.

Therefore, for new price level $800 the shortage of apartment is (240 - 100) = 140.

Therefore, the given statement is false.

Determine whether each of the following statements is true or
false and explain why you think so.
a) In perfectly competitive market, the long-run supply curve is
downward sloping in decreasing cost industry.
b) The marginal revenue for a perfectly competitive firm is
equal to the market price. The marginal revenue for a monopolist is
greater than the market price for positive quantities of
output.
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false and explain why you think so.
a) In perfectly competitive market, the long-run supply curve is
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b) The marginal revenue for a perfectly competitive firm is
equal to the market price. The marginal revenue for a monopolist is
greater than the market price for positive quantities of
output.
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