question archive Which of the following is a likely consequence as firms exit a market

Which of the following is a likely consequence as firms exit a market

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Which of the following is a likely consequence as firms exit a market.

a. The market supply curve shifts to right.

b. Profit decrease for firms that remain in market.

c. Equilibrium output decrease for the market

d. All of the above

When firms in a competitive market are experiencing zero economic profits, this is an indication that:

a.They should be producing a different product.

b.They are doing as well as other companies in other markets

c.They will eventually go bankrupt

d.Accounting losses are being experienced by these firms.

Even if there is only one producer of a particular good, the market may be contestable because:

a.Foreign producers of the good can provide the good to the US market.

b.Domestic firms can potentially enter the market.

c.New technology can make the current good obsolete.

d.All of the above.

When economic profits exists in a perfectly competitive market, the number of suppliers will increase and the market price will fall in the long run. True or False

If a market changes from perfectly competitive to monopolistic, output will increase and the price will decrease, ceteris paribus. True or False

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The answer is c. Equilibrium output decrease for the market

As firms exit a market the supply curve shifts leftward and the equilibrium output falls and price increases.

The answer is b. They are doing as well as other companies in other markets

This is based on the assumption that these other companies are also producing the same product and are in a competitive setting.

The answer is d. All the above

Foreign competition creates intra-industry trade among countries and increases the size of the market. If the producer does not have monopoly power or any cost advantage then, domestic firms specializing in the production of the good can contest in the domestic market. New technology or innovation can lead to destruction of any advantage that the producer may have. Once new technology comes in the market the producer looses its market power to the firms that specializes in the new technology.

The statement is True

Existence of economic profit will attract new firms in the market. With new firms, the supply curve will shift rightwards causing the outputs to increase and price will fall.

The statement is False

Under monopoly firm produces less than the social optimum point and charges higher prices. As a result a monopoly firm will be producing less than a competitive firm and will be charging higher prices.