1.If the market demand for a product decreases in a competitive market, then the quantity supplied by an individual firm will:

A)   decrease and firms will exit the market in the long run.

B)   decrease and firms will enter the market in the long run.

C)   increase and firms will enter the market in the long run.

D)   increase and firms will exit the market in the long run.

2.In a CFA study seminar, the following comments were made:

Comment 1) “In the short run, an increase in demand in a perfectly competitive industry will result in negative economic profit for some firms in the industry.”

Comment 2) “In the long run, a permanent increase in demand in a perfectly competitive industry will result in zero economic profit for the firms in the industry.”

Which of the following best describes the accuracy of these comments?

A)                Correct                                 Correct

B)                 Correct                                Incorrect

C)                 Incorrect                             Incorrect

D)                 Incorrect                              Correct

3.If the market demand for a product increases in a competitive market, then in the short run the quantity supplied by an individual firm will:

A)   decrease and the firm will generate economic profits.

B)   increase and the firm will generate economic profits.

C)   increase and the firm will generate economic losses.

D)   decrease and the firm will generate economic losses.

答案和详解如下：

1.If the market demand for a product decreases in a competitive market, then the quantity supplied by an individual firm will:

A)   decrease and firms will exit the market in the long run.

B)   decrease and firms will enter the market in the long run.

C)   increase and firms will enter the market in the long run.

D)   increase and firms will exit the market in the long run.

The correct answer was A)

If the market demand for a product decreases in a competitive market, then the quantity supplied by an individual firm will decrease and firms will exit the market in the long run because the price will be less than average total costs.

2.In a CFA study seminar, the following comments were made:

Comment 1) “In the short run, an increase in demand in a perfectly competitive industry will result in negative economic profit for some firms in the industry.”

Comment 2) “In the long run, a permanent increase in demand in a perfectly competitive industry will result in zero economic profit for the firms in the industry.”

Which of the following best describes the accuracy of these comments?

Comment 1

Comment 2

A)                                        Correct  Correct

B)                                        Correct  Incorrect

C)                                        Incorrect       Incorrect

D)                                        Incorrect       Correct

The correct answer was D)

Comment 1 is incorrect because an increase in industry demand will increase equilibrium price and output. At the higher price, firms will earn positive economic profits in the short run because the higher price will exceed average total cost. Over the long run, however, new firms will enter the market to exploit the positive economic profits, causing prices to decline until all firms are again earning zero economic profit.

3.If the market demand for a product increases in a competitive market, then in the short run the quantity supplied by an individual firm will:

A)   decrease and the firm will generate economic profits.

B)   increase and the firm will generate economic profits.

C)   increase and the firm will generate economic losses.

D)   decrease and the firm will generate economic losses.

The correct answer was B)

If the market demand for a product increases in a competitive market, then both price and quantity supplied by an individual firm will increase and the firm will generate economic profits in the short run because price will be greater than average total costs.