9) The long-run supply curve is upward sloping in an increasing cost industry. 10) What is an increasing cost industry? 11) What is a long-run supply curve? 12) Firms in the long-run do not experience diminishing marginal returns. Then why do some industries have upward-sloping long-run supply curves? 6.6 Short-Run and Long-Run Effects of Changes in Demand 1) If the market demand decreases for a good sold in a perfectly competitive market firms in the market A) will be able to charge a higher price for their product. B) will receive a lower price for their product. C) will not be able to change their price. D) will not be affected by the change in demand. 2) Toby sells wheat in a perfectly competitive market. This month Toby receives a lower price for a bushel of wheat than he did last month. Which of the following might explain this? A) The market demand for wheat increased. B) The market demand for wheat decreased. C) Firms exited the market. D) Toby’s costs have increased. 3) Toby sells wheat in a perfectly competitive market. This month Toby receives a higher price for a bushel of wheat than he did last month. Which of the following might explain this? A) The market demand for wheat increased. B) The market demand for wheat decreased. C) Firms entered the market. D) Toby’s costs have decreased. 4) Sheila sells corn in a perfectly competitive market. This month Sheila receives a lower price for a bushel of corn than she did last month. This might have happened because A) the market demand increased for corn. B) the market demand decreased for corn. C) firms exited the market. D) Sheila’s costs have increased. Answer: B 5) Sheila sells corn in a perfectly competitive market. This month Sheila receives a higher price for a bushel of corn than she did last month. Which of the following might explain this? A) The market demand increased for corn. B) The market demand decreased for corn. C) Firms entered the market. D) Sheila’s costs have decreased. 6) A perfectly competitive industry is in long-run equilibrium. If demand for the product increases we can expect A) firms to enter the market. B) firms to exit the market. C) no change in the number of firms in the market. D) Not enough information to tell what will happen to the number of firms in the market.
