7) A perfectly competitive industry is in long-run equilibrium. If demand for the product decreases 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. 8) A perfectly competitive industry is in long-run equilibrium. If demand for the product increases we can expect the price of the good to A) rise at first and then fall. B) fall at first and then rise. C) rise and remain at the higher price. D) fall and remain at the lower price. 9) A perfectly competitive industry is in long-run equilibrium. If demand for the product decreases we can expect the price of the good to A) rise at first and then fall. B) fall at first and then rise. C) rise and remain at the higher price. D) fall and remain at the lower price. 10) Long-run equilibrium for a perfectly competitive industry occurs when A) P = MC = ATC. B) P = MC = AVC. C) P = MC = AFC. D) P > MC = ATC. Answer: A 11) You notice that the price of butter rises and then falls. The best explanation for this is that A) demand for butter increased causing price to rise which attracted other firms to enter the market causing supply to increase which caused the price to go back down. B) demand for butter decreased causing price to rise which attracted other firms to enter the market causing supply to increase which caused the price to go back down. C) demand for butter increased causing price to rise which induced other firms to exit the market causing supply to decrease which caused the price to go back down. D) demand for butter increased causing price to rise which attracted other firms to enter the market causing supply to decrease which caused the price to go back down. 12) You notice that the price of butter falls and then rises. The best explanation for this is that A) demand for butter increased causing price to fall which attracted other firms to enter the market causing supply to increase which caused the price to go back up. B) demand for butter decreased causing price to fall which attracted other firms to enter the market causing supply to increase which caused the price to go back up. C) demand for butter decreased causing price to fall which induced other firms to exit the market causing supply to decrease which caused the price to go back up. D) demand for butter decreased causing price to fall which attracted other firms to enter the market causing supply to decrease which caused the price to go back up. 13) If the demand for a product increases we would expect that price will initially ________ and eventually ________. A) rise; fall B) rise; continue to rise C) fall; rise D) fall; continue to fall 14) If the demand for a product decreases we would expect that price will initially ________ and eventually ________. A) rise; fall B) rise; continue to rise C) fall; rise D) fall; continue to fall 15) If the demand for a product in an increasing cost perfectly competitive industry decreases we would expect that price in the long-run would ________ and the number of firms in the market would ________. A) decrease; decrease B) increase; increase C) decrease; increase D) increase; decrease 16) If the demand for a product in an increasing cost perfectly competitive industry increases we would expect that price in the long-run would ________ and the number of firms in the market would ________. A) decrease; decrease B) increase; increase C) decrease; increase D) increase; decrease
