For a perfectly competitive industry, diminishing marginal returns
A. occur only in the long run.
B. occur in both the short run and in the long run.
C. occur only in the short run.
D. Diminishing marginal returns do not occur in perfectly competitive industries.
Answer: C
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If the supply curve illustrates the quantities producers plan to sell at given prices, and the demand curve illustrates the quantities consumers plan to buy at given prices, then the plans of producers and consumers are fully coordinated at the point
where A) the supply curve lies above the demand curve. B) the supply curve intersects the demand curve. C) the demand curve lies above the supply curve. D) the amount of a good needed by consumers exactly equals the amount supplied by producers.
In the run up to the war in Iraq that began in 2003, one of the many concerns raised was that a war could result in a decrease in the supply of oil. At the same time, the U.S
economy was having a hard time recovering from the recession of 2001 and, as a result, incomes of many consumers had decreased (due to layoffs, wage cuts, and so forth). All else constant, it was reasonable to predict, with certainty, that the combination of these two factors would cause the equilibrium: A) quantity of oil to decrease. B) quantity of oil to increase. C) price of oil to increase. D) price of oil to decrease.