If an industry has constant marginal and average costs, any shift in demand will eventually
A) result in a higher equilibrium price.
B) be met by a smaller change in quantity supplied.
C) be met by an equal change in quantity supplied, and equilibrium price will not change.
D) make economic profits zero in the short run.
C
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Consider a perfectly competitive market in which the firms are earning above-normal profit in the short run. In the long run, forces will come into play to
a. decrease market supply b. shift the horizontal demand curve facing each firm downward c. increase the market price d. encourage existing firms to increase output e. decrease the number of sellers in the market
In which of the following examples is excess burden not present?
A. Harriet decides to give up her Saturday hours at her law office after income tax rates rise. B. Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. C. Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. D. Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.