Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:
A. the price of oats will remain at $2 per bushel in the long run.
B. the oat industry is in equilibrium.
C. firms in the oat industry will earn economic profits in both the long run and the short run.
D. new firms will enter the oat industry.
Answer: D
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In order to obtain a conviction for price fixing under the Sherman Antitrust Act, the government needs to prove:
a. only that an attempt to fix prices was made. b. that there was a price-fixing agreement that actually lessened competition. c. that there was a high concentration ratio for the industry. d. all of these.
Suppose Colby buys 20 gallons of gasoline a week when gas costs $3.00 a gallon and only 18 gallons of gasoline when it costs $3.25 . What is Colby's elasticity of demand for gasoline?
a. -1.32 b. -1.02 c. -1.52 d. -1.42