Assume that a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly decreases. Which of the following statements is incorrect?
a. Existing firms will start to suffer short-run losses
b. Existing firms will shut down in the short run if average variable cost exceeds average revenue at all output levels
c. Some firms will leave the industry in the long run
d. The market supply curve will shift to the right in the long run
e. Any short-run losses will be eliminated in the long run
D
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Suppose a country is pursuing a fixed exchange rate regime with imperfect capital mobility. The ability of that country to move its domestic interest rate while maintaining its exchange rate will depend on
A) the degree of development of its financial markets. B) the degree of capital controls. C) the amount of foreign exchange it holds. D) all of the above E) both A and B
Which of the following statements concerning equilibrium in the long run is not true?
a. Most firms earn economic profits in the long run. b. The firm can vary its plant size in the long run. c. Economic profits are eliminated as new firms enter the industry in the long run. d. For firms in long-run equilibrium, P = MC = AC.