Answer the following statements true (T) or false (F)
1. When firms in a purely competitive industry are earning profits that are greater than normal, the supply of the product will tend to decrease in the long run.
2. When new firms enter a purely competitive industry, the market supply curve will shift to the left.
3. When some firms leave a purely competitive industry, the market supply curve will shift in such a way that the remaining firms' profits will increase.
4. In the long run, pure competition forces firms to produce at the minimum possible average total cost and the firms will charge a product price equal to that cost.
5. A purely competitive firm that is earning positive profits in its short-run equilibrium situation will continue to earn positive profits at the long-run equilibrium.
1. FALSE
2. FALSE
3. TRUE
4. TRUE
5. FALSE
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Refer to Figure 7.1. If Angus chooses to earn the most money and Dudley does nothing, Dudley will receive a daily payoff of
A) $100. B) $350. C) $550. D) $700.
Product differentiation means
A) making a product that has perfect substitutes. B) making a product that is entirely unique. C) the inability to set your own price. D) making a product that is slightly different from products of competing firms. E) making your demand curve horizontal.