Assume the market for beef is perfectly competitive. Beef producers are currently earning a zero economic profit. If consumers switch from chicken to beef, which of the following is most likely to occur?
A. Beef producers will now earn economic losses in the short run, and there will be no additional adjustments in the long run.
B. Beef producers will now incur economic profits in both the short run and the long run.
C. Beef producers will incur economic profits in the short run. Some producers will enter the industry until all firms in the industry are earning a zero economic profit.
D. Beef producers will incur economic profits in the short run. Some producers will enter the industry as long as all firms in the industry are earning an economic profit.
Answer: C
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Answer the following statements true (T) or false (F)
1. One of the economic effects of monopoly is an income transfer from consumers to the firm. 2. Price discrimination is not viable if consumers can resell the products they purchase. 3. In most cases, a monopolist practicing price discrimination will end up earning less economic profits than a non-discriminating monopolist. 4. A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic. 5. In a natural monopoly case, the socially-optimal pricing policy rule will often yield a higher price than the fair-return pricing rule.