Which of the following statements is correct?
A) The demand curve of the perfectly competitive industry is elastic as are the demand curves facing the individual firms.
B) The market demand curve of perfect competition is inelastic because the individual consumers are buying a homogeneous product.
C) The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price.
D) The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.
C
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A natural monopoly
A) faces more competition after regulation. B) might exaggerate its costs if it is regulated using rate of return regulation. C) might falsely minimize its costs if it is regulated using rate of return regulation. D) might falsely minimize its costs if it is regulated using a marginal cost pricing rule. E) is allowed to maximize its profit under a marginal cost pricing rule.
A price floor policy establishes a minimum price for a market. Which of the following results from a binding price floor?
A) Equilibrium B) Excess demand C) Excess supply D) Shortage