A sudden fall in the market demand in a competitive industry leads to
a. A short run market equilibrium price higher than the original equilibrium
b. A market equilibrium price higher than the short run price
c. New firms entering the market
d. All of the above
b
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Financial innovation has caused
A) banks to suffer declines in their cost advantages in acquiring funds, although it has not caused a decline in income advantages. B) banks to suffer a simultaneous decline of cost and income advantages. C) banks to suffer declines in their income advantages in acquiring funds, although it has not caused a decline in cost advantages. D) banks to achieve competitive advantages in both costs and income.
Which of the following statements is TRUE of external costs?
A) External costs should not be corrected since people will bear the costs whether they are corrected or not. B) There are no good ways to correct for the external costs. C) When external costs exist, the price of the good will be deceptively low leading to an overallocation of resources. D) External costs should only be corrected for if the correction will not increase the market price.