Practice Questions
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In the context of long-run equilibrium adjustments in economics, what is meant by 'factor mobility'?
Factor mobility means that resources like workers and machines can move to different industries or places. Other options are incorrect because This op...
In a perfectly competitive market, how does economic growth affect long-run equilibrium adjustments?
When the economy grows, more people want to buy things. Other options are incorrect because Some might think that higher demand always raises prices; ...
In the context of long-run equilibrium adjustments in an economy, how does factor mobility influence marginal cost for firms operating in a perfectly competitive market?
When resources can move easily, firms can use them better. Other options are incorrect because Some might think costs stay the same no matter what; Th...
In a monopolistically competitive market, how will firms adjust in the long run if they are currently making economic profits?
When firms make profits, new companies want to join the market. Other options are incorrect because Some might think raising prices will help profits;...
In a monopolistically competitive market, how does a firm adjust its price in response to a change in consumer demand when the market is in long-run equilibrium?
When a market is in long-run equilibrium, firms set prices where they cover costs and earn normal profits. Other options are incorrect because Some mi...
In a perfectly competitive market, what happens to the equilibrium price in the long run when firms are earning positive economic profits?
When firms make extra money, new firms want to join the market. Other options are incorrect because Some might think that more profits mean higher pri...
In a perfectly competitive market, what happens to the price and quantity of goods in the long run when there is an increase in demand?
When demand goes up, more people want to buy the product. Other options are incorrect because This answer suggests that prices drop when demand rises;...
In the long run, how do supply and demand interact to establish equilibrium in a competitive market?
When demand goes up, people want more products. Other options are incorrect because This suggests that if supply goes down, demand stays the same; Thi...
Which of the following statements accurately describe long-run equilibrium adjustments in a perfectly competitive market? Select all that apply.
In a perfectly competitive market, long-run adjustments depend on changes in costs and profits. Other options are incorrect because The idea here is t...
Order the following steps that describe the long-run equilibrium adjustment process in a perfectly competitive market after firms begin to exit due to economic losses.
When firms face losses, some will leave the market. Other options are incorrect because This step happens after firms exit; Prices stabilize only afte...
In a perfectly competitive market, if firms start exiting due to losses, what will happen to the market's long-run equilibrium price once adjustments are complete?
When firms leave the market, supply decreases. Other options are incorrect because Some might think that less supply always means a much higher price;...
In a perfectly competitive market, if firms exit due to economic losses, then just as a river adjusts its flow after a dam is removed, what happens to the market price in the long run?
When firms leave the market, there are fewer products available. Other options are incorrect because Some might think prices keep rising forever; It's...
In a perfectly competitive market, long-run equilibrium adjustments occur when firms exit due to economic losses, which typically leads to a return of the market price to its original level, assuming costs remain constant. This process highlights that the industry's ___ remains unchanged despite fluctuations in the number of firms.
The equilibrium price is the price where supply meets demand. Other options are incorrect because Some might think demand changes with the number of f...
A local coffee shop chain is experiencing economic losses due to a recent increase in coffee bean prices. As a result, several shops decide to exit the market. What is the likely outcome for the remaining coffee shops in the long run?
When some shops leave, there are fewer places to buy coffee. Other options are incorrect because This idea suggests that the remaining shops will keep...
If a perfectly competitive market experiences a decrease in demand leading to some firms exiting the industry, what is the most likely effect on the market price in the long run?
When demand goes down, some firms leave the market. Other options are incorrect because Some might think that fewer firms mean higher prices; The idea...
In a perfectly competitive market, what effect does a decrease in demand have on long-run equilibrium, assuming firms can exit the market?
When demand decreases, some firms will leave the market. Other options are incorrect because Some might think prices will go up because there are fewe...
In a perfectly competitive market, which scenario best illustrates the process of long-run equilibrium adjustment after a period of economic losses for firms?
When firms lose money, some will leave the market. Other options are incorrect because This suggests firms can just make more to lower prices; This op...
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