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Keys_for_2nd_quiz_2007_fall[1] - Keys for 2nd Quiz 2007...

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Keys for 2nd Quiz 2007 Fall MULTIPLE CHOICES 1 2 3 4 5 6 7 8 9 10 C C A C A D A D C D 11 12 13 14 15 16 17 18 19 20 B A C A B A C B A C I Perfect Competitive Market 1) A-- MC; B—ATC; C—AVC; D—AFC 2) Show the short term o the impacts of this decrease on both graphs: Impacts on the industry graph (the left graph): the demand curve shifts towards left, the new equilibrium price is PB; then draw a price line to the firm graph on the right, label the original production quantity as Qa when price was PA, the new quantity as Qb, if the new price is between AVC and ATC. If the new price is below AVC, then the new production quantity should be zero. The market price will decrease, the amount supplied by the typical firm will decrease, and the supply of the industry will decrease too. 3) In the long run, a typical firm in the industry will leave the market because they are suffering a loss if the demand curve remains unchanged after the price decreased. When many firms leave this industry, the supply will decrease and the supply curve will shift up/ toward left. This will gradually drive the market price up and eventually back to the original equilibrium price PA. When they are back to equilibrium, a typical firm will
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