55. Refer to Figure 5. When the market is in long-run equilibrium at point A in panel (b),
what will the firm represented in panel (a) do?
a. It will have a zero economic profit.
b. It will have a negative accounting profit.
c. It will exit the market.
d. It will increase its output.
56. Refer to Figure 5. Assume that the market starts in equilibrium at point A in panel
(b). What will result from an increase in demand from Demand0 to Demand1?
a. a new market equilibrium at point D
b. an eventual increase in the number of firms in the market and a new long-run
equilibrium at point C
c. rising prices and falling profits for existing firms in the market
d. falling prices and falling profits for existing firms in the market
57. Refer to Figure 5. When a firm in a competitive market, like the one depicted in
panel (a), observes market price rising from P1 toP2, what is most likely the cause?
a. the entrance of new firms into the market
b. the exit of existing firms in the market
c. an increase in market supply from Supply0 to Supply1
d. an increase in market demand from Demand0 to Demand1
58. Refer to Figure 5. What would likely cause an increase in market supply from
Supply0 to Supply1?
a. existing firms changing their cost structure
b. existing firms in the market increasing their level of production beyond Q1
c. the entrance of new firms in the market
d. existing firms adding new product lines
59. Why is the De Beers diamond monopoly a classic example of a monopoly?
a. It is government-created.
b. It arises from the ownership of a key resource.
c. It results in very little advertising of the product that the monopolist produces.
d. It was broken up by the government a long time ago.
Question 55: The answer is c. It will exit the market. Since the market is at long run equilibrium at point A, the Marginal... View the full answer