Consider a competitive market where firms are earning zero economic profit. Assuming no changesto supply and demand in this market, what will happen to the firms in this market?a) Firms in this market will exitb) Firms in this market will raise pricesc)Firms in this market will lower pricesd) Firms in this market will encourage others to enter the markete) None of the above 2. Suppose the market referred to in the previous problem is suddenly hit by a decrease in tastes andpreferences. What will happen to Q in this market in the long run (relative to the initial equilibrium)?a) It will decreaseb) It will not only decrease but fall to zeroc)It will be unchangedd) It will increasee) It will be affected by what is known as the “Kazarosyan Effect” 3. In terms of which of the following is the monopoly greater than the competitive market?a) Prevalenceb) The number of firmsc)Market quantityd) Market power of a firme) c and d 4. Which of the following is an example of a company whose barrier to entry is owning all or almost allof a resource?a) DeBeersb) Toyotac)Googled) Coca Colae) a and c 5. Which of the following is true concerning the PLSAs?a) They help people spend more moneyb) They are far worse than regular savings accounts in every possible way which explains why noone uses PLSAsc)They tended to be opposed by state governments which had a monopoly on lotteriesd) They are legal in only one state in the US because of how damaging they are to a state’s poorerpopulatione) We did not discuss PLSAs in this class

Question
Asked Nov 27, 2019
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Consider a competitive market where firms are earning zero economic profit. Assuming no changes
to supply and demand in this market, what will happen to the firms in this market?
a) Firms in this market will exit
b) Firms in this market will raise prices
c)Firms in this market will lower prices
d) Firms in this market will encourage others to enter the market
e) None of the above
 
2. Suppose the market referred to in the previous problem is suddenly hit by a decrease in tastes and
preferences. What will happen to Q in this market in the long run (relative to the initial equilibrium)?
a) It will decrease
b) It will not only decrease but fall to zero
c)It will be unchanged
d) It will increase
e) It will be affected by what is known as the “Kazarosyan Effect”
 
3. In terms of which of the following is the monopoly greater than the competitive market?
a) Prevalence
b) The number of firms
c)Market quantity
d) Market power of a firm
e) c and d
 
4. Which of the following is an example of a company whose barrier to entry is owning all or almost all
of a resource?
a) DeBeers
b) Toyota
c)Google
d) Coca Cola
e) a and c
 
5. Which of the following is true concerning the PLSAs?
a) They help people spend more money
b) They are far worse than regular savings accounts in every possible way which explains why no
one uses PLSAs
c)They tended to be opposed by state governments which had a monopoly on lotteries
d) They are legal in only one state in the US because of how damaging they are to a state’s poorer
population
e) We did not discuss PLSAs in this class
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Under the competitive market, there will be many sellers selling the identical products or similar products in the market. Thus, there will be higher degree of competition between the sellers which causes the zero economic profit in the market ...

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