1 In the perfectly competitive market for mobile phone production all firms have access to the sametechnology. Suppose that the mobile phone industry starts from a long run equilibrium and hasdecreasing marginal costs. Assume that a demand is affected by a negative shock.In the short run, the number of firms doesn't change, prices drop and profits decline (become negative)In the long run, the number of firms decreases (firms exit), prices increase and profits go to zeroO In the short run, the number of firms, prices and profits remain same but in the long run all of these declineO Both a) and b)

In perfectly competitive market, there is free entry and exit of firms.

In the perfectly competitive market for mobile phone production all firms have access to the same technology. Suppose that the mobile phone industry starts from a long run equilibrium and has decreasing marginal costs. Assume that a demand is affected by a negative shock. O In the short run, the number of firms doesn't change, prices drop and profits decline (become negative) O In the long run, the number of firms decreases (firms exit), prices increase and profits go to zero O In the short run, the number of firms, prices and profits remain same but in the long run all of these decline Both a) and b)

In the perfectly competitive market for mobile phone production all firms have access to the same technology. Suppose that the mobile phone industry starts from a long run equilibrium and has decreasing marginal costs. Assume that a demand is affected by a negative shock. O In the short run, the number of firms doesn't change, prices drop and profits decline (become negative) O In the long run, the number of firms decreases (firms exit), prices increase and profits go to zero O In the short run, the number of firms, prices and profits remain same but in the long run all of these decline Both a) and b)

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 7CQ

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