Question

If a market has highly specialized resources and falling demand, which of the following is true?

a.	Firms would leave the market only when variable costs could not be met.	b.	The price would increase.
c.	All costs would be met.	d.	Operators would enter the market.

Which of the following happens when firms are earning short-run economic profits in perfect competition?

a.	Market supply must exceed market demand.	b.	Inefficient firms will be able to survive.
c.	Market demand must exceed market supply.	d.	Long-run average costs must be declining.

Which of the following is a main concern of market performance?

a.	Comparing accounting profitability and economic profitability	b.	Counting the number of units produced by the market
c.	Assessing how profitable firms are in the real world	d.	Assessing how efficiently markets coordinate the needs of buyers and sellers

Which of the following exemplifies an efficient market?

a.	It has achieved the output level that maximizes the number of future mutually beneficial trades.	b.	Consumers have maximized their benefits.
c.	It has achieved an output level where no further mutually beneficial trades may occur.	d.	The firms in the industry have maximized their profits.

Of the following, which does not represent a correct description of an efficient market?

a.	Markets are efficient when it is not possible to make one participant better off without making another worse off.	b.	Markets are efficient when production is such that marginal benefits and marginal costs are equalized.
c.	Markets are efficient when the goods and services produced are those most highly valued by society.	d.	Markets are efficient when they do not take account of the effects of externalities.

Answer 1

1. Option a is true.If a market has highly specialized resources and falling demand, a firm would leave the market only when variable costs could not be met. All other options are wrong. Because falling demand does not lead to price increase. Firm will not met all cost and operators would not enter market if market demand of firm is falling

2. Options c is correct. When firms earning short run economic profits in perfect competition, market demand must exceed market supply. All other options are wrong. If market supply exceed market demand frim will not achieve short run economic profit. Inefficient firms will not be able to survive.

3. Option d is correct. The main concern of market performance is assessing how efficiently market coordinate the needs of buyers and sellers. All other options are wrong. Because the main concern of market performance is the efficiency of market

4. Option a is correct. Efficiency market has achieved the output level that maximizes the number of future mutually beneficial trades. All other options are not exemplifies an efficient market.

e. Option d is correct. Markets are not efficient when they do not take account of the effects of externalities. All other options explains the descrption of an efficient market