Why the market demand curve shifts to the right

Question

1. The marginal cost curve above the minimum average variable cost

1. is the firm's short-run supply curve.
2. covers the area where a firm should shut down.
3. indicates points where the firm will realize an economic profit.
4. is equal to the firm's marginal revenue curve.

2. All but which one of the following are characteristics of monopolistic competition?

1. a large number of sellers
2. easy exit
3. easy entry a homogeneous product
4. a large number of close substitutes

3. Anna Lopez sells timber in a perfectly competitive market. Incomes increase, and many people buy new homes; the market demand curve shifts to the right. In the short run, she should expect

1. the price of timber to remain unchanged.
2. profits to fall.
3. firms to leave the timber business.
4. the price of timber to rise.

4. A firm in a monopolistically competitive industry faces a downward-sloping demand curve because

1. the product is differentiated.
2. the product is homogeneous.
3. nonprice competition is missing.
4. barriers to entry are high.

5. A firm in perfect competition is assumed to be

1. a developer of new inventions.
2. a price leader.
3. large in size, relative to the size of the industry.
4. small in size, relative to the size of the industry.