For an inferior good, the income elasticity of demand is negative.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2In long-run equilibrium for a perfectly competitive firm, price equals which of the following?
a. Economies of real cost.
b. Maximum total revenue.
c. Diseconomies of scale cost.
d. Minimum point on the long-run average cost curve.
QUESTION 3If the income elasticity of demand for a good is positive, the good is a normal good.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4In long-run equilibrium, the typical perfectly competitive firm will:
a. earn zero economic profit.
b. change plant size in the long run.
c. change output in the short run.
d. do any of these.
QUESTION 5If the income elasticity of demand for a good is negative, the good is an inferior good.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include:
a. the entry of new firms.
b. temporarily higher profits.
c. both a and b.
d. neither a nor b.
QUESTION 7If demand for a good is price elastic, it must also be income elastic.
a. True
b. False
Indicate whether the statement is true or false
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