True or False? (Provide reasoning)

1. If two individuals have inverse demand curves given by P = 10 - 4q1 and P = 10 - 8q2 respectively, then total demand for the individuals is P = 10 - 12q.
2. If each of 500 firms has an identical marginal cost curves of MC = Q the market supply curve is P = Q/500.
3. In the short run negative profits in a competitive industry result in each firm increasing its output level once profits have been driven up to zero after firms have left the industry.
4. In a constant cost industry the long run supply curve is horizontal.
5. Competitive markets are deemed efficient if aggregate surplus is maximized.
6. Competitive firms must earn zero economic profits in the long run.
7. In the long run firms in competitive markets can have different short run average cost curves.
8. In an increasing cost industry the long run equilibrium price is unchanged after an increase or decrease in market demand.
9. In a constant cost industry input prices are unaffected by changes in demand.
10. The term “deadweight loss” is another name for negative economic profits.
11. If there is a deadweight loss aggregate surplus may still be maximized.
12. The area under the market demand curve at the equilibrium price is equal to the total willingness to pay of those individuals purchasing the good and is equal to consumer surplus.
13. Short-run, but not long-run, supply curves cannot be downward sloping.

Answer rating: 100% (QA)

False If two individuals have inverse demand curves given by P 10 4 q 1 and P 10 8 q 2 respectively then the total demand for the two individuals is P 10 12 q TRUE Since each of the 500 firms has an i... View the full answer