1. If demand increases in an increasing-cost industry, what happens to each of the following in the short run: industry Q, industry P, firm q, firm p, and economic profit?

A) up, up, down, up, up.
B) up, up, up, up, up.
C) up, up, no change, down, up.
D) up, up, down, down, down.
E) up, down, up, down, down.

2. If the firm in an increasing-cost industry is earning an economic profit and there is entry into the market place, then in the long run:

A) industry Q goes up; firm q goes up.
B) industry Q goes up; firm q goes down.
C) industry Q stays constant; firm q goes down.
D) industry Q goes up; firm q stays the same.
E) firm profit goes up.

3. An individual firm in an increasing-cost, perfectly-competitive market is in LR equilibrium at P. Demand increases in the market in the SR. What will then happen to the individual firms’ price and quantity when the market adjusts back to LR equilibrium?

A) P goes down; Q goes down to the original LR q.
B) P goes down; q goes up.
C) P goes up; q goes up
D) P goes down; q goes down but not back to the original LR q.
E) P goes up; q goes up but not back to the original LR q.