2. Explain why the industry supply curve is not the long run industry marginal cost curve.

4. What is the difference between economic profit and producer surplus?

6. At the beginning of the twentieth century, there were many small American automobile manufacturers. At the end of the century, there were only three large ones. Suppose that this situation is not the result of lax federal enforcement of antimonopoly laws. How do you explain the decrease in the number of manufacturers?

8. An increase in the demand for movies also increases the salaries of actors and actresses. Is the long-run supply curve for films likely to be horizontal or upward sloping? Explain.

10. Can there be constant returns to scale in an industry with an upward-sloping supply curve? Explain.

12. Suppose a competitive industry faces an increase in demand (i.e., the demand curve shifts upward). What are the steps by which a competitive market ensures increased output? Will your answer change if the government imposes a price ceiling?

14. A certain brand of vacuum cleaners can be purchased from several local stores as well as from several catalogs

or websites.

a. If all sellers charge the same price for the vacuum cleaner, will they all earn zero economic profit in the long run?

b. If all sellers charge the same price and one local seller owns the building in which he does business, paying no rent is this seller earning a positive

economic profit?

c. Does the seller who pays no rent have an incentive to lower the price that he charges for the vacuum cleaner?