Q1. Samsung introduces a new manufacturing process that reduces the cost of producing memory. If Samsung prevents others from using their new manufacturing process, then which of the following is true in the short run?

A. All answers are correct.

B. The price of memory remains the same.

C. Samsung's profits increase.

D. Samsung's average total cost curve shifts downward.

Q2. Which of the following implies that the firm should close in the long run? Select the best possible answer.

A. Average variable cost is greater than marginal cost.

B. Average variable cost is greater than price.

C. Average cost is greater than price.

Q3. Consider an upward sloping supply curve and downward sloping demand curve. Firms are perfectly competitive and maximize profits. An outward shift in the demand curve leads to which long run outcome for firms?

A. Firms will exit the industry until profits are driven down to zero.

B. Firms will produce less, operating at positive profit until demand returns to its original level.

C. Firms will enter the industry until profits are driven down to zero.

Q4. Jim's pool cleaning service is a perfectly competitive firm who maximizes profits. Jim cleans pools for $50 each and cleans about 7 pools per day. Also, his total costs each day add up to $400, with $80 of that being fixed costs. What should Jim do in the long run?

A. Both possible answers have the same outcome regarding profits in the long run, so either are acceptable recommendations.

B. Jim should close his firm in the long run.