1) When positive economic profits exist in an industry:

• the market price of the good produced by the industry is less than the marginal cost faced by the industry.
• the market price of the good produced by the industry is less than the average total cost of the industry.
• there is an exit of firms from the industry.
• resources flow from less productive uses to that particular industry.

2) When price is less than the firms' minimum average total cost, ________.

• firms' profits are likely to be maximum
• prices are likely to fall further
• new firms will enter the market
• existing firms will leave the market

3) The entry of new firms into a perfectly competitive market will cause:

• an increase in the profitability of existing firms.
• a decrease in the profitability of existing firms.
• a right shift of the demand curve of the good being produced by the firms.
• a left shift of the demand curve of the good being produced by the firms.

4) Entry of new firms into an existing market causes:

• a downward movement along the market supply curve.
• a leftward shift of the market supply curve.
• an upward movement along the market supply curve.
• a rightward shift of the market supply curve.

5) The incentive for new firms to enter into a perfectly competitive market is primarily the:

• high level of government intervention in the market.
• large number of buyers in the market.
• large number of existing firms in the market.
• positive profits observed for the existing firms in the market.