ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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each firm will produce and supply an equal amount of goods.
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firms will earn economic profits because of the existence of barriers to entry.
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the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve.
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price will equal the minimum average fixed cost.
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Detailed explanation-1: -In a perfectly competitive market in long-run equilibrium, an increase in demand creates economic profit in the short run and induces entry in the long run; a reduction in demand creates economic losses (negative economic profits) in the short run and forces some firms to exit the industry in the long run.
Detailed explanation-2: -A perfectly competitive firm’s demand curve is a horizontal line at the market price. This result means that the price it receives is the same for every unit sold.
Detailed explanation-3: -A perfectly competitive market achieves long‐run equilibrium when all firms are earning zero economic profits and when the number of firms in the market is not changing.
Detailed explanation-4: -Slope of firm’s demand curve is infinite under perfect competition.