If the typical firm in a perfectly competitive market is currently earning a 5% economic profit, what will happen in this market in the long run?

a. new firms will enter until the economic profits have disappeared.
b. firms will exit until the economic profit reaches 10%.
c. firms will neither enter nor exit, since 5% economic profit is enough to maintain the existing number of firms in the market.
d. It depends on the rate of normal profit in this market.


A

Economics

You might also like to view...

Suppose bad weather decreases the quantity of wheat by 12 percent. If the price elasticity of demand for wheat is 0.6, how would the crop failure affect the price of wheat? Would the crop decrease benefit or harm wheat farmers?

What will be an ideal response?

Economics

A paper mill discovers that burning old tires is a cheaper way to get power rather than using coal, and they adopt the new technology. Which of the following will likely happen in the market for paper?

A. The demand for paper will increase. B. The supply of paper will increase. C. The supplyfor paper will remain constant. D. The supply for paper will decrease.

Economics

According to economists, entrepreneurship is a factor of production

Indicate whether the statement is true or false

Economics

A perfectly elastic demand:

A. is demonstrated by a vertical demand curve. B. has a price elasticity of -1. C. means consumers are extremely sensitive to a change in price. D. means quantity demanded is unchanged if the price changes by any amount.

Economics