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- In the long run, when a perfectly competitive firm experiences negative economic profits, firms exit the industry, the market supply curve shifts leftward, and the market price rises. Question 32 options: True FalseA perfectly competitive firm that is maximizing profits will experience which of the following price changes in response to an increase in variable costs? In the short run, the firm’s price will: a. stay the same.b. increase.c. decrease.d. decrease and then increase in the long run.e. increase and then decrease in the long run.If existing firms earn positive economic profits in a perfectly competitive market then: Answers: A. Firms will exit until economic profits are zero. B. No entry or exit will occur. C. Firms will enter in the long run until economic profits are zero. D. Firms will enter in the long run until accounting profits are zero.
- Refer to the figure above. Firm operating in perfectly competitive market will shut-down production in the short run if the market price ______. is higher than $6 is higher than $3 is $4 falls below $3A perfectly competitive firm will tend to expand its output as long as:A) marginal revenue is positive.B) marginal revenue exceeds the market price.C) the market price exceeds marginal revenue.D) the market price exceeds marginal cost.A competitive firm's total cost is TC(Q)=3Q2+7Q+35 when the output level is Q. Accordingly, its marginal cost is MC(Q)=2*3*Q+7. The market price is P=94. You are told that the firm will not shut down in the short run. Please find its optimal output level.
- Evaluate the statement. T/F There are no selling cost incurred in a perfectly competitive market.When a perfectly-competitive industry is in long-run equilibrium A. each firm earns zero economic profit. B. market price is equal to minimum long-run total cost. C. firms have incentives to enter or exit the industry. D. None of the above D.Firms in the market for dog food are selling in a purely competitive market. A firm producing dog food has an output of 10,000 pounds of dog food, for which it sells for $0.50 a pound. At the output level of 10,000 pounds the average variable cost is $0.40, the average total cost is $0.70, and the marginal cost is $0.50. What do expect will happen in the long-run? Explain.