For a perfectly competitive industry, an increase in market demand will result inExit of some firmsEconomic profits in the long runLong-run Industry supply that is horizontalPrice at minimum AVC in the long runEntry into and exit from a perfectly competitive industry willDrive price to minimum Long-Run AVCProduce economic losses for entering firmsAllow efficient managers to earn economic profitsDrive price to minimum Long-Run ATCPositive Economic Profits areA long-run operating condition necessary for a monopolistProfits above what it takes to keep the entrepreneur in that businessEqual to producer surplusEqual to the markup of price over Average Total CostMonopolistic competition is a market structure very much like perfect competition except thatThe demand curves facing firms are perfectly price inelasticEach firm has a strategy for how they will react to other firms’ price or quantityEntry and exit is not permittedFirms differentiate the characteristics of their product

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Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 3P

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For a perfectly competitive industry, an increase in market demand will result in

Exit of some firms
Economic profits in the long run
Long-run Industry supply that is horizontal
Price at minimum AVC in the long run

Entry into and exit from a perfectly competitive industry will

Drive price to minimum Long-Run AVC
Produce economic losses for entering firms
Allow efficient managers to earn economic profits
Drive price to minimum Long-Run ATC

Positive Economic Profits are

A long-run operating condition necessary for a monopolist
Profits above what it takes to keep the entrepreneur in that business
Equal to producer surplus
Equal to the markup of price over Average Total Cost

Monopolistic competition is a market structure very much like perfect competition except that

The demand curves facing firms are perfectly price inelastic
Each firm has a strategy for how they will react to other firms’ price or quantity
Entry and exit is not permitted
Firms differentiate the characteristics of their product

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