Why does the price level in a perfectly competitive market move toward the zero-profit point?   A   Because profitable firms increase short-run productivity  B   Because short-run losses reverse the effects of long-run gains C   Because firms enter and exit the market in response to gains and losses  D   Because firms operate below the average cost curve

Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
Problem 1CQQ
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Why does the price level in a perfectly competitive market move toward the zero-profit point?

 

  1. A
     

    Because profitable firms increase short-run productivity 

  2. B
     

    Because short-run losses reverse the effects of long-run gains

  3. C
     

    Because firms enter and exit the market in response to gains and losses 

  4. D
     

    Because firms operate below the average cost curve

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