Question

In: Economics

Which of the following are true with regard to profit for a perfectly competitive​ firm? A....

Which of the following are true with regard to profit for a perfectly competitive​ firm?
A. Zero economic profit encourages firms to continue producing
B. Positive economic profit encourages existing firms to exit the industry
C. Negative economic profit encourages firms to raise the price
D. Zero economic profit encourages firms to​ shut-down temporarily

Solutions

Expert Solution

Option

A. Zero economic profit encourages firms to continue producing

==

A perfectly competitive market have free entry and exit so the firms earn zero economic profit and if there is an economic profit then firms enter the market and if there is a negative economic profit then firm exit the market but firms can not change the price as the firms are price taker as the product is identical.

Rahul Sunny answered 2 years ago
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