<p style="margin: 0px 0px 10px; padding: 0px; box-sizing: border-box; border: 0px; outline: 0px; font-size: 14px; vertical-align: baseline; background: #ffffff; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">Consider an (almost) perfectly competitive market: the only difference is that different firms have different cost curves (no two firms have the same cost curve). Suppose firm A is in the market in the long-run equilibrium and making zero profit. Suppose there the demand curve shifts to the right. In the new long-run equilibrium,<p style="margin: 0px 0px 10px; padding: 0px; box-sizing: border-box; border: 0px; outline: 0px; font-size: 14px; vertical-align: baseline; background: #ffffff; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">A. Firm A makes strictly positive profits.<p style="margin: 0px 0px 10px; padding: 0px; box-sizing: border-box; border: 0px; outline: 0px; font-size: 14px; vertical-align: baseline; background: #ffffff; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">B. Firm A exits the market.<p style="margin: 0px 0px 10px; padding: 0px; box-sizing: border-box; border: 0px; outline: 0px; font-size: 14px; vertical-align: baseline; background: #ffffff; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">C. Firm A makes zero profits.<p style="margin: 0px 0px 10px; padding: 0px; box-sizing: border-box; border: 0px; outline: 0px; font-size: 14px; vertical-align: baseline; background: #ffffff; font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif;">D. Firm A has higher costs than every other firm in the market.

C. Firm A makes zero profits.In a perfectly competitive market, firms have identical cost curves and face the same market price. In this market, firm A is making zero profit in the long-run equilibrium. If the demand curve shifts to the right, then the new long-run equilibrium will have firm A making zero profits.

Question

In: Accounting

Consider an (almost) perfectly competitive market: the only difference is that different firms have different cost curves (no two firms have the same cost curve)

Consider an (almost) perfectly competitive market: the only difference is that different firms have different cost curves (no two firms have the same cost curve). Suppose firm A is in the market in the long-run equilibrium and making zero profit. Suppose there the demand curve shifts to the right. In the new long-run equilibrium,

A. Firm A makes strictly positive profits.

B. Firm A exits the market.

C. Firm A makes zero profits.

D. Firm A has higher costs than every other firm in the market.

Expert Solution

In a perfectly competitive market, firms have identical cost curves and face the same market price. In this market, firm A is making zero profit in the long-run equilibrium. If the demand curve shifts to the right, then the new long-run equilibrium will have firm A making zero profits.

C. Firm A makes zero profits.

Junaid answered 2 years ago

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