Question

In: Economics

Which of the following industries is most likely to exhibit the characteristic of free entry?


Question 1 

Which of the following industries is most likely to exhibit the characteristic of free entry? 


Question 2 

If a firm is operating in a perfectly competitive market in which the market price equals $12, then its 


Question 3

In a competitive market the current price is $11, and the typical firm in the market has ATC - $11.50 and AVC = $11.15.

Solutions

Expert Solution

1. Option 3. T-shirt silkscreening

Explanation: The remaining three industries require huge amount of capital investment.

2. Option 1. Marginal revenue is $12

Explanation: For a perfectly competitive firm, the price equals the marginal revenue.

3. Option 1. In the short-run, firms will shut down and in the long-run firms will exit

Explanation: The price is lower than the lowest AVC and ATC.


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