Question:

If profits are + in the short run in a perfectly compet. industry, which of the following would you NOT expect

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If profits are positive in the short run in a perfectly competitive industry, which of the following would you NOT expect to happen as the market moves to the long run?

A. Each firm's individual demand curve will shift down.

B. The market price will fall.

C. Each firm will decrease output.

D. Total market output will fall.

E. Firms will enter the industry.

F. Profits of each firm will fall.

G. The market demand curve will remain unchanged.

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3 ANSWERS


  1. positive profits attract more firms so

    A   will happen since entering firms take away some of an individuals demand

    B  will happen more firms entering lead to higher mkt supply leading to lower prices

    C  if price goes down in the market an individual firm sees a lower price and lowers output

    D OOPs  not gonna happen

    E will happen

    F will happen profits will go to zero in a comp mkt

    G  nothing has changed with consumers so the old other things equal kicks in and the demand curve does not change though quantity demanded in the market does

    So  D is not expected


  2. g. the market demand curve will remain unchanged

  3. option G

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